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The benefit of benefits
Offering a choice of benefits to employees can boost the bottom line.
June 22, 2008
Several years ago, faced with a turnover rate topping 128 percent, officials at Vancouver, Wash.-based The Holland Inc., made a decision that could have cost the company millions of dollars.
The Holland, parent company of 39-unit Burgerville, decided to offer health insurance to employees who have been with the company for more than six months and who work more than 20 hours a week. The decision added approximately $1.5 million to The Holland's health care expenses, but considerably decreased its turnover rate.
"Employees have always been our most important asset and are key to our success at Burgerville," said Jack Graves, chief cultural officer of The Holland Inc. "Decisions such as our health care program come from a deep commitment to invest in our people."
In 2006, the year the company began offering its health care program, The Holland's turnover rate dropped from 128 percent to less than 54 percent. Turnover dropped to 52 percent in 2007 and is on track to equal that this year.
The health care cost for an eligible employee is $15 per month, and the cost for a family plan is just $60. The Holland pays 95 percent of the premium for employees and their dependents.
"This commitment comes from the knowledge that happier, healthier employees stay with the company longer, feel a stronger tie to our organization, and are more confident in themselves, both at work and in their personal lives," Graves said. "These attributes all lead to much more highly productive employees, actually raising standards in all aspects of our business, which increases both sales and profits."
Potential for big savings
Restaurant-industry officials peg the cost of losing a single employee to be as much as a third of that employee's annual salary.
So, losing an $8-an-hour worker can cost a restaurant as much as $5,500 in a year through training costs, increased waste and lost productivity.
Extending that logic, for a 40-employee operation, cutting turnover from 128 percent to 54 percent can mean a savings of more that $162,000 per year. Such savings can equal the difference between a profitable operation and one with a "Closed" sign on the front door.
While few operators have the temerity to make the investment Burgerville did in order to improve employee retention, operators are increasingly looking for ways to make jobs more attractive. While boosting pay is always an option, adding benefits to a pay package doesn't necessarily mean a big investment on the part of a restaurant operator, industry experts say.
"There are many things that fit into the realm of benefits," said Ruth Storrings, director of human resources at Fort Lauderdale, Fla.-based AlphaStaff Group Inc."You and I might think of medical insurance, but there is also catastrophic health insurance, which is usually very low-cost but is only there if they absolutely have to have it."
And making participation voluntary can give the employee a choice between a higher weekly paycheck or much-needed benefits.
"People such as singles who need medical insurance are more than happy to take lower pay in exchange for a portion of their medical being paid for," said Michael Grossberg, president of the Greenvale, N.Y.-based payroll and employee benefits provider LCK Services."Other people who are struggling to pay their rent will forego medical unless they really need it."
Columbia, S.C.-based Planned Administrators Inc., a subsidiary of BlueCross BlueShield of South Carolina, offers limited-benefit health plans that can be purchased for as little as a few hours' pay each week.
"What we try to build into the plans are the basic kind of benefits that are going to get people in to see the doctor or get their prescription filled," said Susan Nicolai, director of marketing administration for PAI."If something happens, like a broken arm or a twisted ankle or someone's having a baby, these plans are designed to provide benefits that help the person cope with those types of expenses."
PAI is careful to communicate that the plans aren't meant to be catastrophic coverage, she said. "As long as people know that and they know what they are purchasing and they don't think they are buying major medical, it works well," she said.
Added attraction for low cost
Other types of low-cost insurance an operator can offer would include dental insurance, life insurance, accidental death and dismemberment or 401k plans.
Many operators offer employees assistance with things like filling out applications for government benefits. The 29-unit Sal's Pizza chain, based in Lawrence, Mass., partnered with local officials and area business owners to launch a Citizenship Initiative pilot program. The program will provide green-card holding employees with free legal guidance, educational assistance, citizenship training and language skills development to aid them in pre-qualifying for U.S. citizenship.
Employees enrolled in the program are required to be a legal permanent resident, have a stable employment record and a commitment to complete the program. In turn, employers are required to make financial contributions and actively reach out to employees who meet the criteria.
While things like flexible schedules aren't the same as an insurance benefit, they surely are a great benefit, Storrings said. Some companies are even creating a longer workday, squeezing a 40-hour week into 4 days in order to help employees cut down on commutes, although that concept doesn't always work in areas where states legislate overtime after a certain number of hours per day.
And paying employees via a payroll card that operates like a debit card can be attractive to low-income workers who might not have a bank account, she said.
Most important, Storrings said, is to make sure your employees understand the value of the benefits they receive.
"You also want to make sure you tell them every year the value of those benefits," she said. "I recommend to my clients to give employees a letter each year outlining the true cost of the benefits they receive."
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