US Employees’ Bonuses and Benefits Growing Faster than Wages

US Employees’ Bonuses and Benefits Growing Faster than Wages

The latest compensation data from the US Labor Department’s Bureau of Labor Statistics show that total compensation for US employees has increased modestly over the past year, from $35.28 per hour worked in June 2017 to $36.22 per hour worked in June 2018. Wages and salaries averaged $24.72 per hour worked and accounted for 68.3 percent of these costs, while benefits averaged $11.50 and accounted for 31.7 percent. For private sector employees, compensation has increased from $33.26 per hour worked to $34.19. Wages made up $23.78 or 69.6 percent of that figure, while the remaining $10.41 (30.4 percent) consisted of benefit costs, in which the BLS includes supplemental pay.

While the percentage ratio of wages to benefits was unchanged from June 2017, benefit costs grew at a slightly higher rate than wages year-over-year, nearly 3 percent compared to 2.7 percent. This reflects a nearly 12 percent increase in bonuses and other forms of supplemental pay, from $1.18 per hour to $1.32; supplemental pay made up 3.8 percent of the total compensation mix in June 2018, compared to 3.5 percent a year earlier. Paid leave, including vacation time, also increased slightly.

Taking a longer-term view, over the past five years, benefit costs for private-sector employees have increased by over 20 percent, from $8.64 per hour worked in June 2013; whereas wages and salaries have increased 16 percent, from $20.47 that month. Supplemental pay, by comparison, has increased 65 percent from 80¢ per hour worked in June 2013. This trajectory reflects the increasing tendency we’ve observed among employers in recent years toward variable pay schemes that reward employees for high performance with one-time bonuses rather than standard annual raises.

Read more

Including Benefits in Job Postings Can Help Attract Talent

Including Benefits in Job Postings Can Help Attract Talent

Competitive total rewards packages are a key battleground in the scramble for talent today. Yet many organizations still rely on outdated approaches when communicating rewards through the hiring process, focusing too much on compensation while neglecting benefits. This is becoming more difficult as salary budgets continue to stagnate: Recent salary surveys suggest that cash wages in the US are unlikely to grow much faster in the coming year than they have in 2018, despite a strong economy and a tight labor market.

While compensation is consistently a top driver of candidate attraction anywhere in the world, we know that candidates are also attracted to tangible benefits like health insurance and paid leave, as well as intangible benefits like flexible scheduling and remote work options. Even as wage growth falls short of expectations, we have seen major US employers investing more in benefits like paid family and sick leave, health insurance, and education benefits like tuition assistance and help with paying off student loans.

To better understand how employers can use their benefit offerings as talent attractors, Gartner’s Total Rewards team worked with data from our talent market intelligence portal TalentNeuron, looking for a connection between how organizations pitch their benefits in job postings and how quickly they are able to fill posted roles. Organizations that don’t leverage their benefits offerings in this way, we found, may be missing out on an opportunity to meaningfully boost their appeal to candidates.

Read more

IRS Approves Company’s 401(k) Matching Benefit for Student Loan Payments

IRS Approves Company’s 401(k) Matching Benefit for Student Loan Payments

A private letter ruling released on Friday by the US Internal Revenue Service gave the tax authority’s blessing to a benefit program in which an company offers to make contributions to its employees’ 401(k) retirement savings if they put a certain percentage of their salaries toward paying down their student debt. The letter finds that this scheme does not violate the regulatory prohibition on making other benefits contingent on an employee’s participation or non-participation in a 401(k) plan.

The letter explicitly notes that its ruling applies only to this one employer, and written determinations such as this letter cannot be used as precedent under federal law. Nonetheless, one expert tells Employee Benefit News that this could pave the way for more employers to offer similar matching programs for student loan payments:

Historically, many plan sponsors have questioned whether such an approach would be permissible under IRS rules. But, explains Jeffrey Holdvogt, an employee benefits partner with McDermott Will & Emery in Chicago, the ruling confirmed that— under certain circumstances — “employers may be able to link the amount of employer contributions made on an employee’s behalf under a 401(k) plan to the amount of student loan repayments made by the employee outside the plan.” …

“[The letter] provides helpful guidance for employers looking for new ways to provide such benefits and, in particular, for employers looking for ways to accomplish the dual purpose of helping employees manage student loan repayment obligations while saving for retirement,” Holdvogt says.

The organization in question is not identified in the published letter, but the matching program it describes appears identical to the one the pharmaceutical company Abbott Laboratories rolled out in late June. In Abbott’s Freedom 2 Save program, if employees contribute at least 2 percent of their salary toward their student loans in a year, the company will contribute the equivalent of 5 percent of their salary to their 401(k) plan at the end of that year.

Read more

Are HDHPs Supplanting Traditional Health Plans? Not Quite Yet.

Are HDHPs Supplanting Traditional Health Plans? Not Quite Yet.

A recent data brief from the Centers for Disease Control and Prevention illustrates the growth in popularity of high-deductible health plans (HDHPs) over the past decade. Between 2007 through 2017, the CDC data show, the percentage of adults 18–64 with employer-provided health insurance who were enrolled in an HDHP with a health savings account increased from 4.2 percent to 18.9 percent, while the percentage enrolled in an HDHP without an HSA rose from 10.6 percent to 24.5 percent. In 2017, enrollment in HDHPs was highest among adults aged 30–44 than among other age demographic.

