Charting a Steady Course

Transcription

1 BENEFITS STRATEGY & BENCHMARKING SURVEY INDUSTRY ADDENDUM TECHNOLOGY Charting a Steady Course

2 Survey Overview Gallagher s 2016 Benefits Strategy & Benchmarking Survey provides insights into how benefit and human capital challenges are addressed by over 3,000 organizations nationwide. This addendum highlights key findings and implications based on data from 186 employers in the technology industry that participated in this year s research. Technology employers operate in a fast-moving, forwardthinking market environment where compensation is highly competitive. Relatively short product life cycles, abundant project-based work and rapid industry growth not only create an ebb and flow of personnel, but also produce obstacles to benefits planning and talent retention. With near-term planning that s commonplace in an era of unsustainable healthcare cost trends, employers are pressured from both an operations and a human resource standpoint to find effective solutions. Innovative, value-based benefits and a longer-term compensation and benefits management strategy can help them contain benefit costs while competing successfully for top talent. Full-time employees (FTEs) domestic UNDER to % 8 % 39 % 48% 500 to 999 1,000 OR MORE Region 21 % 16 % 28 % 28 % 7% BENEFITS STRATEGY & BENCHMARKING SURVEY Industry Addendum

3 Human Capital Strategy Emphasis placed on talent retention 38 % Most are stuck in a reactive planning cycle 75 % Manage year to year based on costs 75 % 27 Manage year to year with adjustments as needed BENEFITS 33 % Report turnover of 15% or more 58 % Consider talent retention their top HR priority Premiums increased % 10% or more at most recent renewal Benefits account for 20% or more of total compensation and benefits spend COMPENSATION 8 % Plan multi-year with multi-data inputs 10 % Plan multi-year with multi-data inputs Many technology companies are undergoing a period of rapid expansion and face tough competition for scarce talent. Because of their focus on acquiring and retaining key employees, they tend to offer above-average compensation and benefit packages. However, the price tag on this priority is an above-average cost of benefits per employee, and it s growing at a rate that also exceeds the national average. Employers in other industries routinely rank benefits cost management as one of their top HR priorities. That s not the case for the technology sector. Yet, easing the pressure of healthcare costs is increasingly important to meeting operational and financial goals in such a competitive marketplace. Although a proactive strategy is key to meeting this challenge, technology employers tend to plan their compensation and benefits from year to year. This short-term view makes it difficult to factor in future healthcare cost trends and mid- to long-term goals for business growth. Employers should take a more structured, sustainable approach that sets financial objectives for benefits plan performance, includes trend analyses and considers innovative cost-containment methods. In the technology space, workplace culture is known for its unique characteristics. Employers tend to invest more often in perks like dry cleaning, meals and other conveniences to create an environment that promotes engagement and improves work-life balance. Meeting the expectations of their highly skilled workforce can pose a challenge, but it s imperative to maximizing employee performance and becoming or remaining a preferred employer. Offering a range of benefits to meet the different needs and preferences of the workforce will allow each employee to assemble a total rewards package that s more personalized and valued. Arthur J. Gallagher & Co. AJG.COM 3

4 Medical Benefits Average cost of employer-paid benefits per eligible employee 1 1 Due to rounding, percentages do not total 100% Cost transparency tools Healthcare decision support Telemedicine Reference-based pricing for healthcare services Private exchanges 59 % Under $10, % Innovation projections by 2018 $10,000 $14, % $15,000 or more 18 % Perform eligibility audits An additional 16% plan to by % 46 % 18 % 13 % 71 % Medical plans are a major factor in technology employers efforts to develop a competitive, sustainable total rewards approach that s valued by their employees. Yet, despite a looming concern about healthcare cost increases, the adoption of cost-containment methods tends to lag behind other industries. This reluctance often stems from a fear of hindering benefits delivery as well as a lack of strategic focus. Taking steps toward affordability can be as simple as evaluating whether the right mechanisms are in place to manage benefits enrollment and eligibility appropriately. Targets could include general and dependent eligibility audits, and surcharges or exclusion for spouses with access to other coverage. In addition, employers may want to examine the cost benefits and control afforded by self-insurance. Accepting the financial risk for health benefit claims allows more flexibility in benefits design and utilization management. Savings from reduced administrative costs, risk and taxes are another possible advantage. Technology employers should also consider newer methods for containing healthcare costs. Value-based benefit tactics and innovative solutions are on the rise, including healthcare decision-support consultation, telemedicine, and reference-based pricing for healthcare services. And by design, private exchange solutions coupled with a defined contribution approach have strong potential to appeal to the sophisticated preferences of technology employees. Many exchange platforms are engineered to provide employees with greater choice and control over their benefits while decreasing the administrative burden on HR BENEFITS STRATEGY & BENCHMARKING SURVEY Industry Addendum

