A business encounters many costs, but the most volatile expenses are those surrounding employee benefits. Last year, employers spent an average of $8,669 per employee, an increase of nearly $500 from the year before. Multiply that rising number by each staff member and the costs can significantly pile up. There are a number of ways the rising cost of benefits negatively impact your business, but there are also several methods for alleviating this major issue.
The initial implications of this trend are clear. The more your organization spends on employee benefits, the less profits it will make. One of the biggest culprits hurting your bottom line is the price of prescription medication. Already taking up 30% of an employer’s health care costs, prescriptions are set to rise 7.3% in 2017, with specialty meds rising 16.8%. The bill employers have to foot for healthcare is rising overall, with 77% of organizations seeing increases, and nearly a quarter of those employers seeing an increase of 16% or more. These numbers provide hard evidence that profits will rapidly shrink if action is not taken.
However, any action must be approached carefully and strategically. One area where making a wrong decision can be especially devastating to a budget is in compliance. A single slip-up can cause lingering legal issues and attract hefty penalties and fines. As healthcare reform continues to hang in the balance and confuse business leaders across the country, cutting corners to skimp on costs in this area is not a viable option. During these confusing times your business needs an expert versed in compliance, whether it’s a cost-effective outsourced partner or a higher-priced in-house talent.
One increasingly-common way organizations are circumventing profit loss is by passing employee benefit costs to employees through higher deductibles, copayments, and premiums. While this can look good on financial statements, it is resulting in decreased employee morale. Some workers may brush off increased healthcare costs, but many others will be motivated to look for a new job that offers more affordable benefits or a higher salary. After all, if costs go up once, employees will expect them to go up again.
Similarly, the rising cost of employee benefits is impacting the hiring and recruiting arms of businesses. Even if you’re able to attract an in-demand candidate into an interview and entice them into considering a formal job offer, it won’t take much to push them to a competitor. When you’re offering a similar salary and responsibilities as someone else, being able to tell a candidate that they will get great benefits at a low cost can be the deciding factor in securing their talent. Additionally, only 20% of employers continue to offer a retiree program. Candidates who see such a program in your job offer will take notice and view your organization as a career destination.
Despite the gloom and doom surrounding the rising cost of benefits, there are a number of strategies that can lessen the negative effects.
It can be difficult to take action and implement new strategies for combating the rising cost of benefits without experience, and especially when you have other pressing core business concerns. That’s why the greatest solution of all could be engaging with an expert PEO. The right outsourced HR partner can provide strategic direction and instantly save money by connecting your organization to a larger employee base providing better and cheaper benefits.