Beyond Traditional Benefits: Sweetening the pot without draining the profits

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By Jim Cuprisin, MBA, CIC, CRM, ARP

Successful agency owners and managers realize the importance of designing compensation plans that will attract and retain experienced and talented personnel for their agency, while still leaving an ample margin for profit. The National Alliance Research Academy conducts nationwide studies of the insurance and risk management industry and publishes the results—revealing valuable job profiles, useful benchmarks, and expert opinions. According to The Academy’s 2014 Growth and Performance Standards (GPS) study, about two-thirds (67.82%) of agency revenues are spent on compensation expenses. Of those compensation expenses, 5.18% are spent on employee benefits, such as life insurance, health insurance, payroll taxes, and retirement plans, and about 3.45% of agency revenues go to cover payroll taxes; meaning 59.19% are spent on salaries, commission, and bonuses. In addition to the compensation expenses, agencies have operating and administrative expenses to consider, as well. The “Catch-22” is clear: agencies need to attract the best personnel to be profitable and achieve sales and service goals; however, too much revenue spent on compensation expenses can significantly erode their profit margins. Without going overboard on employee compensation, what benefits and perks can agencies offer to make compensation packages sweeter while still remaining profitable?

To provide information on which benefits agencies are offering and advice on what they should be offering, The National Alliance Research Academy pulled data from several studies and also interviewed three expert practitioners. These experts were are able to pull from their career experience in agencies and companies, as well as their work as National Alliance faculty members and insurance agency consultants. They are:

  • Laurie Barrett, CIC, CRM, independent agency consultant
  • Bill Toll, CIC, of Bill Toll & Associates, Inc.
  • Becky Lathrop, CIC, CPIA, of Optimum Performance Solutions

Benefits

Let’s take a look at the benefits that are currently being offered to insurance agency employees. Data from The Academy’s soon-to-be published 2016 Producer Profile study shows, in the chart at the top of the next page, the benefits typically available to commercial lines (CL) producers:

Benefits
% CL Producers
Vacation Time
85%
Health Insurance
82%
Retirement Account
78%
Life Insurance
67%
Disability Insurance
64%
Dental Insurance
57%
Educational Assistance
57%
Employee Stock Ownership Plan
13%
Flex Time
12%
Pension Plan
10%
Child Care
1%
Other
4%
None
6%

Clearly, agency managers need to be creative and consider many benefit options. Keeping their budget constraints in mind, managers should choose the specific benefits that are best fit for their agency and employees, given the cost and the perceived value of the benefits.

Laurie Barrett had this to say about the trends related to some of the more traditional benefits: “Many agencies offer life insurance policies that are transportable. Paid time off (PTO) is replacing the combination of sick days and vacation days, but I have not seen an increase in the number of days per year.” With PTO, if a person is sick, they can use a PTO day. If they need a week of vacation, they can use five PTO days. So, paid time off can be used for sickness, vacation, or any other reason for taking time off of work. PTO is typically administered in half or whole-day increments, but increments of one or two hours can be used. For example, a person can use two hours of PTO to meet the plumber at their house and remain at home for the duration of the service call.

Flex-time is a benefit some agencies can offer certain employees. Bill Toll provided some insight about employee benefits. For example, Bill knew of one agency that had employees work four 10-hour days: “The owners and managers would typically get Monday or Friday off, thereby always having three-day weekends. Other employees had a choice of taking off on Tuesday, Wednesday, or Thursday on a regular basis. Of course, the agency would still have to schedule employees so that adequate staff was available on all five weekdays, including staff for all lines of business.”

Becky Lathrop offered some alternative ideas for agency benefits. She noted that additional vacation days can typically be given for time of service with the agency, but vacation days can also be given to reward employees for high performance. “For some employees, extra time off may be more appreciated than a small raise.”

