Revised 7 February 2006

The attractiveness of your benefits package can make the difference between pulling in star candidates or having to settle for average performers, especially when the labor market is tight.  According a recent Value of Benefits Survey conducted by the Employee Benefit Research Institute (EBRI) and Mathew Greenwald & Associates, U.S. workers' preferences for employee benefits haven't changed much from a survey conducted four years ago. Health insurance still ranks as the most-valued benefit, with retirement savings plans (like 401k plans) the next most valued, while benefits such as stock options rank very low. Consequently, small and medium-sized business owners are increasingly using health benefits packages to attract and retain top talent. 

Before you make any decisions about your benefits plan, research your environment thoroughly to make sure you offer competitive benefits that make sense. Similar companies compete for similar pools of employees ? if your direct competitors offer full benefits, then you probably should as well.  According to the 2005 SHRM survey of employer benefits, 97% of companies offered some form of health insurance, and the same percentage offered prescription drug coverage.  About eight percent of organizations offer vision insurance, while only 42% cover part-time employees' health needs.

Though the 2001 EBRI/MGA Value of Benefits Survey found that seventy-seven percent of employees reported that the benefits a prospective employer offers are "very important" in their decision to accept or reject a position, not all benefits are equally important to every candidate.  Virtually all candidates are focused on relocation and assistance in transitioning to their new community, but otherwise, benefits can be highly individual. Health care may be very important to someone who is single or the sole breadwinner, whereas a married candidate already covered under a spouse's plan might not care as much about it.

Obviously, employees might prefer health plans that the employer fully pays for, but rising costs make these traditional plans out of reach for many small business owners.  With today's new generation of plans, however, even the smallest businesses can offer valued health packages to employees. The trend is clear: companies are encouraging employees to shoulder more of the costs of health care or at least plan better for them.   

One sign of this is the growth of medical flexible spending accounts: 71 percent of companies offered them in 2004, but now over 78 percent do.  Another harbinger - a full twelve percent of employers offer the new "consumer-driven" health care plans, which combine a high-deductible insurance plan with a tax-free health savings account.  These plans were virtually nonexistent just a few years ago.

So don't be afraid: go ahead and ask employees to share insurance costs. While asking employees to pay for part of their healthcare might seem off-putting, it can actually help employees value their healthcare plans more.  You can also be more competitive as a business by managing costs through a phased approach.  This is where employees share the cost of their benefits on a decreasing basis as they build seniority. in other words, more loyal employees pay less towards their health insurance.

Remember: differentiation is key to competitiveness.  Even when particular benefit elements are seen as desirable or almost universally offered, employers can still differentiate their programs.