Are benefits beneficial?

In my last column I proposed the dangerous idea that job experience is overrated. I have a few more dangerous ideas and was planning to save them for later, but one of these dangerous ideas seems especially relevant now.

Let me preface this idea by stating that I’m not taking sides in the current school budget dilemma. Most organizations are facing the same situation, but the school budget allows us to view the problem with some numbers.

Let’s start with a thought experiment. Let’s imagine that we’re starting a brand new school system. We have 68 million dollars to use to educate approximately 11,000 students. How should the money be used to best accomplish the goal?

We could probably come up with a nice long list of ways to spend the money. My list would start with good teachers, books, computers, supplies, furniture, utilities, and building maintenance.

But if we were starting from scratch, how long would it take for someone to suggest that we should spend $200,000 of the money on dental care for teachers’ spouses? That’s not in my top ten and probably wouldn’t be in my top hundred.

Again, I’m not taking sides in the current debate, I’m simply offering this “dangerous” idea: I think employee benefits are a bad way to accomplish what most organizations want to accomplish.

Most organizations use employee benefits to help attract and retain the best employees. They keep people happy. But what if that’s not true? Let’s follow the logic.

Do the best teachers tend to have spouses with bad teeth? We can see the same kind of problem as we examine the most popular employee benefits. On average, companies spend an amount equal to 40 percent of their payroll on employee benefits. Companies spend the most on health insurance, retirement savings, and paid time off.

If a space alien landed in the US and observed this pattern, I’m sure they would ask why we pay so much to attract sickly people who want to get paid for not working.

The idea that benefits help to attract and retain the best employees is certainly debatable. But even if we accept the fact that good employees expect the most popular benefits, we still need to ask: Are benefits the most cost-effective way to “buy” employee loyalty?

The school budget for next year includes about $7.5 million for health insurance. I wonder how many teachers would rather just divide up that pool and take the cash?

Here’s the part where the benefits expert points out that taxes must be paid on the cash but not on the insurance. And the whole idea behind a group plan is to buy insurance at a discount.
That’s true, but I believe that most families can buy perfectly acceptable health insurance plans for much less and would still have some left over to supplement their salaries.

The problem is that we (employees) never shop around. So the cost of the group plan continues to rise, employers continue to pay the premiums because they don’t believe they have a choice, and money gets diverted from the organization’s real goals.

I’m almost to the bottom of the page, but I feel obligated to also point out that I’ve never met an employee who preferred spousal dental care over a positive and supportive work environment.