Will lowering the costs of benefits increase wages? [View All]

[johnaries]

I posted most of this in reply to another thread, but I felt it deserved it's own thread.

NOTE: I am talking about non-Union companies and positions. Unions would have to negotiate for higher wages. If that is too difficult for them, considering what I am about to say they should hire new negotiators.

Having worked closely with HR on wage and salary issues I can explain this very simply:

Employee wage and compensation is the largest single expense for all but a handful of companies. Therefore, employers want to make sure they hire quality employees to get the most productivity or "bang for their buck" as it is often called. Further, employee retention is very important because the process of hiring and training is very expensive with no return value until the training is completed.

Every company is competing with every other company for many of the same employees. To effectively compete, HR departments have to track the employee market and what other companies are paying and what benefit packages they are offering. Most "quality" employees seeking long-term employment are looking for a good benefits package as well as good wages.

Like everything else, employee compensation has to be budgeted. If the benefits cost less, then there is more in the budget for wages. In order to compete with other companies in attracting potential employees, with benefits being more or less equal the company will increase wage offerings. Other companies will increase their wage offerings in turn to compete.

Unfortunately, these wage increases usually begin with new hires rather than existing employees. But, as other companies "woo" existing employees away with the increased wage offerings the company will then increase existing wages in order to maintain employee retention.

Therefore, yes, lowering the costs of benefits definitely results in increased wages.

With regrads to rising insurance preiums, my company actually took a very progressive approach.

Our home office had a small "work-out" room. The company expanded it, enhanced it, hired two full-time Physical Trainers (we affectionately call one of them the "Work-out Nazi" because she is so strict, but everybody loves her and she gets results), and began multiple Health programs.

It not only got us huge discounts on Health Insurance, it increased productivity and overall employee satisfaction. It was so successful Gov Bredesen came for a tour and encouraged other TN companies to follow suit.

Unfortunately, the premiums continue to rise despite the success of this program. It may have garnered us huge discounts, but it's only a matter or time until the continued increases put us back in the same position we were before - if something doesn't happen to directly control insurance costs (such as restricting the MLR, hint, hint).