Becky offered some more suggestions: “Annually, agency owners should provide a written statement to their employees outlining the value of the total benefits dollars the agency provides for them each year. Many times these benefits are hidden in their regular paycheck, and the employee is unaware of everything they are receiving. The total cost of all these benefits is typically significant and may surprise many employees. The employees need this reminder so they can properly evaluate their total compensation package and realize it is much more than just their salary and/or commission.” Benefit expenses could include insurance premiums for health, dental, vision, disability, and life insurance. Other benefit expenses may include contribution to a retirement account, auto stipends, and education expenses. Becky even suggests, “Payroll taxes should also be included so that employees know how much money the agency is paying on their behalf, reminding the employee that they are valued by the agency owner/leadership.”

In addition to the more standard or traditional benefits listed in the first table, other benefits to choose from may include:

  • Auto allowance
  • Furnished company auto
  • Health savings account
  • Cell phone expenses
  • Long-term care insurance
  • Ownership in book of business
  • Ownership in agency

Bill Toll stated that more agencies are offering an auto allowance as a special benefit: “Employees are not given a company car, rather, they receive a set sum on a monthly basis to help pay for gas, insurance, repairs, parking, tolls, or any other auto-related expenses. Depending on the monthly limit, this can represent a significant employee benefit. In some cases, the auto allowance could be raised with an increase in production, acting like a bonus for high achievers.”

Becky Lathrop mentioned that “family time” is an important perk that employees often value. “People sometimes need to take an hour or two off from work to meet certain family and/or personal obligations. Agency owners can grant their employees this time off when they need it, but needs to assure that no employee takes advantage of the situation and requests too much time out of the office. Everyone has obligations and may need time out of the office, so owners should try to be equitable and give equal time off for family or other personal considerations, regardless of whether someone has a family or not.”


Special Perks

What is a benefit and what is a perk? Most benefits would include different types of insurance: life, health, disability, etc. Also, retirement income is a benefit, such as a 401k account, pension plan, etc. Perks are usually more minor in nature as compared to the benefits, but still important. Of course, there is gray area in placing an item under the benefits list or the perks list, but for this article, some perks include:

  • Working from home
  • Membership dues for charitable organizations
  • Fitness club membership
  • Country club membership
  • Casual dress days in the office

Bill Toll mentioned that working from home is being used more often as a special perk: “When employees choose this option, many insurance agencies require that the employee have a dedicated work space in the home away from babies, dogs, and any other noises or distractions.” The work-fromhome option can often be used for military families: “Having a home office can help the spouse of a military member who has to move because of a job transfer. If a valuable and experienced CSR or account manager has to go to another state with his/her spouse, a work from home situation may allow the agency to retain the employee’s services through computers and phones.”

Modern technology makes working from home far more possible and feasible than in the past. This option can vary from one day to all five days per week. Bill Toll added, “I think it would be best to use for the tenured employees in the agency; they can be more trusted to be as productive at home as they are at the office.”

While not a regular benefit, top employees can be rewarded for reaching certain goals or levels of achievement. These perks can include:

  • Lunch with employees
  • Restaurant gift cards
  • Gifts such as pens, plaques, etc.
  • Employee of the month recognition
  • Trips or vacations
  • Tickets to sporting events, plays, or concerts

Becky Lathrop mentioned how important it is to recognize employees who are doing a great job. “Some employees may prefer recognition in private, while others prefer to be recognized in front of their peers. Agency owners need to determine what method of recognition works best for each employee and what methods are best for their agency.”


Bonuses

Dollar compensation includes salaries, commissions, and bonuses. Just like benefits and perks can be thought of as add-ons to an employee’s compensation package, bonuses are another add-on, as well.

According to the Producer Profile study, 45% of CL producers receive a bonus. The findings show that the bonuses are based on a number of different factors, as shown in the chart below:

How Bonus is Determined
% CL Producers
Individual Total Production
47%
Agency Profit
43%
Individual New Business Production
30%
Growth of Individual Book of Business
30%
Agency Growth Rate
14%
Account Retention Rate
11%
Size of Book Serviced
11%
Department Profit
7%
Years Experience with Agency
7%
Department Growth Rate
6%
Other
10%

“Other” ways included: owner discretion and amount of contingent income earned.

