Do Your Employees Know What Their Benefits Are Worth?

In a tight labor market, forward-thinking organizations are aware that employees who do not understand the value of their benefits may leave to seek a better rewards package elsewhere.

According to recent research from employee recognition software company O.C. Tanner, less than 40% of workers even know what the term “total rewards” means and only 14% of them can explain it.

Helping employees to understand and identify the value of their total rewards (TR) is paramount, said Mindi Cox, chief marketing and people officer at O.C. Tanner.

“[Our research] finds when employees are happy with the total rewards their organization offers, they are less likely to suffer from burnout and mental health challenges, and they are more likely to be engaged and want to stay,” she said.

Still, it can be difficult for employees to fully appreciate the actual financial value or even perceived value of their benefits if they aren’t clear on what’s included or how it can be impactful for them.

For employers, could one solution include attaching a “value” tag to their benefits?

A ‘Substantial’ Expense

Most employees don’t fully appreciate or understand the value of their organization’s TR package because they don’t know the full scope of offerings, said Alicia Scott-Wears, a compensation content director at WorldatWork.

She noted a 2022 MetLife study found only 65% of employees understood what their benefits truly cover.

“While transparent communication in compensation often gets the spotlight, transparency in benefits is equally important,” Scott-Wears said. “Employee benefits are often the second-highest operating cost — after payroll — for an organization. … Clearly sharing high-value benefits [such as healthcare spend], including both the employer and employee cost-share, gives employees a fuller picture of the financial investment involved.”

Regarding healthcare, employees are often unaware that large organizations assume the lion’s share of financial risk in providing such benefits, said John Jones, a managing director and employee experience business leader at WTW.

“That expense can be substantial, and organizations should take credit for the amount of spend they take to keep employees and their families healthy,” he said.

What Employers Should Share

Total rewards statements can help convey the overall cost, Scott-Wears said, but she cautioned contribution splits alone don’t capture the whole “value” picture.

She advised employers to share additional insights to help employees understand both financial and utility value, such as:

Clarity around out-of-pocket costs for using the benefits;
High-profile elements that are included or excluded, to identify any gaps that could lead to additional personal expenses;
Ways to optimize benefits for personal gain, including employer contributions, employer matches and tax advantage potential for various options; and,
How to compare and select benefits that best suit their needs and those of their families.

Highlighting these aspects can bring clarity from both a cost and a perception perspective, Scott-Wears said.

Communicating the Value

Even with proper communication, the O.C. Tanner research found it doesn’t matter how robust a benefits package is if employees don’t believe their organization has their best interest at heart.

As one study participant put it: “A lot of people don’t feel like it’s a reward to get your compensation and benefits.” In other words, much of what’s offered in TR can be perceived by workers as the minimum that they expect for their employment.

Therefore, as Jones put it, a “value” tag is a must.

Many organizations already have an online TR dashboard that is updated frequently, usually in sync with payroll timing, where a full picture is available to employees, he said.

“[The dashboard] is focused on the total cost and the total benefit of an individual’s total rewards,” Jones said. “That gives organizations a clear way of articulating a substantial part of the employee value proposition.”

But a “value” tag alone may not significantly increase perceived value, said Scott-Wears.

The key is connecting employees with benefits that truly matter to them, she said.

“Communicating those clear insights that lead them to better understanding of costs and utility associated with their benefit options improves perceived value,” Scott-Wears explained.

For example:

Providing accessible information and tailoring communication about benefits may help employees better understand and appreciate the value behind the offering.
Effective communication generally includes reaching employees through their preferred channels and at appropriate times, which will vary based on workforce composition.
Using clear and easily understood language is likely essential. For organizations with a diverse employee population, offering translated versions of benefit information can further enhance understanding and perceived value.

Regardless of what benefits resonate with employees most, TR professionals should communicate those benefits in a way that is easily digestible and quickly understood, Jones said.

“If done correctly, the story becomes a powerful retention tool,” he said.

Editor’s Note: Additional Content

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