| It's Free!
It’s a typical day at Bob’s Company, Inc.
Bob notices that a recently-hired employee is now eligible for dental
benefits. So, Bob hands her an application. As he walks away, she asks,
“What’s the cost?”
Bob’s reply? “It’s free. The company pays
for it.”
If this was a movie rather than an
article, the startling shower music from “Psycho” would come on at this
point.
Or maybe it would turn into a take-off
from “Young Frankenstein.” Instead of “It’s alive!” the line could be
“It’s Free!”
Shame, shame on Bob. He wasted a terrific
opportunity for a “teachable moment” with a new employee.
Of course it’s not “free.” Every benefit
provided by the company costs good money.
Free. What was Bob thinking? He
should have responded something like this: “Our dental insurance costs
about $25 per month. The company pays for it. It’s part of your
compensation – just as our other benefits are.”
Too often employees think only about base
wage or salary when the subject of compensation arises. This happens
because we business owners and employers let it happen. You’re likely to
hear something like “I make $35,000 per year.” You are very unlikely to
hear an employee say, “Well, my base is $35,000, but on top of that my
employer generously pays another $12,000 for my health insurance. Counting
my paid time off, my other benefits and my payroll taxes, I cost my
employer a whopping $58,000 per year.”
So, how do we get our “bang for the
buck”? How do we get our employees to recognize and appreciate all aspects
of the compensation package - so the company can enjoy a fine ROI in the
form of increased employee satisfaction, improved productivity and reduced
turnover? How do we drive the “entitlement culture” out of our companies?
Here are some approaches to use:
- During hiring interviews, listen for
signals. If the candidate is focused like a laser beam on your vacation
plan or grimaces noticeably when you explain that you don’t pay 100% of
the health insurance, these are not good signs. (Note: Yelling “Next!”
is not a tactful way to end an interview.)
- Your candidate job offer letter should
outline the entire compensation package and focus on the total value –
not just the salary.
- Make ongoing education part of your
company’s culture. Talk about the cost of doing business. Let your folks
know how much insurance rates go up every year. Make sure the employees
know that they have a vested interest in the company’s success … if they
help the company succeed, you can continue to subsidize their insurance
costs and provide excellent benefits.
- Print a year-end statement for each
employee, showing his or her total compensation and benefits costs.
- Consider all aspects of
compensation costs when budgeting and projecting pay increases. Example:
Let’s say you like to provide an average 4% pay increase per year, and
your total company compensation expense (including benefits) is
$800,000. A 4% overall increase is $32,000. If you expect your health
insurance to go up $5,000, you now have $27,000 left for salary
increases. (Back to education: Explain your rationale and the math to
your employees. Involve them in the decision. Maybe they want more
salary increases and are willing to bear more of the insurance costs. If
they help make these decisions, you’ll get better buy-in.)
You invest lots of money in your company
in the form of salaries and benefits. Chances are, payroll and related
expenses are the largest line items on your income statement. Spend the
additional time and effort to maximize the investment. Done right, it can
pay you back many times over.
PS: Bob’s story has a happy ending. He
realized the error of his ways and corrected his statement to his
employee.
Disclaimer: Any resemblance between Bob
and any real business owner – alive or dead – is strictly coincidental.
------------------------
Bill Collier is the author of “How to
Succeed as a Small Business Owner … and Still Have a Life” and is the St.
Louis area coach for The Great Game of Business. He helps businesses teach
their employees to think and act like owners. He can be reached at
314-221-8558 or bill@collierbiz.com.
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