Recalibrate Total Rewards Not Just for the Excise Tax | Mercer US

Recalibrate Total Rewards Not Just for the Excise Tax

Our Thinking / Healthcare /

Recalibrate Total Rewards Not Just for the Excise Tax
Calendar14 October 2015

As any HR professional knows, managing a total rewards program is a complex balancing act. How do you find the right combination of pay, benefits, career opportunities, and work/life balance to enhance the employee value proposition — the reason the people you want choose to work for you rather than another employer? And while you focus on internal imperatives like retention and maximizing productivity and performance, you must also be continually aware of external factors that can change the equation.

The excise tax on high-cost health plans is one such factor. In general, it is causing many employers with generous — and even not-so-generous — health plans to think about scaling them back. While it might seem to be just a benefits issue, it’s a great opportunity to step back and take a look at the entire rewards program. Companies that have to cut benefits because of the excise tax may not want to keep the money themselves. What’s the best thing to do with those dollars? If you push it into pay, how? Who gets it? Everyone? That might seem the obvious solution, but what’s the impact on other compensation structures in place? Can you enhance the benefit package to replace the lost value of the health plan with another tax-efficient offering? What if you put the money into training and development? Do you need to focus on attraction or retention?

You also need to look ahead five years or so because trends that are gaining momentum will change the employment landscape. We’re moving toward a bifurcated workforce of core vs on-demand employees. That means organizations will focus more on their own employees, while their contractors, freelancers, and temporaries will have to manage their own employee value proposition (think Uber drivers). And, as employees have greater accountability for managing their own careers and their own finances, we’re moving towards more individualized rewards and “do-it-yourself” benefits, where employees will need financial savvy to make good health care selection and 401(k) savings decisions to be ready for retirement.

Because young employees continually ask themselves “is this the best place for me to work,” employers must continually nurture, adjust, and reenergize the value proposition. The excise tax has come along at a time when deep, structural changes are also challenging us to reassess the impact of what we offer our employees.

If you haven’t yet stopped to consider whether your total rewards program will serve your organization’s needs five years from now, the excise tax might be just the nudge you need.

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