Enable choice and help employees make smart decisions

What kind of choice do employees want?

The wide range of employee needs is driving employers to provide more benefits choices. Yet, this places a greater responsibility for benefits decisions on the employee when, for many, benefits are already complex enough.

How can employers square the circle? How can they enable more choice, without it resulting in choice overload, and ensure employees select appropriate benefits?

One option employers have is to provide a small set of manageable choices and limit the range of options as much as possible. This could mean a very limited core range of benefits with a small degree of flexibility on the level of provision (that can be adjusted up or down) coupled with defaults for those not willing to make active choices.

This approach recognizes and tries to address the limitations of employee engagement and could be used as a first step toward fuller choice. But employees prefer a different approach, seeking instead a fuller range of choices, with support and guidance from their employer (Figure 11). Moreover, employees are not naive and recognize the tension between choice and complexity. They do not desire unfettered choice; rather, they would prefer their employer to put guardrails in place to help manage their choices and limit the room for mistakes.

Figure 11. What role should employers play with respect to benefits choices?

Most employees desire a moderate number of benefits choice options, with neither too much nor too little choice (Figure 12).

Figure 12. Employee preferences for the amount of benefits options

The bottom line is, workers by and large want meaningful choice but do not want to be overwhelmed.

They would prefer that their employer actively guide their benefits choices through such avenues as:

• Education and communication (providing information to aid employee understanding and support effective decision making)
• Decision support tools (using technology and tools to guide choices)

In the past, education and communication have been most popular with employers, but increasingly employers are leaning toward offering decision support tools.

Global results from Willis Towers Watson’s 2019/2020 Benefits Trends Survey reveal the strategies employers are taking to provide benefits choices to their employees (Figure 13). In general, employers are evenly divided: Just over a third support choice via education and communication, while a similar proportion favor decision support tools. The remaining third provide simplified choices.

Figure 13. Employer approaches to supporting choice

Yet this hides significant differences across regions. Employers in North America and Latin America still favor education and communication, while employers in EMEA look more toward decision support tools. Asian employers favor a reduced, simpler set of choices. This likely reflects employer views and experiences in those regions on the effectiveness of engaging and informing consumers via education and communication and the availability of tools in those markets.

Employee views on choice today

The benefits industry focuses a lot on decision support, but what does that mean to employees today? To answer this question, we asked employees how they make benefits choices (Figure 14). For most, employee benefits remain an employer issue, with employer communication being the primary resource employees use to make benefits decisions. Online tools are the next most-used resource, with use widespread and popular across all age groups.

Many older workers rely largely on the information provided by their employer, which they typically want to research independently at their leisure.

By contrast, younger workers are more likely to seek guidance from friends, family and outside professionals. Younger workers also want real-time access to their benefits information via apps, call centers and the like.

Thus, not only preferences for benefits vary across employees but also the preferred support mechanisms to enable choices.

Figure 14. How employees make benefits choices

Looking more closely at employee reactions to online tools, we find that current tools in the marketplace appeal most to more financially literate consumers (Figure 15). Employees with lower financial literacy are much more likely to report they found their benefits choices “complex” and that they find financial decisions stressful. Even among those with high financial literacy, we see around one in four struggling with their benefits or financial decisions. Financial IQ is then an important driver of making good benefits choices, but it is not enough: Those with high financial IQ can still struggle with benefits complexity. In addition, there are limits to the extent employers can help their workers become more financially literate (given available time and resources).

Figure 15. Choice complexity

So, while education and communication clearly have a role, many employers and employees are turning to tools to circumvent the challenges of low engagement and a lack of financial literacy surrounding complex benefits choices.

Offering decision support tools has a significant impact on improving employee’s financial wellbeing today (Figure 16). Where employers offer the broadest range of tools and resources, employees are at least three times as likely to say their employer has encouraged them to improve their financial situation and nearly 1.5 times as likely to say they are heading in the right direction with their finances (compared with those without access to tools). In short, tools matter, particularly where they offer broad support to employees across a range of issues.

Figure 16. The role of decision-support tools

In the U.S., we also find similar results with regard health and wellness: Where tools are effective, 47% of employees report, “The resources and initiatives offered by my employer have encouraged me to live a healthier lifestyle,” compared with only 24% where tools are not effective.

Clearly tools have the potential to motivate change and improve employee wellbeing; however, to be truly effective, benefits tools must:

1. Move away from just focusing on enrollment toward a wider focus on “in the moment” decision making.
2. Reflect the range of approaches employees actually take when making choices, rather than an idealized view of what employees should do. For example, many financial tools address budgeting behavior, but only a small minority of workers follow a strict formal budget (often only doing so in response to extreme financial circumstances). For the majority, budgeting is more informal, reactive and in the moment, so messages trying to make them “budgeters” may fall on deaf ears.
3. Match up to the consumer-grade experience employees see in the tools and apps they use in their everyday lives.