As an employer, you’ve likely heard it said (over and over again):
“Your employees are your greatest asset.”
Truth be told, your employees are also your greatest expense. In fact, the average cost of labor amounts to over 70% of total business costs.
When total workforce compensation is broken down, the cost of employee benefits makes up a significant portion. The U.S. Department of Labor’s Bureau of Labor Statistics News Release reports that the cost of employee benefits corresponds to between 29.5% and 38.1% of labor costs.
In other words, your employee benefits program is a substantial investment.
With this in mind, your employee benefits broker can guarantee that you make the best possible investment. For the purpose of securing a competitive and cost-effective employee benefits program, your benefits broker is your greatest asset.
Why, then, is it also common to hear (over and over again)?
“My best friend is my benefits broker.”
Whether it be loyalty to a friend, a family member, or a long-term employee, placing and keeping a familiar relationship in such an important role may not be your best option.
Here at Combined, our benefits experts have helped countless employers, just like you, to establish a constructive benefits broker partnership. We want you to fully understand what to expect from your benefits broker and how to make sure these expectations are met.
In this article, you will learn the true cost of familiarity in a benefits broker partnership. By the end, you will know why healthy broker competition is valuable to scoring the best benefits program for your business.
What does a benefits broker do?
An employee benefits broker is a licensed insurance professional with expertise in employee benefits administration.
Their job is to know the ins and outs of the benefits industry – the best vendors, the best plans, the best practices for selecting and negotiating the best employee benefits programs at the best prices.
You may be wondering why I repeated “the best” so many times – simply to emphasize the importance of the role a benefits broker plays in helping an employer to navigate the process of purchasing the right employee benefits program.
And, because I’d be willing to guess, that as an employer, you want to offer your employees just that.
The best way to do this is to partner with the best benefits broker for your business.
How to determine the best benefits broker for your business?
The job of any benefits broker is to negotiate quotes with a variety of insurance carriers and offer you advice on which to choose.
Does that mean that all benefits brokers are the same? Of course not.
Think about it like this – in the sport of gymnastics, every athlete must compete in the same event types. But rather than perform the same routine, each athlete attempts new and different, innovative, advanced skills in order to stand out and win the gold.
While a benefits broker may not be tumbling across a spring-loaded floor, the concept of competition is the same. Competing benefits brokers offer new and different services, innovative software, even advanced reporting services in order to stand out.
In the case of a benefits broker, that coveted gold medal is the opportunity to provide broker services to your business.
Competition, then, can help you determine the right broker for your business. So why not use it to your advantage?
When comparing benefits brokers, here are a few questions you can ask to differentiate between them:
- Do they monitor and adapt to current market trends?
- Do they offer access to up-to-date, relevant technology?
- Do they offer ongoing employer and employee support?
- Do they have additional resources available to you?
By asking questions like these, you’ll be able to isolate which broker stands out to you, which broker can offer your business the services you value, and ultimately which broker is your best option.
What is the cost of the “my best friend is my benefits broker” dynamic?
Now that we’ve discussed the value of competition in the broker selection process, let’s examine why employing a friend or family member in the benefits broker role comes at a cost.
Let’s face it – no employer wants to replace an employee who they have built a relationship with. In the case of the “my best friend is my benefits broker” dynamic, you develop an obligation to continue working with the same broker, regardless of performance.
Even though competing brokers may provide better benefits plans, services, and perks, you keep your broker for the sake of comfortability.
If you work with a familiar relationship in the role of benefits broker, you eliminate any degree of broker competition.
Along the same lines as Tony Robbins’s famous words – “If you always do what you’ve always done, you’ll always get what you’ve always got” – the expectations and responsibilities of your best friend broker will not change. And, neither will the outcome.
And this lack of progress, in a constantly changing employment market, can cost you in several ways.
Let’s dive into the costs of removing competition from the broker playing field.
The cost of an outdated employee benefits program
Your benefits broker should continually be monitoring benefits program options to make sure that the one you are offering your employees is top-tier.
This means monitoring market trends so that your benefits program aligns with what employees want to be included in their benefits plan.
For example – According to the Society for Human Resource Management (SHRM), today’s workforce values the tax savings that accompany an employer-sponsored 401K retirement plan. As such, your employee benefits program will be more attractive to employees if it reflects the inclusion of 401K benefits.
By paying attention to changing employment trends, your benefits broker becomes crucial to recruitment and retention.
If your benefits broker is a friend or family member at little to no risk of being replaced, they are less likely to keep up with market trends and make optimal adjustments to your benefits program. Because of this, your benefits program can become outdated.
An outdated employee benefits program costs you the ability to competitively recruit and retain top talent.
The cost of obsolete benefits administration technology
How often do you update the software on your phone to keep it running at maximum capacity?
If you’re like me, the answer is too often to keep track of.
Your benefits broker should stay on top of advances in benefits administration technology in the same way that you maintain your phone software. If they do, the process behind your benefits management and enrollment will be quick and easy.
But, if your broker does not have the incentive of broker competition to do this, you risk using obsolete benefits administration software.
And obsolete benefits administration software costs you convenience and time.
The cost of inadequate compliance support
As an employer, you already know the importance of maintaining compliant policies.
Your benefits broker should assist you with benefits-related compliance management. Whether it be providing information on compliance updates or performing routine risk assessments, your broker can safeguard your benefits policies from slipping through the compliance cracks.
A familiar broker, however, may not offer compliance management as a service. Without the risk of another broker who does offer compliance support being hired, why would they?
A lack of compliance support costs you an increased risk of receiving compliance violations.
The cost of few broker resources
Competing benefits brokers often provide additional free resources.
A few resources your benefits broker may offer include:
- Compliance support
- Harassment training
- HR tools and assistance
- Employee handbook services
- COBRA administration
Resources like these may be something your business already needs. So, receiving them from your benefits broker is not only convenient, but also cost-effective.
If your benefits broker is a friend or family member at little to no risk of being replaced, they are less likely to offer many resources as a supplemental service. Which means, if you do require them, they can become an added expense.
In this sense, access to few broker resources costs you overhead.
Cost - The common denominator is your bottom line
What do all of these cost factors have in common?
They all cost you money.
Therefore, they all directly affect your bottom line.
If you are unable to hire and retain a capable workforce, your business productivity suffers. Decreased productivity directly affects your bottom line.
If using your benefits administration software is inconvenient, it draws time from another area in which it could be allocated. Misuse of time directly affects your bottom line.
If you receive compliance violations for your benefits policies, you will incur violation penalties. Paying unnecessary fees and fines directly affects your bottom line.
And expenditure on resources that your benefits broker could otherwise provide also directly affects your bottom line.
So, what is the takeaway?
A familiar business-to-broker relationship can cost you money and directly affect your bottom line.
Next steps to finding the best benefits broker for your business
Recall that the cost of your employee benefits program amounts to a significant portion of your total workforce expense. With this in mind, the benefits program you offer is an investment into your business.
By partnering with the right benefits broker, you can be sure to see the return on this investment.
In this article, you learned:
Now you understand how to approach finding the best benefits broker for your business!
Here at Combined, our benefits experts have successfully matched businesses with qualified benefits brokers for years. We are confident that we can help you find a broker that doesn’t just meet your service needs, but above and beyond exceeds your expectations.
Schedule a free consultation with an expert to discuss how you can better benefit from your benefits broker.
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|Contributors:||Jack Wang, Robin Tholt|