Software giant’s switch from traditional plan to flexible benefits ran smoothly – despite awkward timing around economic downturn
Implementing a benefits redesign can be a somewhat harder sell when a recession hits — employees may question the employer’s motives.
But when Microsoft Canada moved from a traditional plan to flexible benefits through the fall of 2008, the launch was “incredibly smooth,” says Carolyn Buccongello, HR director at the Mississauga, Ont.-based software company.
“By the time we communicated to employees we were looking to do this and we’d done focus groups, it was really the start of the economic downturn and some people assumed then that, because of the timing, we were doing this as a cost-cutting measure. That’s really where the skepticism came from,” she says. “So we had to do a lot of work to convince people that the plan was actually cost-neutral.”
While the timing was awkward, the change was overdue. Microsoft had offered a traditional program with no choice of coverage since the company established itself in Canada in 1985. But many top employers offer flexible benefits and the software company strives to be an employer of choice and ahead of the curve, to attract the best and the brightest, says Buccongello.
“As we looked at that, our benefits package actually seemed out of whack in our minds, because we’re not the first to go with flex benefits, not leading-edge, so for us it was a catching-up in some ways, to where great companies already were.”
The addition of Greg McKerracher as a total rewards manager was also a big reason for the revamp, she says, as he was surprised by the lack of flexible benefits at Microsoft Canada and was familiar with this type of implementation.
“Our workforce is incredibly diverse, in terms of the demographics of our employees, and if you look across the 1,400, you know everybody is sitting in a different place in terms of what benefits they need,” says Buccongello. “Feedback from them and our knowledge of them was pointing us to the conclusion that the one-size-fits-all wasn’t going to work for this population. The biggest driver was choice, providing choice.”
With the traditional health benefits plan, HR had a lot of experience dealing with employees on both ends of the spectrum, from those who didn’t need coverage to those bumping up against the maximum, she says.
“We didn’t want to spend any less money on benefits but we wanted to spend it more effectively and efficiently,” says Buccongello.
Redesign part of drive to make HR more strategic
Another reason for the overhaul was HR’s continuing drive, started about four years ago, to do more strategic work. With the downturn, it has been critical to have people in HR the business can count on when it comes to restructuring, reorganizing, doing more with less, change management, change leadership and cultural work, she says.
The company decided to move to a flexible plan that would give employees a certain number of credits that could be used to choose one of three levels of coverage in health care and dental care. Or those with a spouse could opt out entirely. And Microsoft Canada hired Aon, an insurance brokerage and human capital consulting company, to implement the redesign.
Throughout the process, executive approval was needed for the concept, design and project plan. And there was some skepticism upfront around the change, particularly with long-time employees who questioned the reasoning behind the redesign because they didn’t know any different, says Buccongello.
“Whereas, our newer entrants into the company, who had worked for other companies and did have more flexibility, they were asking for it.”
Microsoft Canada then took the design to employee focus groups, who provided limited but rich feedback on certain components, she says. And while Aon led the initiative, HR was heavily involved, providing feedback on the design and consulting from a change-management perspective.
The wrinkle-free implementation happened largely because of Aon’s understanding, knowledge, experience and easy-to-follow steps, says Buccongello. McKerracher also did “amazingly well” with a hands-on, one-on-one approach that helped people quickly understand the concept and offerings.
“Any skepticism was pretty quickly overshadowed by the actual benefits of the program, and the choice. (Employees) actually got quite excited and attracted to that,” she says. “Six months later, we’re thrilled with it,”
Microsoft Canada also ran an extensive communication and launch plan, with a series of “bright and colourful” e-mail newsletters explaining the benefits redesign, along with a guide to help with the decision-making process. There were also information sessions for managers, so they could help employees, and subsequent information sessions for employees. The company’s small HR team of 10 had all hands on deck, says Buccongello, while a website and a toll-free hotline set up by Aon helped employees through the open registration period.
Overall the reaction to the redesign was very positive, she says. There were, of course, extremes, with some people having no questions while high-end users had many detailed questions that took a lot of one-on-one consulting and hand-holding, she says.
Other changes
In doing the total revamp, Microsoft Canada made a few other alterations. It switched to Sun Life as its health insurance broker, because it offered electronic solutions such as online filing and checking statements. Microsoft also moved to Aon for third-party benefits administration.
“That’s very much, again, in line with our long-term vision that the HR department move to more strategic-type work and partnership-type work, and the administrative type of work is being outsourced,” says Buccongello.
The benefits redesign was not only a way to change the way benefits were delivered but an opportunity to update them.
“It was both the choice as well as what the offering actually looked like,” she says.
That meant, for example, the annual maximum for massage therapy rose from $500 to $750, with no cap per visit (previously it was $20). Paramedical services, such as physiotherapy, acupuncture or chiropractors, had a combined maximum before but now there is a per-practitioner limit. And while parents are not considered dependents, if an employee has flex credits, he can use them to include elderly parents in a claim against his health-care spending account.
Microsoft Canada will continue to evaluate and update all its benefits, says Buccongello, with changes forecast for vacation time (which currently does not vary by tenure or experience), wellness initiatives (such as an on-site farmers’ market) and reduced rates at a nearby daycare.
