Employees Consistently Underestimate the Cost of Benefits

Surveys show that workers greatly underestimate your cost of providing their various benefits – which, ironically, originally stemmed from an effort to reduce total compensation.

Health insurance … life insurance … disability … vision care … dental … the list goes on. Did you ever wonder where the idea of having employers pay for all these benefits came from?

Surprisingly, it was from an effort to reduce total compensation.

Back in the 1950s and ’60s, companies found that constant pressure from workers for higher wages could be blunted by offering benefits instead. Health and other forms of insurance were cheap then, so organizations just piled them on.

Apparently, employees’ perceptions are that such benefits still are cheap. At least, that’s the surprising conclusion of a recent survey by the Charlton Consulting Group, a supplier of benefits communication programs.

Done with research specialist Harris Interactive, the survey showed that workers estimate the cost of benefits pay to be 30 percent or less over and above pay. In fact, according to government statistics, the average cost of benefits is nearly half again that … 43 percent of pay.

“There continues to be a disconnect between what companies spend on benefits and how employees perceive that investment,” says David Janus, a principal at Charlton.

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To get the maximum value of benefits in recruitment and retention of the best employees, Janus explains, “employers need to clearly communicate the total compensation message in order to enhance their return on investment for the benefit dollars being spent.” His recommendation is using a personalized benefits statement, which his company, among others, supplies.

Tomorrow, the one “bennie” employees are unwilling to give up — regardless of the cost to you (or, interestingly, them).

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