SL:ELTECH Systems Corporation is a small, privately-owned company that is primarily located in northeast Ohio. We have been around since 1982, although one of our operating divisions has been in existence since 1969. We provide a wide range of products, technologies and services to the electrochemical industry.
As a small, privately owned company we have a lot of challenges when it comes to attracting and retaining quality employees.
HR.com: What about your role at ELTECH? Can you tell us a bit about that?
SL:My current title is Vice President of Human Resources and General Counsel. I´ve been in this role for about two years. My primary background is in the legal industry, but because of the size of our company I wear many hats. I have assumed the role of HR, and it is an exciting field to operate in.
HR.com: You were recently involved in a cost sharing initiative at ELTECH. Why did you choose to focus on cost sharing?
SL:One of the things that we foresaw was that medical costs were rising and becoming astronomical in many cases. The inflation rate for medical is five or six times that of normal inflation rates. We felt that it was better to be proactive and identify those aspects of our program that we could modify in the least painful way to our employees and retirees, while still maintaining what we feel is a great program that attracts and maintains great employees.
When you are a small company, in a small town in Ohio, it is often a struggle to attract and retain employees. What we have to do is make sure that we offer a whole compensation package, which includes our benefits program, in order to attract those people who we think will make our company better.
HR.com: Have you noticed a difference?
SL: Our organization, like many companies, felt the downturn of 2001/2002 and with that came the difficult decision to downsize. We are now seeing things go the other way and have begun hiring again. What has come out during our recent candidate interviews is that people are very, very concerned about the benefit programs being offered by employers. Medical plans are obviously the core concern for most people. We all feel the pain of the rising cost of prescription drugs and going to the doctor or receiving any kind of medical treatment. Compensation is a big issue, but benefits are right up there with it.
HR.com: Let´s go back to when you decided to get into cost sharing. How did you start out? How did you address the issue?
SL: We try to view ourselves as being proactive and rather than being forced into a situation where we had to make dramatic and drastic changes to our plan that would have an adverse impact on our employees, we thought it was better to take small steps.
In conjunction with our insurance broker and our claims administrator, we talked about the issue and tried to get a feel for what potential changes we could make. We asked them about what changes they were seeing out there, but at the same time, we wanted to maintain a top-tier benefits program. With their guidance, insight and investigation we began to look at various components that we could change. Some changes would occur over time and others on a one-time basis that would allow us to continue our medical plans on a long-term basis. For example, we began a cost-sharing program over a two-year period, which started with the company paying 90% of the premiums and then transitioning to 85% in the second year. We found that to be very successful. That was the first step we made and now, on an annual basis, we look at various components of our program, whether it is the office co-pay, favoring generic drugs over name brand drugs or encouraging mail-order prescriptions, all of which can reduce costs.
Consumer-driven healthcare, where you try to make employees conscious of the medical decisions they are making and their related costs, has had a real impact on our bottom line. Education and communication are really the keys to having a successful benefits plan, whether it is medical or otherwise.
HR.com: What other programs or changes have you considered?
SL: This past year we looked at the health savings account approach that is now getting some press and some movement in the marketplace. We looked at that and will certainly look at it on an annual basis for the next few years. When we are making a change, we try to look at whether the change fits our culture and whether it follows the direction that we want the company to go. At this time, we have chosen not to go ahead with a health savings account approach.
We have also looked at and explored alternative benefits plans where you have a more generous plan and a bare bones plan that employees can choose from. At this time, we have decided that it is not right for our company, but we will keep an eye on it while we monitor our costs and see if the changes we have made have been effective. Although we are proactive, we are cautious and want to avoid jumping into something that we might regret later.
HR.com: Can you tell us about the kinds of benefits that you offered before cost sharing and what happened afterwards?
SL:We continue to offer roughly the same package. When moving to cost sharing, we wanted to provide some good news along with what may be perceived as bad news. We pumped up our medical plan by offering an annual eye exam. We looked around our company and realized that many of our employees wore prescription lenses or contacts, and therefore we thought that was a benefit that they would get value out of. Another thing we looked at was enhancing our 125-reimbursement account by adding in non-prescription drugs, which is authorized by the IRS. Then we began an education program to get people to participate more in that program and learn how to take advantage of it.
HR.com: You also have a 401K plan. Did participation in that go up?