The greater an individual’s family income level and educational attainment, the more likely they were to be enrolled in an HDHP with an HSA, the CDC found, while the likelihood of enrollment in both traditional health plans and non-HSA high-deductible plans decreased as income and education rose. This may reflect a greater understanding of the investment value of HSAs among higher-earning and more educated employees.

Other recent data tells a similar story: Last year, Bank of America Merrill Lynch’s Plan Wellness Scorecard found that more employers were offering HSAs, more employees were using them, and their account balances were growing. That report also found that employees were using about 70 percent of their HSA contributions to cover health expenditures during the year and saving the other 30 percent for future expenses.

However, while the adoption of HDHPs has certainly grown over the past decade, our benefits research at Gartner shows that their popularity has been leveling off over the past three years, when deductibles for individual plans have actually been trending downward. (Gartner Total Rewards Leadership Council clients can view our full report on medical plan trends and observations for 2018 here.)

Read more

GM Partners with Henry Ford Health System on Direct-to-Employer Care Plan

GM Partners with Henry Ford Health System on Direct-to-Employer Care Plan

General Motors has made a deal with Henry Ford Health System, a Detroit-based hospital system, to provide a new health care plan to its salaried employees and their dependents in southeast Michigan, the Wall Street Journal reported on Monday. The optional ConnectedCare plan, which will be available to some 24,000 GM employees and their dependents starting next year, replaces traditional group health insurance with a direct-contract system wherein Henry Ford will manage nearly all of the participating employees’ health care needs.

The company’s existing health insurance options will remain available, but the ConnectedCare plan is expected to save them anywhere from $300 to $900 a year compared with the current cheapest option. According to a press release from the Henry Ford system, the plan will give GM employees access to more than 3,000 health care providers offering “a comprehensive range of health care services including primary care, more than 40 specialties, behavioral health services, hospitalization and emergency care as needed, as well as pharmacy and other services.”

Under the five-year contract, the hospital system agreed to specific goals for quality, cost and customer service. For instance, plan participants are promised same-day or next-day appointments with primary care physicians and appointments with specialists within 10 business days. They will also have access to a range of digital health tools, wellness services, and assistance in managing their care and choosing the right health care options, Henry Ford said in its statement.

Blue Cross Blue Shield of Michigan, GM’s insurance provider in that state, will continue to manage claims-processing and other functions, while again continuing to provide the PPO plans GM already offers its employees. ConnectedCare will not apply to GM’s large unionized workforce in Michigan, whose health benefits are negotiated under a labor agreement.

Read more

Employee Engagement in Financial Wellness Programs Lags Behind Need and Interest

Employee Engagement in Financial Wellness Programs Lags Behind Need and Interest

Financial wellbeing programs that help employees better manage their finances, pay down debt, and plan for retirement have become commonplace among private US employers. Employees want this kind of help and employers are increasingly eager to offer it. Bank of America Merrill Lynch’s 2018 Workplace Benefits Report, however, finds that only one third of employees are actually participating in these programs, even though many more are struggling with financial fitness, Nick Otto reports at Employee Benefit News. One potential explanation for this low level of engagement is that the financial wellness benefits employers are offering are misaligned with employees’ own priorities:

Employers tend to focus on actions to manage immediate financial needs, such as budgeting and handling expenses, according to the study. Meanwhile, employees mostly prioritize long-term financial goals, such as tactics that help them save and invest for the future. The report finds workers are looking to their employers to help manage their financial lives, shining a light on what employees seek in an employer-sponsored financial wellness program.

Employees feel the best approach to improve financial wellness is getting a personal financial assessment, supported by specific actions to take. Additionally, employees would also like help measuring their progress, through tracking and measuring of accomplishments.

Another notable finding from the report is that few employees recognize the role of health care costs in their financial planning: 7 percent identified health care as a key component of financial wellness, even though more than half said they had skipped or postponed a medical need to save money. The connection between health care costs and financial wellbeing is particularly salient in the US; for instance, many experts have promoted the use of health savings accounts as long-term savings and investment vehicles, comparable to 401(k) plans for retirement.

Read more

More US Workers Receiving Health Insurance Through Their Employers Again

More US Workers Receiving Health Insurance Through Their Employers Again

The latest data from the Labor Department shows that the percentage of private sector employees in the US offered health insurance through their employer rose from 67 percent in 2017 to 69 percent this year, the Wall Street Journal reported earlier this month. This figure had dwindled from 71 percent in 2010, when the department began conducting this survey, and this latest uptick represents the first year-over-year increase since 2012.

The Labor Department report showed that 86 percent of full-time private sector employees were offered health benefits, along with 21 percent of part-timers. Union members were significantly more likely to be offered these benefits (94 percent) than non-union employees (66 percent). Of those private sector employees offered medical benefits, 72 percent chose to take advantage of them.

Smaller employers, who are not required to offer health insurance under the Affordable Care Act, had driven most of the decline over the past eight years: Among organizations with fewer than 50 people, 51 percent offered health insurance to their employees in 2018 compared to 55 percent in 2010. Large businesses, with over 500 workers, have been more consistent in offering these benefits, with the percentage of large employers providing health insurance hovering near 90 percent since 2010.

The ACA mandates that organizations with 50 or more full-time equivalent employees offer at least a minimum standard of health benefits to employees working 30 or more hours a week, or pay a penalty of $2,000 per employee. Most large businesses already offered medical benefits before the ACA took effect and continued to do so, but some mid-sized employers have chosen to pay the penalty instead, as the cost of covering their employees would be greater, Paul Fronstin, director of the Health Research and Education Program at the Employee Benefit Research Institute, told the Journal.

Read more