Offering solid benefits can cement your company's relationship with its current employees, but there's an unseen payoff as well. Benefits can also attract potential employees, offering HR a larger and more motivated candidate pool when it comes time to fill positions.

Today's sluggish economy has created a dilemma for businesses: some are scrutinizing every benefit they offer, while others are taking the opportunity to try new incentives to differentiate themselves from their competitors. As a strategic partner, HR must find ways to use the power of their benefits program as a recruiting tool while ensuring that this tool doesn't detract from the company's bottom line.

Reviewing Your Plan

Kathy Solomon, associate director of HR at Neurogen Corporation in Branford, Conn., says that she reviews her company's benefits program at least annually. "There's really a continual review, though, since employees will also come to us with requests, like a recent one concerning Section 529 college savings plans." Solomon says that HR researches these kinds of requests and then takes appropriate action on them.

Von Madsen, assistant vice president at ARUP Laboratories in Salt Lake City, Utah, says that his company also reviews its total benefits package each year to determine where it may need to beef up benefits or perhaps eliminate them. "Even in the present economy, we've made some recent additions, such as an improved Paid Time Off policy this year," he explains.

The trick during a poor economy, says Solomon, is to find the right balance. "Your benefits package does have a significant impact on recruiting. We benchmark ourselves against others to make sure we're competitive," she says. "We still have to maintain a level of benefits that allows us to hire and retain the best scientists and researchers."

Knowing what candidates want will provide a solid base to your benefits program. According to the most recent Value of Benefits Survey conducted by the Employee Benefit Research Institute (EBRI) and Mathew Greenwald & Associates (conducted after September 11, 2001 and released in March 2002), U.S. workers' preferences for employee benefits have changed very little from a survey conducted two years previously. Health insurance ranks as the most important benefit, with retirement savings plans (such as 401(k) plans) the next most important benefit. Benefits such as stock options rank very low.

Even when particular benefit elements are generally seen as desirable or almost universally offered, employers can still differentiate their programs from their competitors'. "Employees have come to expect certain benefits, like health insurance," says Madsen, "so this particular aspect of our benefits package isn't really thought of as a 'benefit'. However, our employees do see as a benefit the fact that we pay the majority of the premium."

Another important benefit for employees is the company's health clinic, says Madsen. "This is a family practice/urgent care clinic that is free and on-premise. We saw around 6,000 individuals last year; they can walk in or get appointments within two days."

Even if your company isn't able to offer such generous programs, HR can still tweak a basic benefit like health insurance to reflect employee interests. The SHRM/SHRM Foundation 2003 Benefits Survey found that companies have shifted from HMOs (65% in 1999 to 54% in 2003) in favor of PPOs (81% in 1999 to 87% in 2003) and alternative medicine, reflecting consumer preferences and interests.

Of course, many companies are evaluating their benefits plans with an eye to cutting costs. Fortunately, such action doesn't always have to be painful: HR can look at usage data to see if there are "perks" that most employees don't draw on, or that would have minimal impact if dropped. For instance, the SHRM/SHRM Foundation 2003 Benefits Survey cites belt-tightening measures like dropping cell phones and pagers for employees' personal use, or matching charitable contributions, as the type of "nice to have" benefit that survey participants find they can eliminate without a lot of agonizing.

Focus On Employees

A good benefits program doesn't consist wholly of health care, 401(k) matches and other costly elements. Flexible scheduling, payroll deduction and bill paying services, merchandise discounts, and free parking are all benefits that make your company an attractive place to work. If money is especially tight, concentrate on low-cost benefits that still show your concern for employees and set you apart from competitors:

• voluntary benefits like child-care accounts, home and/or auto insurance, or pet insurance which are paid for by employees but administered by the company;
• nap rooms or lactation rooms;
• professional memberships;
• unpaid time off for volunteer work;
• casual dress;
• eldercare referral services;
• compressed workweek or telecommuting; or
• any services or discounts which are less costly to employees if negotiated by a large employer.

"For the past ten years, our guiding philosophy has been 'what is the right thing to do for the employees?' says Madsen. "We ask ourselves how we want to attract and retain people, and we believe the way to do it is with respect, fairness, and making this a nice place to work."

Madsen says that this philosophy may sound like common sense, but "some employers don't get it. They may think 'if we have fluffy benefits, people will want to stay with us.' But chemists can easily move from employer to employer—and they won't stay with a bad one," Madsen says. "Companies must first create a fundamental atmosphere of respect."

With their foundation in place, ARUP Laboratories conducted a survey nine months ago, Madsen continues. "We wanted to discover the impact our benefits package had in making employees want to come to the company, and then want to stay." He was pleased with the results: for 56 percent of employees, the company's benefits package had a high impact on their decision to apply and want to work for the company. "And for 83 percent of employees, our benefits have a major role in the decision to stay."

Use The Power Of Benefits

Though the 2001 EBRI/MGA Value of Benefits Survey found that 77 percent of workers reported that the benefits a prospective employer offers are very important in their decision to accept or reject a job, not all benefits are equally important to every candidate.

"Obviously candidates are focused on relocation and assistance in transitioning to their new community, but otherwise, benefits are highly individual," says Solomon. "Health care may be very important to someone who is single or the sole breadwinner, whereas a married candidate under a spouse's plan might not care as much about medical benefits.

"For recruiting, I ask candidates what is important to them," Solomon continues. "Then I can speak about how my company will meet those needs."

It's important for HR to understand what benefits will attract candidates so that they can implement the right package, say experts. Benchmarking against peers can be especially valuable, whether they be small companies, start-ups, or well-established companies, says Solomon. "You need to determine what you have or don't have compared to your competition."

Because there's such a close link between benefits that retain employees and benefits that attract them, HR can often use surveys of current employees to understand what will be attractive to future ones. Demographic and sociological studies will also spot trends HR may want to address. "We don't have any requests yet," says Solomon, "But I think that with changing demographics, long-term care insurance may be something employees will want—we would certainly research this in the future."

"We are looking at child care," says Madsen. "We have 1,600 employees who have an average age of 39—we're thinking there's a demand. We're doing a needs assessment on this issue."

Keeping a benefits program vibrant will both attract and retain employees. "Ten years ago, we had 21 percent turnover (which was an industry average), and we had been at that level for the prior 15 years," says Madsen. "We also hired a lot of people every year: we might have 350 people leave, and we'd hire 400. We were growing, to be sure, but we also wanted to cut turnover."

The company focused on retention, says Madsen, and looked at improving benefits as a means to improve the bottom line. "We currently have a turnover of 15 percent, which is in the bottom quartile of our industry."

Madsen says that their efforts have been equally successful in recruiting. "Eight years ago, we struggled to get one or two candidates for some of our key positions. Last year we had over 14,000 applications for 325 jobs. We believe that improving our benefits contributed greatly to that larger pool of candidates."

That greater pool of applicants has positive implications for the quality of hire, as well. Madsen says, "If you have only one candidate, you have to ask yourself: did I get the best person for the job?"

Carla Joinson is a Stafford, Va.-based writer specializing in human resources and management topics.