Bill
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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.
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