Article: Health benefits through a different prism

Compensation & Benefits

Health benefits through a different prism

The healthcare component not only balances the total rewards strategy but also affects employee well being
Health benefits through a different prism

Often it is seen that employers design healthcare benefits independent of other programs. It is essential to look at it within the total rewards framework


In the last few years, healthcare benefits have become an essential component of total rewards strategy. The realization that smartly planned and successfully implemented healthcare benefits can increase employees’ productivity and engagement is one of the driving forces behind this change. One thing is clear – Health and wellness is no longer a reward component that can be ignored or implemented just for the heck of it. It’s time companies try to see what they can do in this space to make it a differentiator for their employees. The argument that it is just a cost center and doesn’t show return on investment is losing the battle. Companies are realizing that the healthcare component not only balances their total rewards strategy but also affects employee well being, which in turn improves productivity.

To make healthcare benefits work, the approach needs to be completely overhauled. Often it is seen that employers design healthcare benefits independent of other programs. It is essential to look at it within the total rewards framework. The second step is to look at the offerings, service delivery, communication and engagement part. It will help HR include more relevant options in the bouquet, focus on the way a program is implemented and communicate its value proposition to employees and help them derive results.

A recent Deloitte study titled ‘2013 Top Five Global Employer Rewards Priorities Survey’ substantiates the argument that employee healthcare and wellness is one of the main components in total rewards and that it will gain more importance in the days to come. The study claims that during the research 63 per cent of respondents said health programs will receive more emphasis in case they plan to adjust the mix of Total Rewards programs in their organizations. Similarly, 64 per cent of respondents said that wellness and disease management will receive more emphasis. Clearly, companies are focusing more on healthcare benefits when designing their total rewards strategy and rightly so.

Most of the companies frame health benefits in a manner that employee and employer both have to pay premium for it. Over time, employees just see the deductions from their salary, thus they don’t look at it as a benefit. With greater focus on making healthcare benefits more effective, some companies are even exploring defined contribution approach, which is getting popular in the West. Defined contribution approach requires an employer to provide a fixed healthcare allowance to employees. Options like these, which show more value to employees, can be explored while designing the healthcare benefits.

Now, the question is, is the healthcare component getting the importance it deserves vis-à-vis other components of total rewards? The answer is - not really! There is a need to not only give healthcare benefits an important place while designing total rewards strategy, but also to look at how this benefit can be a differentiator for employees. This will require focus on the offerings and implementation part of it. The fact is that only initial base of work is happening in that space at this point; mostly the approach towards it is traditional. Offerings include typical options such as mass packages for health checkups or health insurance etc. This reduces it to a tick box exercise rather than a reward. Secondly, biases exist against the importance of employee healthcare. Many companies, especially the ones that are starting out to restructure their total rewards follow the traditional outlook of seeing it as a mandatory spend rather than as an investment made towards employee engagement and productivity. This skepticism arises from the thought that monetary benefits or perks show immediate results while healthcare investments take time to show RoI. This approach will not yield results in the long run.

In the offering there should be value for the end customer i.e. employee. Plans that would drive results should be identified and included. Need of the hour is focus on preventive health checkups and events. There is a need to redesign health benefits to better align with the needs and requirements of employees. One trend that is coming up to speed is to make these more flexible. An ideal case will be where employers keep employee needs in mind while picking healthcare plans for them. It might require some degree of customization. If the end customer –which is employee- doesn’t find value in the offerings, it will reduce the entire plan to a futile exercise with minimum employee engagement.

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Topics: Compensation & Benefits, #ExpertViews, #TotalRewards

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