A number of questions arise from an attraction and retention perspective alone: Are the benefits that employers currently offer competitive from a millennial’s perspective? How do millennials define benefits, anyway? Do they even care about benefits? Should they care?
This article endeavors to address some of these questions, and provide a springboard for future thought and action in offering competitive benefits to millennials.
Millennials as a predominant force
The millennial generation, also known as Generation Y, typically represents those whose dates of birth range from the early 1980s to about 2000. This generation follows Generation X, which in turn followed the baby boomer generation. As baby boomers continue their journey into retirement, they are increasingly being replaced by millennials in the workplace.
In 2000, millennials represented 6 percent of the U.S. workforce, compared to the baby boomers’ 48 percent and Generation X at 33 percent. While the Generation X’s percentage has remained largely steady over the last 15 years, the other generations have changed materially. Millennials have jumped to 35 percent in 2015, while the baby boomers have dropped from 48 percent to 31 percent. Millennials currently make up the largest portion of the workforce, and this shift will continue, with many experts expecting millennials to represent 75 percent of the country’s workforce within the next 10 years.
One can no longer think of millennials as the “kids in the office.” They are the office. (Click on the charts to enlarge them.)
When Generation Xers or baby boomers think of benefits, they will typically first think of a medical, dental or retirement plan, or perhaps life or disability insurance. There are many other benefits available, but these typically make up a large part of a core benefits package. This certainly makes a lot of sense, since these plans provide important protections for employees and their families. But where do millennials, the majority of the workforce, prefer that employers focus their attention?
According to a Price Waterhouse Coopers survey, the number one most valuable benefit to millennials is training and development. Number two on the list is flexible working hours, followed by cash bonuses. These benefits, based on the survey, are more important to millennials than even free private health care, which came in at a distant fourth. While employers spend a large amount of time each year toiling over copayments, deductibles, and which carrier to use for their health care plans, millennials may prefer that their employers spend more time thinking about how to assist them in their quest to grow professionally or establishing policies that allow for flexible schedules. While this preference may not ring true for older generations, employers must increasingly consider their evolving workforce.
Illustrated below, PWC conducted a global survey of millennials and what benefits they most value from employers. While it is important to note that millennials outside of the U.S., many of whom have access to some form of public health care, would not rank free private health care quite as highly, this study does illustrate key trends in what benefits millennials value.
Who chooses the benefits?
Compared to other generations, many millennials do not want their employer to pick many of their benefits for them, instead preferring that their company provide them with a list of benefits to choose from on their own. According to a recent study by the Employee Benefit Research Institute and Greenwald Associates, only 30 percent of millennials want their employer to choose their benefits the way they do today, while 45 percent would prefer to receive a defined dollar amount and then choose their benefits from a list. This suggests a shift toward the defined contribution approach that is being promoted by the private exchange industry today.
In many cases, millennials would go even further. They would prefer to just take the employer money that otherwise would go to benefits and decide for themselves outside the workplace which benefits — if any — to purchase. In fact, twenty-four percent of millennials would prefer this type of total control.
This trend calls into question the role that the employer plays in benefits selection for its employees. Is part of the employer’s role to protect employees from themselves, especially those in the younger generation who may not have the life experiences to know better? What would happen if employers indeed just gave employees the money and let them decidetheir own benefits?
Handing the reins over to employees: The long-term disability example
Today, the majority of large employers offer company-paid long-term disability insurance to their employees. This is a valuable benefit, as it generally pays out a percentage of pre-disability income until the employee’s normal retirement date.