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Small Business Digest



Voluntary Benefits Can Help Meet Challenges of Productivity, Health-Insurance Costs, Employee Retention

Particularly for small-business owners and their HR staffs, the Great Recession has led to a Great Balancing Act between the needs of the business and the needs of employees, an Aflac executive says.

At the root of the business side of the equation is the reality of rising costs, particularly regarding healthcare/medical insurance. Equally important to maintaining balance is the need to effectively manage, engage and leverage workers - a company's human-resource assets can become its largest expense or profit lever, says Thomas R. Giddens, Aflac's senior vice president and director of sales.

A recent Aflac survey identified the top three issues for small businesses (those with three to 99 employees) as increasing employee productivity (51%), controlling health/medical insurance costs (47%), and retaining employees (43%)."These findings reflect all too clearly the daily battle faced by small-business owners," Giddens says. "Such a complex issue can't be solved by one single measure or tactic; however, adding voluntary insurance policies to the benefits offerings can greatly impact all three priorities for small businesses."

Priority One: Controlling Health/Medical Insurance Costs: Healthcare costs are rising. The average cost of a family plan in 2009 was $13,375, with employers paying $9,860, according to the Kaiser Family Foundation. For the foreseeable future, employers will continue to struggle to find ways to keep health costs down and provide access to the coverage their employees need. This is particularly true for small businesses, which, because of their size, could be significantly affected by even a small misstep in managing healthcare costs.

Many small-business owners and their employees are looking for more-flexible benefits options as they seek ways to manage rising healthcare expenses. Making voluntary insurance policies available to employees has no direct cost to the employer, and may reduce corporate taxes by cutting FICA tax contributions. Adding voluntary plans to a company's benefits offerings can help to satisfy the biggest benefit challenge for six out of 10 small businesses - offering robust benefits while staying within budget/cost constraints.

Priority Two: Curbing Productivity Loss: he very nature of a small-business operation is to run lean and mean, squeezing every ounce of productivity out of a streamlined staff. That's why any loss in productivity can in many cases significantly affect the ability of small businesses to compete, Giddens says.

Workers' productivity is often dictated by personal distractions, including financial and health struggles. In fact, 47% of employees who work for a small business said they were currently dealing with a health or financial problem that affected their ability to get their job done. Further, roughly 58% of small-business owners believe their company has lost between 5% and 20% of work productivity because employees are concerned about personal issues they are experiencing. And 32% of owners say they've lost 20% or more of work productivity.

A strong connection exists between health and finances.  A worker's financial stability can be threatened by an unexpected illness or accident; and conversely, the ability to obtain adequate medical care can be influenced by finances. For example, 62% of all personal bankruptcies in the U.S. in 2007 were caused by health problems, according to a research study conducted by Drs. David Himmelstein and Steffie Woolhandler of Harvard Medical School; Elizabeth Warren of Harvard Law School; and Deborah Thorne, a sociology professor at Ohio University.
Voluntary insurance plans - including policies for accident, cancer/specified-disease, dental, life, short-term disability and vision - help employees cope with out-of-pocket costs associated with serious accidents or illnesses - costs major medical insurance is not designed to cover. In the event of a serious accident or illness, policyholders receive cash benefits that can be used to help pay for daily living expenses, such as rent, gas, groceries, travel expenses and baby sitting, as well as unreimbursed medical expenses.

Priority Three: Controlling Turnover Costs, Increasing Retention: Labor expenses can be one of the largest costs for companies today. According to the U.S. Department of Labor, it costs a company one-third of a person's annual salary to replace him or her. These are expenses that can derail the best small-business management. Particularly now, as small businesses are helping to drive the U.S. economy and put the recession behind them, having the best of talent in place is priceless.
A company's benefits package can directly affect retention of employees. The Aflac study found that 63% of small-business owners think their overall benefits package is very influential in employee satisfaction and loyalty, and 18% believe it is very influential in an employee's decision to leave the company.

Voluntary benefits not only can enhance a company's benefits package, allowing it to better compete with larger organizations' benefits programs, but can also demonstrate to employees that they matter. With no direct cost to the company, adding voluntary benefits as an option for employees may go a long way in helping to avoid the high pricetag of turnover.

"As the cost of healthcare continues to rise, many companies are cutting back on major medical-insurance coverage to help keep rising costs at bay," Giddens says. "Yet, there remains a great need to help employees improve their healthcare coverage and prepare for the unexpected occurrences of life. What may have been viewed as a nice-to-have benefit in years past, voluntary insurance may now be considered as a cost-effective supplement to core benefits and has become essential to many small businesses."

For more information about Aflac, call 1-800-99-AFLAC (1-800-992-3522) or visit

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