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Is bigger better?

Smaller firms fare well, according to a survey comparing benefits offered by Indiana employers.

It's a common perception that employee benefits are better when the company is bigger. But it's not necessarily true in Indiana, or at least the comparison is not that simple.

That's evident from a look at the annual Compdata compensation and benefits survey conducted for the Indiana Chamber of Commerce by HRMS Inc. of Indianapolis. Among its general findings is the not-surprising fact that larger employers tend to offer more benefit choices than do smaller firms; hence the perception that bigger is better. Yet Compdata also spotlights an often overlooked truth: At larger firms, employees themselves tend to chip in more for their benefits.

"You would anticipate that smaller companies are not going to be as sophisticated, and that's not necessarily the case," says Robert S. Sinn, principal of Indianapolis-based HRMS. "You're not going to have as many options, but smaller companies are more likely to pay a larger percentage of your insurance. Your out-of-pocket expense is going to be less at a smaller company, as reported by this survey. Smaller companies are making benefits choices, which are to pay for more of fewer benefits. Smaller companies may be a little more paternalistic."

Evidence that the benefits at smaller companies are different but not necessarily inferior begins with the survey question "What percentage of payroll are your benefit costs?" The average response for companies with fewer than 100 employees was 18.3 percent. The average for companies with 1,000 or more employees was only slightly higher, at 22.8 percent. "The actual cost of non-mandated benefits is not all that different," Sinn says.

The differences start to show up in the specifics of the benefits plans. Take health insurance, probably the most basic and important benefit of all. All of the respondents said they offer a health plan. And though the survey didn't question this point, it's common practice in Indiana for the employer--large or small--to pay the entire premium for employees. But in the case of coverage for dependents, just 9 percent of the largest employers pay all of the premium, while some 28 percent of the smallest companies do so.

The insurance deductible provides another example of out-of-pocket savings for those who work for smaller companies. Of the smallest companies responding to the Compdata survey, 39 percent reported an annual per-person deductible of $100 or less, while just 11 percent of the largest companies reported a deductible that low. Also, 20 percent of the smallest companies reported an annual family deductible of $200 or less, compared with just 11 percent of the larger companies. On the other hand, there was little difference regarding co-insurance; nearly all companies, large and small, said their plans require co-insurance payments of 20 percent or less.

From here, the picture changes. Ask about other benefits and you're likely to get more affirmative responses from the larger companies. Nearly 91 percent of the surveyed companies with 1,000 or more employees said they offer a prescription drug plan, while just under 60 percent of the companies with fewer than 100 full-timers said they did. The numbers were similar on the question of dental insurance. Some 36 percent of the largest companies reported a vision-care program, while 25 percent of the smallest companies cited that benefit among their offerings. "If you're in a larger company," Sinn says, "you're generally going to have more options."

Health insurance may be an important benefit, but companies these days say they're having to work a lot harder to keep their plans intact. Gone are the days of linking up with one insurance company and renewing every year; premium increases have forced employers to do a lot of shopping. John Hogg of Peerless Potato Chips Inc., a Gary-based potato-chip maker and snack-food distributor that employs about a dozen, says his company has changed carriers a couple of times in recent years. "I never used to mess with it."

"We've shopped our health-insurance plan almost on an annual basis, and we've changed twice," agrees John Stone of the Evansville Brewing Co., whose 100 employees brew a number of brands of beer, including Falls City, Sterling and Wiedemann.

Gemeinhardt Co. Inc. of Elkhart--a division of Steinway Musical Properties that makes flutes and piccolos and employs 180 people--had to do some shopping when its hourly work force turned in some hefty claims and caused a premium increase. Kathy Andrews, Gemeinhardt's personnel manager, says the answer for hourly workers turned out to be a health-maintenance organization, which the company could afford and the employees seem to like. Salaried Gemeinhardt employees continue to use a conventional insurance plan, she adds.

A creative option to which a large number of companies continue to turn is self insurance. Of the Compdata respondents with 1,000 or more full-time workers, 86 percent said they were self insured. This type of plan funding clearly works best with the biggest companies, yet 46 percent of the companies with fewer than 100 employees also said they were self insured. Most of these self-insured companies, especially the smallest ones, said they carry stop-loss policies.

One way to keep claims lower is to promote wellness, more and more employers are finding. "The trend is obviously toward wellness and fitness," Sinn says. "But you can see that it's dramatically different in that larger companies have started the transition and smaller companies haven't." Nearly three-quarters of the largest companies surveyed said they have a program to promote wellness, fitness and better health, while under a quarter of the smallest companies have such a program. More than a third of the big companies provide on-site exercise facilities, while about 6 percent of the small companies do. And a related wellness-promoting idea, employee-assistance programs--which offer counseling services--were reported by more than 80 percent of the largest companies but fewer than 40 percent of the smallest ones.

Sunrise Publications in Bloomington is among the companies promoting wellness. In addition to the standard health-insurance plan Sunrise offers, "our employees are allowed to spend up to $250 a year for physical examinations, mammograms, pap smears and that sort of thing," says Kathy Anderson-Conner, vice president of administration at the 230-employee firm. "We're trying to encourage employees to have regular checkups." The wellness money is available with no deductible or co-payments.

While employees are concerned about their health today, they also worry about their finances tomorrow. That's why most of the companies in the Compdata survey offer some kind of pension plan. Of the largest companies, virtually all have plans, as do about four-fifths of the smallest companies.

