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Demographics Affect Your Benefits

demographicsAs we approach the end of the year, it’s time for open enrollment. If you’re like me, you’re anxiously waiting for your HR department to reveal the new benefits package for 2013. Will your benefits improve? Are costs going to go up? I’m particularly anxious this year because for the first time, the HR department issued a benefits feedback survey to the employees. And since they used the same survey platform that the rest of the company uses, you can easily go in and look at the results.

And the results are largely not in my favor. My company started out as a few recent grads who had brilliant engineering minds. As the company grew, they looked for their kind of people – more young nerds. When I joined the company just over four years ago, well over half the employees were in their 20′s. But for a company to grow and compete in the business world, you need to bring in more experienced people. Over the past two years, the demographics of the company have shifted dramatically.

So the results of the benefits feedback survey were not surprising. After all, the benefits had been crafted to cater to a young workforce. With more middle aged employees who are supporting families, there were many complaints that the benefits package gave unfair preference to the young single employees.

There are a couple key areas where the age demographics of a company make a huge difference in the benefits package.

Premium Coverage

Because such a huge percentage of the employees were in their 20′s when the benefits package was first created, the premiums were low. So unlike most companies that pay a percentage of the employees’ premiums, my company pays 100% up to a certain dollar amount per month. That has worked great for years, because it allowed single employees in their 20′s to choose any plan they want, and employees in their 30′s or supporting a family could choose a cheaper plan that would be mostly covered or a more expensive plan that they’d have to pay a little extra for. Everyone was happy because they felt like the company was offering great benefits.

But if you’re a 50 year old supporting a family, even the cheapest plan is about three times the amount paid for by the company. Understandably, those employees don’t think it’s very fair that someone like me gets my premiums completely paid for while they have to pay 2/3 of their premiums. This was the number one complaint on the survey.

I’m assuming there is going to be a big change in premium coverage for 2013. We will very likely move to the more traditional percentage-based coverage. I will be very curious to see how the company balances giving the older employees a more fair package without making the younger employees feel like their benefits are shrinking too much. My speculation is that they’ll keep paying 100% up to a certain dollar amount and then pay a smaller percentage for any premium costs above that.

401(k) Matching

It’s no secret that most 20-somethings are not thinking about their retirement. While they love having great benefits when it comes to premium coverage, because it means they get more money in their pocket each month, they don’t care as much about their retirement benefits. And in turn, companies that employ predominantly young workers don’t feel the need to offer great retirement benefits. The typical matching structure at most companies is 50% matching up to 6% of your salary, for a total of 3% of your salary. When I joined my company, they matched a piddling $500/year. A couple years later they upped it to $1000/year. Getting better, but still far below what an experienced, high salary employee would like.

Now that we have more older employees who are more focused on their retirement, this below-average 401(k) match may come under fire. This was another area where there were many complaints on the survey. I don’t really have a good sense of how much most of my coworkers earn, but $1000/year is much less than 3% of my salary, and I think I’m one of the lower-salaried employees, so I can only assume that for most of the company, a $1000 match is absolutely terrible.

I’m expecting a change here. To stay competitive and attract great experienced people, the company has to offer retirement benefits that are more attractive to older workers. I’m curious to see if they increase the benefit but stay with a fixed dollar amount, or if they switch to a percentage-based benefit. If my benefits are going to shrink when it comes to premium coverage, I really hope they grow a lot here!

Have you experienced dramatically different benefits packages at companies with different age demographics? Have you worked at a company through a demographic shift and witnessed your benefits changing? Are there other demographics besides age that can affect how a company structures their benefits package?

4 Responses to Demographics Affect Your Benefits

  1. Very interesting…I’ve never been a part of such a small organization that grew such as this, so I’ve never experienced anything along these lines. It all does make sense though. However, I could argue that the current structure for your health insurance is fair: you’re all getting the same allowance. It’s not your fault that they have families and higher insurance premiums. ;)

    • Yes, you certainly could argue that a flat dollar amount toward coverage is more fair, but compared to what most companies offer, it strongly favors younger employees. And since most of our older employees came to us from a previous employer where they likely got more coverage, they really notice the difference.

  2. I think that benefits packages are becoming less generous across the board. What you are saying about the demographics of your company really makes sense though. I wouldn’t blame the older employees for thinking that the current situation was unfair to them. It’s hard to know what is fair, really.

    • It does seem like benefits packages are becoming less generous overall. I would hope that companies that are doing well and growing choose to reward their employees with nice benefits. I’m keeping my fingers crossed that our 2013 package is better than 2012!

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