What extent does the health insurance you offer affect talent attraction and retention?

Times are changing here in the UAE and employers need to be ready to change as well or risk falling foul of an increasingly turbulent job market. The days of lavish expat packages appear to be gone and the workforce is now looking around for better opportunities. That means it’s time for employers to get creative with their benefits.

According to the Hays GCC Salary and Employment Report 2015, 69% of respondents said they were not satisfied with their current salary and benefits package, and 57% said they were anticipating a move to a new company in 2016. After salary, the main reason they gave for desiring a move was to secure a better benefits package.

This general sense of dissatisfaction became evident in 2014, when Metlife published its United Arab Emirates Employee Benefit Trends Study. Metlife’s research revealed that while 63% of UAE employers felt strongly that their company was a great place to work, only 43% of staff agreed. Moreover, 39% of employees overall and 44% of managers were strongly hoping to be working for another company within the next year.

After salary, the main reason given by employees desiring a move to a new company was to secure a better benefits package.

Since that study, Dubai and Abu Dhabi have introduced mandatory employee healthcare schemes but the effect on employee satisfaction overall has not necessarily been positive. In 2014, before employee health cover became mandatory, 82% of employees whose package included health insurance said they were satisfied with their medical benefits. But the subsequent rise in the cost of employee health insurance has driven some companies to cut back on their health benefit packages – something that will not have gone unnoticed among their staff. A survey carried out by the Institute of Management Accountants (IMA) in 2015 found that only 37% of its members in the UAE were satisfied with the benefits they received.

The reality for every worker in the region is that without adequate medical insurance, a serious health problem could have a devastating effect on their finances.

The value of staff retention

When it comes to attracting and retaining good staff, the introduction of mandatory health insurance has been a game changer. Now that everybody is obliged to offer medical insurance as part of their employee benefit package, the quality of cover you offer has become paramount. If you want to attract the best staff and stop the ones you currently have from jumping ship, you need to make sure your medical insurance is suited to your employees’ needs and expectations.

To drive the point home we can again refer to the Metlife survey: Of those respondents who admitted they were considering leaving their current employer, 53% in fact said that an improved benefits package would persuade them to stay.

It’s not surprising that retaining top talent continues to be a major concern for employers. The cost of recruiting and training a new employee to replace one who leaves is the equivalent of anything from two to nine months’ salary, depending on which study you go by. As a general rule, the longer an employee stays with your organisation, the more valuable they become. After an initial period of investment, new employees find their feet, become more engaged and start to reward the organisation by making more effort, as well as developing more relevant knowledge and becoming an expert in your company’s unique way of doing things and their specific niche. So after the first year or two, they will be adding value incrementally and it makes good business sense to hold onto them.

53% of employees considering leaving a job said that an improved benefits package would persuade them to stay.

If they notice a steady stream of colleagues leaving of their own accord, this will inevitably have a negative effect on morale, reducing engagement and productivity and, in all likelihood, further increasing your attrition rate.

So even more important than attracting new talent, your benefits need to be tailored to meet the needs of your existing staff.

Standing out in a global job market

It’s important to consider that in an international environment like ours, your pool of potential employees is global and benefits such as housing, school fees and flight allowances are expected if you are to be successful in luring talent away from home. The good news is that salaries in the UAE are still attractive, thanks in particular to the zero income tax. According to the Numbeo database, the average monthly disposable income in Dubai is currently around AED 12,300, while in London it’s in the region of AED 9,600.

It’s worth noting that in a 2016 study in the United States, 67% of financial services employees said they would be at least somewhat likely to accept a job with lower pay but better benefits. And 25% said they had left or turned down a job within the past year due to unsatisfactory benefits. Now that the UAE is beginning to follow in the US’s footsteps with an emphasis on private healthcare, we might find our trends beginning to echo theirs.

Even if your policy is to attract people who are already based locally, you still need to offer a package that will compare well against what an expat could receive in their home country – and medical insurance is the benefit that employees want more than any other. Metlife’s study revealed that UAE employees who are happy with their medical benefits are more than twice as likely to say their company is a great place to work, that they’re satisfied in their current role and that their employer is loyal to them.

Even if your policy is to attract people who are already based locally, you still need to offer a package that will compare well against what an expat could receive in their home country.

Managing better employee health benefits

We’re increasingly hearing that HR departments are struggling to manage their benefits packages. They are also finding recruitment and retention very challenging. These facts are not unconnected.

As I discussed in a previous article on health insurance cost drivers, your people strategy should define where you put most emphasis when it comes to attracting and retaining staff. It should determine whether your organisation prefers to offer outstanding benefits or competitive salaries, or to aim for mid-market levels, and where cuts might be made in difficult times.

Remember that in markets where health insurance for employees is a mandatory requirement, those companies that provide a better level of medical cover will stand out from the crowd. Even if your people strategy puts the emphasis on salary rather than benefits, you can still improve the appeal of your benefits packages with a bit of careful tailoring.

For example, you might consider offering more comprehensive health cover for top executive roles, where the right talent is most crucial. You could also consider putting a voluntary benefits scheme in place, offering employees the option of paying a top-up fee to boost their cover to meet their individual needs. Or you could even launch a flexible benefits programme, where staff can choose benefits to suit their own priorities within a certain budget.

In Metlife’s UAE study, 70% of employees expressed an interest in supplemental health insurance, which would cover them for care not included in their standard policy. This might include things like dental, optical and critical illness insurance and cover for work-related injury or illness. Additionally, 83% said they would like to be able to seek healthcare abroad, so would appreciate access to international health cover.

Of course, there are other ways you can demonstrate that you care about your employees and what’s most important to them. For example, you could offer flexible working hours, allow them to work from home or offer generous holiday allowances, all of which will encourage engagement. But with so much evidence to show that employees rate health cover as the second most important factor behind salary in their job choices, it’s wise to offer the best employee health cover you can.

Notwithstanding the message it sends out about how much you care about your staff, we shouldn’t forget the chief purpose of employee health insurance, which is to make sure your workforce remains healthy and productive. So I strongly suggest you take a thorough look at the health cover you provide and make sure it demonstrates how much you value your staff, as well as being a good fit with your corporate strategy.