Customer service representatives (CSRs) and account managers also may receive bonuses. Data from the CSR Profile study shows that their bonuses are based on the following factors:

How Bonus is Determined
% CL CSRs
Agency Profit
33%
Department Growth or Profit
18%
Agency Growth Rate
13%
Years Experience with Agency
12%
Retention Rate
9%
Size of Book Serviced
7%
Other
24%

“Other” ways included: holiday bonuses, owner/manager discretion, and set bonuses paid annually to all employees.

Becky Lathrop stated that some agency owners share a part of their agency contingency bonuses with their employees. “Typically, different employees receive varying amounts depending on their individual contributions to the agency’s growth and profit. For example, an account manager may receive a larger bonus than the receptionist, but a producer may receive more than an account manager. It’s very important for owners to properly communicate that agency contingency bonuses are only received when the agency grows profitably—giving everyone a stake in making this happen.”


Workplace Culture

Agency owners can afford to give their employees only so much when it comes to compensation and benefits, but also need to be competitive in these areas to retain their employees and keep them from moving to competitor agencies or other industries. Another way to retain employees is by having a positive agency culture. An agency culture is developed over time and is related to the attitudes and personalities of the agency owners and managers.

Laurie Barrett had some comments about agency culture: “I have observed employees in some agencies that appear happier than employees in other agencies. The only thing I can attribute to that is agency leadership, because there were not any great differences in compensation, benefits, or perks. Happy agencies seem to have outgoing, happy managers that communicate (face-to-face) often with their employees. I have been told by some unhappy employees that all they really want is to be acknowledged and informed about what is going on. The happy agencies seem to work in a cohesive manner, whereas the other agencies appear to operate as individual units, all doing their own thing.”

Some of the perks mentioned earlier can be used to help improve the agency culture and foster communication among employees. Whether it is working from home, casual days, or flex-time, these perks can improve morale and make the agency feel like a better place to work.

According to Becky Lathrop, the office setting of the agency cannot be ignored: “Employees should have proper equipment at their desks, with multiple monitors, headsets, appropriate lighting, and anything else they truly need. The agency needs sufficient space so employees are comfortable. A break room can help with that by giving employees a place to have a cup of coffee or a snack and get away from their desk occasionally. Little things in the office setting can make a big difference in attitudes and job contentment, which can lead to happier and more productive employees.”

All agency owners need to continually evaluate their agency culture and seek improvement. Getting feedback from employees about what they value and would enjoy can be key, and managers should always strive to acknowledge employees for a job well done.


Conclusion

The National Alliance Research Academy wishes to extend its gratitude to agency/company experts Laurie Barrett, Bill Toll, and Becky Lathrop for their contributions and insights regarding non-traditional benefits and perks. While salary, commission, and bonuses are three of the compensation pieces that matter the most to agency employees, there are many other benefits, unrelated to money, which can make a difference to employees, as well. Offering a good benefits package, especially related to health insurance and retirement needs, is critical. Special perks can be added to their benefits plans to make them even better. While monetary compensation and benefit expenses must be kept at a reasonable level, agency owners should also focus on improving their agency culture. Happy employees are more likely to stay with the agency, even when there are other work options available to them.


Learn More, Earn More

Growth & Performance Standards
Producer Profile
CSR Profile

Attending a CIC Agency Management Institute is a great way to learn more about how compensation expenses impact the bottom line of an agency. You may also attend a Ruble Agency Management Practices Seminar to learn how to compare your agency’s financial performance to industry benchmarks. In addition, the Ruble Managing People Seminar is highly instrumental in helping agency owners and managers learn to build effective teams and enhance job satisfaction. And to top it off, The National Alliance Research Academy publishes three books that each provide unique information about agency compensation and benefits: Growth and Performance Standards (GPS), Producer Profile, and CSR Profile.


Jim Cuprisin, MBA, CIC, CRM, ARP, is the Research Director for The National Alliance Research Academy and the Editor-in-Chief of Resources magazine. He has over 30 years experience in the insurance industry, which included working as an underwriter for two companies. Jim has earned his MBA and been with The National Alliance for over 25 years.

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