Benefits and Compensation

Q&A: Fighting the Benefits Illiteracy Epidemic

As an HR manager, you’ve likely spent a lot of time putting together your company’s benefits package. You’ve selected exciting new benefits and made sure you have a good balance of health, wellness, and leave packages. But there is a problem: Your employees just do not seem to understand them. How can you make the most of your benefits package?

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We recently spoke to Marcy Klipfel, SVP of Employee Engagement at Businessolver, concerning the company’s research into benefits illiteracy. Here are the results of that conversation.

HR Daily Advisor: Your study found that benefits mean as much to employees as pay, yet they only spent 17 minutes enrolling on average. Why is there this disparity? What forces are at work here?

Klipfel: Employees often find benefits confusing and stressful, and studies have found that 40% would opt to do something uncomfortable—like an extended hot yoga session—over electing their benefits. An analysis of our benefits administration platform user response data found that over 80% of employees admit they don’t have a good understanding of their benefits packages, including 25% of Baby Boomers, who have been selecting benefits for decades. We also found that 65% of employees are risk-averse when it comes to making benefits selections. This means not only do employees not fully understand their benefits options, but as a result, they may also be more likely to choose what seems safest or most familiar to them rather than the benefits options that make the most financial sense for their situation.

If employers can begin to empathize with employees’ lack of understanding by providing consistent benefits training and education and empowering benefits engagement throughout the year, employees will be able to make more informed benefits decisions for themselves and their families.

HR Daily Advisor: Can we blame employees here?

Klipfel: Neither employees nor employers are to blame. Benefits have become more complicated as the industry and workforce evolve, and there are more options for employee benefits packages and personalization than ever before. The combination of many benefits choices coupled with employee risk aversion can make it hard for employees to make sound, rational decisions in the absence of relevant, personalized guidance.

This shines a light on a clear employee engagement opportunity for employers. Many employers today recognize that financial well-being is an important issue for employees, and benefits are a large factor of that. Our recent MyChoice Recommendation Engine Benefits Insights Report uncovered that only 26% of employees report spending less than they earn and regularly making deposits to savings accounts. Under- or over-insuring, or otherwise failing to maximize benefits, can compound an employee’s financial turmoil, which is why it’s critical for employees to make optimal decisions about their benefits.

HR Daily Advisor: What is benefits illiteracy? What impact does it have on employees and employers?

Klipfel: Benefits illiteracy is not having the level of knowledge or understanding that allows an individual to make informed decisions related to choosing and using his or her employee benefits. When employees fail to utilize these important components of their overall compensation package, they miss out on support for their physical, mental, and financial well-being. They may spend too much on coverage they don’t need or pick too little coverage and expose themselves to significant financial risk.

Many employees suffer from financial stress, and it impacts the rest of their lives. Employees who are mentally and physically healthy are more likely to stay with their employer, reducing turnover costs and improving productivity. Businessolver’s State of Workplace Empathy Study found that 93% of employees would be more likely to stay with their employer if they empathized with the employees’ needs. When employers show empathy through benefits education and guidance, it helps foster a more engaged workforce, but failing to do so prevents employers and employees from capitalizing on these advantages.

HR Daily Advisor: What prevents companies from helping their employees understand their benefits?

Klipfel: Companies may not fully understand the extent of the benefits illiteracy issue among employees or which benefits topics to focus on. There could also be a lack of leadership understanding of or buy-in for how much investment is needed (time and money) in benefits education and communication for employees. The other gaps occur when employers don’t have the ability to consistently communicate with employees across a variety of mediums (text, e-mail, mobile app, etc.) and leverage technologies to ensure that employees are regularly engaging with their benefits.

HR Daily Advisor: It seems like whatever they are doing now isn’t working, so how can organizations help their employees better understand their benefits?

Klipfel: It’s common for employers to only communicate about benefits once a year during annual enrollment. But that information is often focused on helping employees choose their benefits; it often doesn’t provide any real guidance on how to use benefits. Or, that information is buried in places employees can’t find. So, it’s important to provide resources that employees can access anytime, anywhere to answer questions and improve overall benefits literacy at their own convenience.

During the year, proactive education and communication help people better understand and use their benefits more wisely. These can be anything from generic posters in work rooms to remind employees to get a free annual physical to highly personalized text messages to someone using his or her health savings account (HSA) for small-dollar costs. The objective is to help employees understand and optimize their benefits.

Additionally, some benefits administration technology software offers decision guidance tools that can provide employee response data, allowing organizations to take a comprehensive look at the top issues surrounding their employees’ benefits decision-making. These insights can help employers understand the extent of the benefits literacy problem and where to focus and invest in their benefits education and communication efforts.