A new study of human resource professionals shows that last year nineteen percent (19%) of an employee's annual salary was spent on mandatory benefits such as unemployment, workers' compensation and Social Security. Eighteen percent was spent on voluntary benefits such as medical plans, prescription coverage and survivor benefits. Eleven percent of an employee's salary was spent on pay for time not worked benefits.

According to the survey, 63 percent of employers say the economic recession has negatively affected employee benefits to some extent. Housing and relocation benefits saw significant cuts from 2009 to 2010. Business travel cuts were significant over the past five years with 24 percent of employers cutting paid long-distance call benefits. Retirement savings and financial planning benefits also have dropped significantly since 2006. "Employee Benefits: Which Ones Are Surviving the Weak Economy?" www.prnsnewswire.com (June 28, 2010).

Commentary

While benefits are declining, history shows us that benefit costs to employers, as a percentage of total compensation costs, are at an all time high. According to the Employee Benefit Research Institute, benefit costs to employers increased from 28.2 percent in 1991 to 29.2 percent in 1994. Employer benefit costs steadily declined after that reaching a low of 27.4 percent in 2000 and 2001. However, in 2002 benefits costs increased again and by December 2009, benefit costs were 30.2 percent.

Not every employer has the financial ability to provide all the benefits that employees desire, especially with employee benefit costs on the rise. Even so, employers offering fewer benefits can still retain good employees by communicating with employees about benefits and the value of the employee to the organization as well as making sure they are providing a positive work environment.

For example, if your organization cannot afford costly benefits right now, let your employees know what financial steps are needed and your plans to make such benefits available. Consider incentive programs to enhance salaries. These programs can provide a financial boost to help employees pay for health care and other benefits. Implement less costly benefits such as longer vacations, sabbatical periods, and tuition reimbursement. Finally, make employees feel safe. The safer you make your workplace from injury and discrimination, the more likely they will understand that you care for their well-being.

This informational piece is part of "News to Use" published on July 22, 2010.