It costs approximately $4,000 to fill an open role, and it’s money wasted if a new hire decides to leave within months of onboarding. This is why employee retention is as important as (if not more important than) attracting talent.
Employee retention depends on job satisfaction. According to a report by the Society of Human Resource Management (SHRM), job satisfaction comes not only from competitive pay, job security, respectful treatment, engagement, and trust between management and employees. Employee benefits also play a role.
An organisation must have an excellent benefits package to retain talent. An employee savings plan, life insurance and health insurance are employee benefits that can enhance employee job satisfaction.
1. Employee Savings Plan
An employee savings plan lets employees save for retirement. It can be a good enough inducement to make employees stay in a company until retirement. On the employer’s part, an employee savings plan helps a company prepare for end-of-service or retirement gratuity liabilities.
It helps that employee savings and pension plans typically include a vesting period. This is the length of time employees must work in the company before gaining full ownership of the employer’s contributions to their pension plans.
Savings and pension schemes in organisations can be one of these types:
Defined Benefit Plans
In defined benefit plans, employers promise employees a specific amount upon retirement, calculated based on factors like salary history and years of employment. This type of plan, also known as a final salary scheme, benefits employees by providing them with a clear, predictable retirement income. It is an excellent benefit for retention purposes.
However, in this type of plan, the employer bears the cost, investment risk, and the responsibility of ensuring it has adequate funds. That said, this should be more than doable with the right business insurance partner and a plan that keeps the fund liquid and guarantees it never falls below a stated threshold.
Defined Contribution Plans
In defined contribution plans, the employee and employer contribute a set amount (usually a percentage of the employee’s salary) into an employee savings account. The sum of their contributions is invested, and the employee’s retirement benefits depend on investment performance.
Employees decide where to invest their savings; this gives them control over the risk and potential returns. The employees also know that their retirement income is not guaranteed and depends on factors like the amount contributed and the return on investment.
Some organisations offer a hybrid of defined benefit and defined contribution plans. These hybrid plans marry the predictability of defined benefit schemes with the flexibility and lower cost of defined contribution plans.
2. Life Insurance
A life insurance plan protects the employee’s family or designated beneficiaries in the event of an employee’s death. This benefit is typically available to employees for the duration of their employment.
Employee life insurance plans typically have the following features:
- Group plan: Organisations usually procure group term life insurance. It covers the entire group for a set period or term. Employers may renew them yearly, modifying the plan to remove and add employees.
- Cost to employees: Employee life insurance plans may come at no cost or a low cost to employees. For basic employer-provided life insurance, the employer pays the entire premium. Employees may opt for additional coverage; they can pay the extra premium through payroll deductions.
- Coverage amount: The coverage amount or death benefit can be a multiple of the employee’s annual salary (e.g., two or three times the salary). Some organisations may offer a flat coverage amount or allow employees to choose their coverage level within a specified range.
- Eligibility and enrolment: Employee life insurance plans are available to full-time employees. The company may set a waiting period before new employees become eligible for the policy. Coverage may require annual enrolment.
- Portability: Some life insurance plans are portable, allowing employees to retain their coverage upon leaving the company by converting their policy to an individual life insurance plan.
3. Medical Insurance
Medical insurance is an excellent employee benefit. The following are the key features of employee health insurance plans:
- Coverage scope: Medical insurance typically covers outpatient consultations, diagnostic procedures, treatments, hospitalisation, and sometimes prescription drugs. Some plans extend to dental and optical care, mental health support, chiropractic, physiotherapy, nutritional counselling, and wellness programmes like brain training for organisational performance.
- Premium contributions: Employers may cover everything. They may also cover up to a specific amount, benchmarked for employee age, tenure or both; the exact split varies across organisations.
- Pre-existing conditions: Many employer-sponsored plans cover pre-existing medical conditions, a significant advantage of employer-provided medical insurance over individual health policies.
- Family coverage: Employees may be able to add spouses and children (or dependent parents and siblings for employees who are single) to their employee plan, but they must pay additional premiums.
- Network of providers: Employer-provided plans typically come with a network of healthcare providers. Employees receive the most benefits when using in-network services, although out-of-network treatment may be partially covered.
- Co-pays and deductibles: Employees may be responsible for co-pays (a fixed amount for a healthcare service) and deductibles (a fixed amount incurred annually that must be paid before the insurer begins to pay).
- Wellness programmes: Some plans include wellness programmes, offering preventive care, health screenings and lifestyle management.
- Portability: Some employee health insurance plans can be converted into individual policies, allowing employees to carry them over after leaving the company that provided the health care benefit.
- Annual enrolment: Employees typically have to register for the employee medical insurance policy every year.
Some companies also provide employees with the option to put part of their pre-tax earnings into a health savings account. They can use the money in this account to pay for medical expenses.
Employee Benefits for Retention
Retaining employees is an excellent way to save on recruitment costs. Long-term employees are also more productive because they know the ropes and need no training.
Organisations must enhance employee job satisfaction to retain employees. Providing benefits like a pension plan, life insurance and medical insurance can be a way to accomplish that.