SL: Outside of our medical plan, we have what we believe to be a very generous 401K plan, which has a tremendous participation rate. Even with a ~96% participation rate, we still felt that we wanted to educate and communicate to our employees to make sure that they were taking full advantage of the program. Last year we did two employee trainings, one in February, and one in September. We had great participation in the program. After the February training about 15% of employees increased their contribution level and another 20% or more increased their contribution levels in September. Even though we did two programs in fairly close proximity, we saw great results. Another advantage of being a small company is that we were able to identify those employees that were not participating in the program. We set up one-on-one meetings with each one of those employees to make sure that they had enough information on the program to make an informed decision. We found through that process that all of those people that were not participating had very good reasons for not doing so. The feedback for the program was fantastic. It was an eye-opener for a lot of people.
HR.com: Can you tell us a bit about your retirees, or your soon-to-be retirees?
SL: We are the poster children for what the US government is facing. About a year ago I did an analysis and discovered that within five years, 50% of our staff will be retirement eligible. As a result of that, we have some other issues we need to address. We are looking at succession planning, staged retirement and anything that might allow us to keep these people instead of losing a tremendous amount of talent and experience.
We are fortunate enough that as a corollary to our medical plan, we also have a retiree medical plan. Although it might not be of concern to our younger employees, it is certainly something that our older employees have on their priority list.
The changes that we talked about with regards to our medical plan, equally apply to things we did to our retiree medical plan. We are going to be in a position in the not-too-distant future where we may have as many retirees as we do employees. As the social security system has to face that issue, we likewise have to and we need to adjust our plans and make sure that they have long-term viability. We want to make sure that we can still offer great benefits to those employees that have put so many years of hard work and effort into making our company a success.
HR.com: What do the retirees think of the plan?
SL:We have several company events throughout the year where retirees come out and mingle with their former workers. During those events people would come up to me and ask me what was happening with the plan, whether it was going to be dissolved or whether there were going to be dramatic premium increases. Because of the changes we had made, I told them I was hopeful that we could maintain the plan and keep increases to an acceptable level. Once we did roll out the rates, people were ecstatic, and they are very appreciative that the plan is still there. We wanted to ensure that we were doing the best we could for our retirees.
HR.com: You were telling me before that ELTECH is a global company. You have employees in many different locations. How do you balance out the benefits and the cost sharing in a case like that?
SL: Although we are primarily located in Ohio, we do have foreign nationals working for us. In those cases, we simply use the particular country plan for them. We are now facing a situation where our retirees are dispersing throughout the country, and we have to make sure that they have access to medical providers. Even though the primary workforce is in Ohio, we need an administrator who has domestic breadth and to a lesser extent global breadth, relative to accessibility and coverage.
HR.com: Are your global employees satisfied with their benefits?
SL: Certainly. We had a Canadian national working for us, and what we did was normalized our plan. We examined available Canadian plans and made sure that this individual had the same plan or as close as we could get to it as our domestic employees.
HR.com: Prior to the cost-sharing plan, ELTECH paid 100% of medical insurance premiums. What do you pay now?
SL: We pay 85%, and employees pay 15%. I was recently looking at our employee premiums and rates over the last couple of years and they have only gone up by 15%. That is very good in today´s environment, particularly as so many of our employees are approaching retirement age.
HR.com: Have their been any benefits specific to your HR department?
SL: It certainly allows us to be held in higher esteem, and I think the employees appreciate that we are out there fighting and trying to maintain these programs. It would be very easy to throw in the towel and eliminate the program or cut it drastically to see immediate financial returns. We don´t believe that is a proper approach, and it is not going to create the goodwill you need from an HR department or any corporate department perspective.
We are currently in a hiring mode right now, and there is no shortage of applications coming in. I think that tells us we are doing things right.
HR.com: You mentioned before that one of the ways you communicate HR issues to your employees is through a newsletter.
SL: Yes, we have a quarterly employee newsletter in which we have an HR Corner where we try to educate people about HR issues. We want to encourage employees who are confused about something to meet with us one-on-one to clarify things.
HR.com: Do you also offer information and articles about obesity and stop-smoking programs through the newsletter?
SL: We are addressing healthy lifestyles within the company. We put out a diet program in which we encouraged employees to become more conscious of things like cholesterol and blood pressure. The program was voluntary, but we had great participation levels. About 10% of our workforce joined up for the program.
In the past we have done smoking-cessation programs. We feed off of what our employees tell us and what they are interested in. Our obligation, as HR, is to observe where our population is and take note of the issues that are of concern to them.
HR.com: Are all of these things available now because of your cost sharing initiative?
SL: It has allowed us to remain competitive. You need to be competitive or all of these wonderful plans are going to go by the wayside. We need to make sure we still offer a return to our employees, to our shareholders and certainly to our customers. It pays dividends when you can make painless changes while maintaining the viability of a plan.