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CCH® BENEFITS — 07/7/11

Economy Hurts Employee Benefits In Three-Quarters Of Firms

from Spencer’s Benefits Reports: The economy has negatively affected the employee benefits offered by more than three-quarters of organizations, according to a new Society for Human Resource Management (SHRM) survey report released at SHRM’s 63rd Annual Conference and Exposition in Las Vegas.

Seventy-seven percent of surveyed human resource professionals said in 2011 that the economy negatively affected benefits to some or to a large extent, an increase from 72% in 2010, SHRM’s 2011 Employee Benefits Research Report showed. In addition, the national survey found that more employers offered benefits that put responsibility on employees for managing retirement savings, leave, and health care costs.

The majority of organizations (84%) provided a preferred provider organization (PPO) for employee health care, with only a third of employers using health maintenance organizations (HMOs). Health savings accounts (HSAs) are gaining in popularity as a health care benefit. In 2011, 35% of organizations provided HSAs, up from 29% in 2007.

Most businesses (93%) offered defined contribution retirement savings plans, significantly more than those that offered defined benefit pension plans (22%) and formal phased retirement programs (5%). Although employees are more responsible for managing retirement savings, 42% of employers provided individual investment advice, and 37% supplyed retirement preparation planning advice.

“We have seen many cuts to HR benefit budgets over the last three years,” said Mark J. Schmit, director of research at SHRM. “Organizations have had to be creative to find ways to compensate for the loss of benefits with hard cuts in order to stay competitive in the recruitment and retention of top talent.”

The future of employee benefits includes workplace flexibility benefits, which increased in 2011. More than half of surveyed HR professionals (53%) said their organizations provided flextime as a benefit, up from 49% in 2010. Twenty percent offered telecommuting on a full-time basis, an increase from the 17% of employers that offered it last year.

“The addition of workplace flexibility programs has been one of the primary tactics organizations are using to offset the benefit losses,” Mr. Schmit said. “These programs can have positive outcomes for both the employees and the organization.”

Benefits Spending

Employer spending on employee benefits remained stable this year. Organizations spent an average of 19% of an employee’s annual salary on mandatory benefits, like Social Security and workers’ compensation. Employers spent an additional 19% on voluntary benefits and 11% on leave pay benefits. Larger organizations spent more on voluntary benefits than organizations with small staff levels.

The survey of 600 randomly selected HR professionals examines 284 benefits. Among other findings are these:

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For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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