How health care reform and the economic crisis has affected, and will further affect, benefit programs

In the past year, the business world has been marked by significant change. Legislative reforms have forced us to shift our approach to the administration of benefits and how we view wellness and employee involvement in benefit choices. The international financial crisis has left businesses struggling to regain profitability, reduce costs and realign talent to maximize productivity.

“Organizations have had to constantly adjust courses to be mindful of their corporate balance sheets and human capital returns,” says Chet Rhoads, vice president, business development, Aon Risk Services Central, Inc.

For the fifth consecutive year, Aon Consulting surveyed employers across the United States to examine the strategies and tactics their organizations are employing.

Smart Business spoke with Rhoads about the survey and the shifts in employers’ attitudes towards their benefit programs.

What high-level findings were gleaned?

  • Recession-driven change. The majority of respondents altered their human resources practices to mitigate the recession. Reducing or realigning work forces (84 percent) and adjusting cash compensation — generally by freezing or reducing base pay (77 percent) and incentive compensation (90 percent) — were the most common actions. Some 54 percent reduced health benefits or increased employee costs, another 9 percent closed their defined benefit plan for participation or future accruals, and 22 percent suspended or reduced their contributions to plans.
  • Shift toward consumer-focused, total rewards packages. Nearly half of the respondents indicated they had already moved, or are moving, away from a paternalistic role toward a consumer-focused approach.
  • Need for formal metrics on rewards and retirement programs. There is a strong desire to better align total rewards programs with the company’s financial objectives and employee values and preferences. However, only one-quarter of respondents have formal metrics in place to measure the impact of benefits and policies on their business.

What did the survey say about the specifics of the employer’s total rewards policy?

Survey respondents rated medical care coverage for active employees/families and base compensation as absolutely critical or very important, 78 percent and 79 percent respectively. Incentive compensation was rated behind retirement programs in terms of importance — 53 percent rated incentive compensation as absolutely critical or very important, while 62 percent rated retirement plans similarly. Regarding career development, it was rated as highly important by 44 percent.