When is $1.00 worth $1.39? When you provide fringe benefits to your employees.

According to a 2000 Chamber of Commerce study on employee benefits, employers paid an additional 36.8 percent over wages in 1999 for employee benefits. These benefits include everything from group life and health coverage to annual bonuses, pension and profit-sharing plans, tuition reimbursement, paid vacation, holidays, medical leave — even free parking. Providing employees with these perks is like giving them a "second paycheck" for each actual paycheck they receive.

Unfortunately, that "second paycheck" goes unnoticed by most employees. According to the same study, 2 out of 3 employees have no idea how much of their total compensation comes from this hidden paycheck. Employers are paying more and more each year, but the real value of those payments is not perceived by employees. Little wonder then, that employers are increasingly looking for ways to cut benefit costs. But there's a slippery slope here: Employers still need to attract and retain valuable employees, and a good benefits package is key to that aim.

That is why Voluntary Payroll Deduction (VPD¹) programs are rapidly gaining in popularity among business owners. These programs — which enable employees to purchase individual life plans through the convenience of payroll deduction — are helping employers add perceived real value to their benefit packages with no direct out-of-pocket cost to themselves. Since the coverage offered under these plans is individual-employee-owned, it is also individual-employee-paid. Employers simply apply the administrative procedures they're already using for other payroll deductions to enable their employees to create a disciplined, painless protection program.

¹ Employee participation in a payroll deduction insurance program is completely voluntary. Since this program is not intended to be subject to the Employee Retirement Security Act of 1974 (ERISA), the employer does not contribute to, or endorse, any policy offered under the program.

VPD programs can provide real value to employees for a number of reasons:

• All employees can participate. Unlike many individual life insurance plans, VPD programs often have fairly liberal underwriting requirements. As a result, they are offered to all active employees equally, and voluntarily chosen or declined. The opportunity to apply for insurance is open to all, and the decision to apply is made individually by employees.
• Employees like the ease and convenience. The majority of employees view payroll deduction as a good way to obtain insurance. Since they don't have to write out a check to pay, the buying experience is relatively painless; and because they don't have to remember to pay, it's easier as well.
• These plans fill a definite need. According to the latest information from the Life Insurance Marketing Research Association (LIMRA), 55% of all employees surveyed had no personal insurance, and many surveyed had no dependent coverage. Moreover, well over 80% of employees will outlive their group term insurance coverage.² The security of a life insurance policy that offers the opportunity for cash value accumulation can be the perfect solution for many of today's workers.
• Policies purchased under a VPD program are portable. Employees own their own policies and can take the coverage with them if they leave their jobs for any reason. Of course, this is also true of any life coverage purchased through the plan on spouses, children, and grandchildren.

² Source: A Social Dilemma: The Growing Underserved Market, LIMRA and LOMA, 1999.

For all of these reasons, VPD programs greatly enhance the morale of employees even when there are few employee benefits. The employer is making insurance coverage conveniently available to employees at a competitive price.

So what's the catch? Just one: Employers should be prepared to allow their employees some small amount of time during the work day to meet with the insurance company's agents. This demonstrates the employer's commitment to the program, and gives the agent a chance to explain the features and benefits of the plan. It's also an opportunity for the agent to explain to the employee how the VPD plan supplements the existing company-provided package of employee benefits — that "hidden paycheck" that is all too real to the employer and all too unknown to the employee.

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