5 PTO, Leaves & Disability Benefits PTO arrangement 57 % Have a strategy for leave administration Another 12% expect to have a strategy by % Combined bank of days 44 % 29% offer unlimited PTO now or may in the future Separate days for vacation, illness, etc. Top absence management concerns Compliance with government regulations Manager education on leave types, regulatory concerns and compliance Consistent administration Employee notification and education about available leave types Impact of absence on productivity Strategically applied leave policies can enrich an employee benefits package. Non-medical fringe benefits including extended family or parental leave and paid time off (PTO) are highly important elements of a destination-employer culture that can give technology organizations a competitive edge. This sector tends to offer more generous paid and unpaid leave benefits compared to other industries. And there s an emerging trend toward allowing employees to take unlimited vacation removing limits on time off and placing leave and productivity management at their discretion. Most technology employers self-administer their leave programs. They can reduce the ongoing burden of ensuring that leave management complies with governmental regulations, such as the Family and Medical Leave Act and the Americans with Disabilities Act, by outsourcing the administration of these programs. Formalizing policies for PTO, leaves and disability benefits, and providing clear communications on what is or is not available to employees will help to ensure fairness and mitigate compliance risks. Accurate tracking of employees before, during and after a leave period is a key capability of any absence management program. Employers should establish data-driven controls for leave management to help them accommodate employee expectations, keep up with industry benchmarks and meet the demands of complex regulations. In addition, the right systems are required to transition employees back to work as seamlessly as possible. A formal process for reentering the work environment, along with supporting tools, will prepare these employees to meet return-to-work requirements and boost productivity. Arthur J. Gallagher & Co. AJG.COM 5

6 Retirement Benefits Types of plans offered 72 % Have a retirement program 401(k) 97% Defined benefit 6% Profit-sharing 5% Cash balance 3% 403(b) 1% LESS THAN ONE IN THREE employers are taking steps to gauge employee retirement readiness Retirement benefits are a foundational contribution to employees sense of financial security, and support not only their confidence to retire, but also their health and wellbeing. Although technology employers offer retirement plan options similar to most other industry approaches, they tend to pay median salaries that exceed the norm sometimes significantly. So their investment in defined contribution plans, which are typically salary-based, is relatively higher. These above-average retirement benefits help to protect or promote technology employers competitive standings, much like above-average medical and paid time-off benefits do. The sector s emphasis on providing financial vehicles for retirement far surpasses its investment in guiding employees to securely prepare for this post-career phase. Technology workforces typically have a lower median age than those of U.S. employers overall, so the limited use of retirement-readiness support mechanisms may partly be due to demographics. However, retirement savings are becoming a higher priority among all workforce populations regardless of age or industry. Providing tools that help technology employees assess their retirement readiness and manage their savings is a clear opportunity to attract, engage and retain key talent. 56 % Have auto-enrollment 401(k) 39 % Apply auto-escalation BENEFITS STRATEGY & BENCHMARKING SURVEY Industry Addendum

7 Other Significant Benefit or Human Capital Trends 83 % 75 % Expect revenue to increase over the next two years Expect headcount to increase over the next two years 57 % Strongly agree or agree employee communications are successful 59 % Do not offer a wellness program 49 % Have never conducted an engagement survey to assess workforce motivation, satisfaction and commitment Arthur J. Gallagher & Co. AJG.COM 7

8 Final Remarks Technology employers face many challenges unique to the industry, and chief among them is a heated competition for talent. Yet they re not immune to the rising cost of healthcare a common concern of all U.S. employers. In fact, the generous total rewards packages that sector employers offer can make them especially vulnerable to the escalating cost of benefits. This dilemma may seem like somewhat of a dichotomy for employers that are also slower to adopt cost-management solutions. However, a better understanding of viable options will help them overcome a fear of disrupting benefits delivery and diminishing the employee experience. One important facet of successful benefit outcomes is long-term planning. Organizations that have an above-average record of employee retention coupled with better benefits cost management almost always take this approach.* Keeping employees well-informed about their benefit and compensation opportunities, and the potential value they provide, also supports peak employee and business performance. Effective communications help strengthen employees connection to their workplace culture whether onsite or virtual and in turn, increase their engagement level and drive greater productivity. This addendum offers a look at some of the key benefits management issues facing technology employers. The intent is to provide context and direction that can help you transform your HR and benefit strategies, and in the process, create the engaging employer-of-choice environment your employees need to achieve and sustain success. To learn more, contact Technology Industry Consultant, Doug Bradshaw (doug_bradshaw@ajg.com), or your local Gallagher consultant. *Arthur J. Gallagher & Co., 2015 Best-in-Class Benchmarking Analysis, March 2015 TERMS OF USE The intent of this Survey is to provide you with general information regarding current practice within the employee benefits environment. The data does not constitute recommendations or other advice regarding employee benefit programs, and the user is in no way obligated to accept or implement any information for use within their organization(s). The decision to utilize any information provided rests solely with the user, and application of the data contained does not guarantee compliance with applicable laws or regulations regarding employee benefits. Information provided by the Survey, even if generally applicable, cannot possibly take into account all of the various factors that may affect a specific individual or situation. Additionally, practices described within the Survey should not be construed as, nor are they intended to provide, legal advice. The Web Site and the Content do not constitute accounting, consulting, investment, insurance, legal, tax or any other type of professional advice, and should be used only in conjunction with the services of a Gallagher consultant and any other appropriate professional advisors who have full knowledge of the user s situation. Gallagher does not represent or warrant that the Content will be correct, accurate, timely or otherwise reliable. Gallagher may make changes to the Content at any time. Gallagher assumes no responsibility of any kind, oral or written, express or implied, including but not limited to fitness for a particular purpose, accuracy, omissions and completeness of information. Gallagher shall in no event whatsoever be liable to licensee or any other party for any indirect, special, consequential, incidental, or similar damages, including damages for lost data or economic loss, even if Gallagher has been notified of the possibility of such loss. For the purposes of this section the term Gallagher shall be construed so as to include Gallagher Surveys as a marketing division and/or Gallagher Benefit Services, Inc. and its affiliates Gallagher Benefit Services, Inc. All rights reserved. No part of this book, including the text, data, graphics, interior design and cover design may be reproduced or transmitted in any form, without explicit consent from Arthur J. Gallagher & Co. Gallagher Benefit Services, Inc. 16GBS25075_TEC