How do we create and then administer a benefits program for our workforce? We need to understand several things before creating the program so that we create a system that is both valuable to the employees and affordable for the organization. Remember that our goal is to have a program that increases employee motivation and engagement and helps create a competitive advantage. As part of strategic value, to help attract and retain the best workers, some companies offer generous voluntary benefits. But of course, any firm that decides to provide these generous benefits must be able to afford the high cost. The first issue is how much money the company is willing to spend to provide an employee benefits program. Many companies will calculate this as a percentage of direct compensation.
We may analyze the current situation and come to the conclusion that we are able to provide a 40% premium to direct compensation for the cost of benefits. We have to be very careful in our consideration of the amounts available for employee benefit programs. As with other types of compensation, if we tell our employees that we will provide a benefit that they value and then fail to follow through for any reason, it is just as damaging to motivation and engagement as any other type of management action that breaks the expectancy theory process. We need to make absolutely sure that we will have the funds available if we commit to providing the benefit.
Finally, we need to consider how much flexibility we are willing to build into our benefits program because flexible options are very important to today’s employees. Flexible benefit programs allow employees to pick from a set of benefits in some way. The employee can, at least for a portion of their benefit package, choose one type of benefit over another in flexible benefit plans. Flexibility is important to motivation because it gives employees the benefits that are of value to them—expectancy theory.
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