Most employers offer their workforce a benefit package that has been pieced together over a number of years and for a variety of reasons. Some benefits may no longer be appropriate for your current employee population, and others may simply be cost prohibitive in this environment of escalating prices. Consider the following questions as you evaluate your current and future plan offerings:

• Is your plan competitive with other firms in your industry?
Most employers consider their benefit portfolio to be one of their strongest recruiting tools. If your pay scale is adequate, but other firms in your industry offer a stronger benefits portfolio, it may cost you the talent you need to build your business. Check with your benefit consultant, or your industry association about what is generally accepted in your field.

• Are you and your employees maximizing your benefit dollar?
Small employers are usually subject to reform legislation that limits the plans that they have access to and the rating methodology used to calculate their premiums. Operating within these constraints does not allow you to be very creative in designing your plans. Instead, take a look at how you’re paying for them. If your employees are contributing to the cost of their benefits, give them access to IRS Section 125 plans, which give them the option of paying their contributions with pre-tax dollars. This will save money for your employees and your firm since you will be subject to lower payroll taxes. Take this concept a step further, and you can also allow employees to establish Section 125 pre-tax spending accounts to pay for unreimbursed medical or dependent care expenses.

• Does your contribution strategy position you for next year?
If you ask employees to contribute a flat dollar amount toward their benefits, you might find yourself in the awkward position of having to increase that number over the years. Consider using a percentage of your expense as the employee contribution. This percentage can remain constant and allow you to pass a portion of future increases on to employees.

• Do your employees understand the value of their benefit plan?
One of the most valuable exercises you can conduct with your employees is to reveal the total value of their compensation package. Employees often underestimate the financial contribution you make on their behalf in the form of non-cash benefits. Ask your benefit consultant to prepare a “hidden paycheck” analysis that will show employees what you provide by way of vacation days, paid holidays, retirement plan contributions and employer paid benefits such as life and disability insurance.

• Consider voluntary benefit options
Voluntary offerings are an excellent vehicle for expanding the scope of your benefit portfolio without increasing your cost. Employees can elect a wide range of benefits such as supplemental life or disability insurance, dental, vision, and even pre-paid legal support. The employee elects the amount of coverage that is appropriate for their situation, and pays for it via payroll deduction. Many of these benefits are not available on an individual basis, and by offering them through the workplace you get group rates.

• Don’t sacrifice quality
When you evaluate new benefit options, make sure you pay attention to the reputation and stability of the underwriting carrier. Look to independent rating services to provide information about the long-term financial viability of the carriers that you entrust with your business. A low rate may be attractive, but if the carrier is not around to pay claims, it won’t do you any good. Also rely on published information about the level of member satisfaction that carriers, particularly HMOs, are afforded.

Maybe the most important component of evaluating employee benefit options in the year 2000 lies in positioning your portfolio for change. If current trends continue, and you are faced with similar decisions next year, you want to leave yourself room to make further adjustments. If you make drastic changes now, you may not have anywhere to go next year. And if historical trends continue, it appears that we are in a cycle of increasing costs that will last for at least for the next 24 months.