The type of plan varies greatly, however. Among the companies with fewer than 100 workers, the pension plan is a 401(k) plan in about half of the cases. Among the companies with 1,000 or more employees, just 14 percent of the official pension plans are of the 401(k) variety, though two-thirds of the big companies and a third of the small firms do offer 401(k) plans in addition to their non-401(k) pension plans. Of the companies that offer a 401(k) plan, three-quarters of the big firms and two-thirds of the small companies match at least part of their employees' contributions.

Peerless Potato Chips has a pension plan, says Hogg, though it's not a 401(k). The company makes a contribution to employees' Individual Retirement Accounts. The 401(k) plan simply is too complicated for a firm as small as his, he says. "I don't want to get into a 401(k) because there are too many hang-ups and ifs and ands and ors and buts. With our plan, if an employee leaves, he takes his IRA book with him."

Likewise, Cabinets by Nichols Inc. in Bargersville isn't quite ready to step into a 401(k) arrangement, says Robert Nichols Jr., the vice president. However, the manufacturer's 54 employees may make IRA contributions through payroll deduction, a benefit Nichols says is popular. "It's amazing how many people have started IRAs that way."

Rod O'Kelley Inc.'s employees in Terre Haute also may build up savings through payroll deduction, says Rod O'Kelley, president of the dozen-employee firm that sells boots, raises livestock and makes Pizzazz-brand dog food. That option is in addition to the retirement fund to which the company contributes.

A related benefit some companies offer is profit sharing. Compdata found such plans in 29 percent of the companies with fewer than 100 employees and 36 percent of the firms employing 1,000 or more.

Cabinets by Nichols has a similar type of incentive plan that has paid off for both the employees and the company, Nichols says. His company's plan is based on production incentives, and employees often earn bonus pay equivalent to the better part of a week's paycheck. The plan has boosted productivity and fostered teamwork, Nichols says; often when employees of one area meet their goals, they then help employees in another department.

Then come other benefits. Paying for child care is a concern of many workers, and 41 percent of the largest employers in the Compdata survey offer some sort of child-care assistance. Some Indiana companies--such as the Fishers-based USA Group, an education-finance firm--offer child-care facilities on the premises. Child-care assistance is an idea that has not yet caught on among smaller companies, however; of the smallest Compdata respondents, just 6 percent offer child-care assistance.

A so-called flexible-benefits plan can help employees with child-care expenses, even if the company itself doesn't make a contribution. At Cabinets by Nichols, for example, workers may have a specified amount of their check set aside before taxes are taken out, and that tax-free income may then be spent on work-related child care. Nichols adds that the tax-free dollars also may go toward non-covered medical expenses, including deductibles, co-payments, routine physicals, vision care and dental costs.

Tuition-assistance plans remain popular among Indiana employers. In the Compdata survey, the percentage offering tuition assistance ranges among the company-size groups from 72 percent to 88 percent.

Flexible scheduling is an idea that seems to be catching on as well. Compdata found nearly 60 percent of the largest companies and nearly 40 percent of the smallest companies offering some alternatives to the standard 8-to-5 schedule. At Sunrise Publications, for example, all workers must be at their jobs during certain "core hours" and must work the required total number of hours. But they may set their own arrival and departure times depending on their own needs, such as getting their children to the bus stop.

Also, Anderson-Conner says, Sunrise tries to expand the standard holidays by tacking on extra days, in an effort to provide a four-day weekend every month. It's good for morale for obvious reasons, but it also helps productivity during the days employees do work. "They can time their outside appointments on those off days, and they don't end up missing as much work."

The morale factor is, perhaps, one of the main reasons companies like to be as generous with benefits as possible. A happy and well-protected work force is a productive and stable work force. "People always come and go, but since we improved our benefits package we've hardly had any turnover here," says Nichols of Cabinets by Nichols.

"We obviously feel our employees are the most important part of our business," adds Andrews of Gemeinhardt. And because the Elkhart area is peppered with other companies that make musical instruments, "we need to be competitive in our industry so we can attract the best employees."

What does the future hold? Prognosticators expect more and more employees to look for jobs that include long-term-care insurance for when they retire, though that notion hasn't really caught on in Indiana yet. Hoosiers can look to the coasts for other ideas as well, Sinn says. "In California, some companies are offering $300 to $500 of credit toward getting an attorney to do wills and that sort of thing. We're such a litigious society that ultimately that's going to be an issue as a benefit."

Indeed, non-Hoosier companies like American Express, AT&T and PepsiCo already offer legal-services plans. According to Hyatt Legal Plans, such coverage can cost anywhere from $3 per month per employee for a simple plan that handles wills, trusts and real-estate deals, up to $12 for a comprehensive plan that adds services such as adoption, divorce, personal bankruptcy and defense of civil lawsuits and traffic violations.

Up-and-coming benefits also include discounts on everyday things such as pizza and drycleaning. A new Indianapolis consulting company called Progressive Benefits Group among other things will arrange a discount card that employees may use at area merchants.

What about the serious issues such as health care? Managed care is on the rise, and Sinn says some people are predicting that companies will begin hiring their own doctors to get an even better handle on health-care costs. "But I don't know if that's going to happen," because that could expose companies to additional liability.

With health-care benefit costs continuing to climb, businesses will continue to seek creative solutions, but it won't be easy, he says. "The whole issue of health care is one that defies any rational answer."
COPYRIGHT 1992 Curtis Magazine Group, Inc.
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Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Author:Kaelble, Steve
Publication:Indiana Business Magazine
Date:May 1, 1992
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