Phasing in Employee Benefits by Seniority

Karen Taylor Smith is the Senior Manager, Group Benefits at The Benefits Trust. She has worked with The Benefits Trust since 1997, using her deep knowledge of employee benefit plans to customize the right solutions for businesses. Karen speaks, blogs, and contributes regularly to various media outlets on group benefits and compensation topics.

Phasing in Employee Benefits by Seniority

employee-benefitsWhen most people think about differentiating benefits for groups of employees, they assume the groups are separated by role. An example would be a benefits plan that provides executives with different benefits than customer service representatives (CSR) in small and mid-sized companies.

This is certainly one way that groups or classes can be defined to help your benefits plan reflect your compensation philosophy. However, groups of employees can also be created based on seniority. There is a difference between a CSR who has been working for you for 3 months and a CSR who has been with you for 10 years.

The CSR with many years of experience has a greater wealth of knowledge, and is therefore a valuable employee who you may want to provide with additional compensation. Although the CSR of 3 months and the CSR of 10 years are technically doing the same job, the employee with seniority is more of an asset to your company.

You may want to set up your benefits plan, or a component of your benefits plan, to reward loyalty to your organization. When there are material pay grade differences within a job class, it makes sense to provide a benefits plan that also compensates employees accordingly.

A custom benefits plan can be designed that will compensate, within a job class, based on seniority. Here are three examples of how this can be done:

1) Build a Healthcare Spending Account (HCSA) into your plan that provides employees with an HCSA of $200 for every year of service, with a cap of $2000.

2) Base an HCSA on a percentage of earnings. A new CSR will typically be paid less than an experienced CSR, creating a graduated scale over time.

3) Scale up the reimbursement levels in a traditional benefits plan design over time. Employees with less than 2 years are reimbursed with 50%, 2 to 4 year employees are reimbursed with 75%, and those with 5+ years are reimbursed with 90% or 100%.

With these plan designs, the benefits coverage is consistent for all employees, but those who have longevity in your organization are increasingly rewarded.  Phasing in employee benefits by seniority works well in many different businesses. It is particularly beneficial for any industry with a high turnover rate, as it can encourage employees to stay.

>> The Benefits Trust can help you create a benefits plan that rewards your employees by seniority, regardless of the size of your plan. Contact us today for more information.


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