A Varied Menu of Benefits

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Companies are offering employees "cafeteria-style" choices

As the summer vacation season arrives, employees at Fluor Corp. (1982 revenues: $7.3 billion) face a tough decision. Do they want more money or more time off? Those working for the California-based construction firm can add unused holidays and sick leave to their vacations and take extra, paid time off. On the other hand, they can sell their vacations back to the company for cash and spend their summers on the shop floor or behind their desks.

Such choices are part of a growing corporate trend toward flexible, or "cafeteria-style," benefits. Instead of dispensing rigidly fixed programs to everyone on the payroll, some 100 major U.S. firms now offer or plan to offer expanded menus of alternatives. Employees whose working husbands or wives already have family medical insurance, for example, might prefer legal insurance or added vacation instead of more health coverage.

The options can be as varied and innovative as personnel departments can make them. At Detroit's Comerica Inc. (1982 assets: $7.4 billion), Michigan's second largest bank holding company, employees can tailor their benefit packages to help pay for child care. At Baker Packers, a unit of California-based Baker International (1982 revenues: $2.5 billion), workers can cash in up to a week of vacation and deposit the proceeds in company-sponsored savings plans that invest in stocks and other securities.

A main appeal of the flexible programs is tax savings. Employees who opt for child care or other services may receive them in place of higher salaries. But since the benefits are not considered taxable income, the workers are not pushed into a higher tax bracket.

Another driving force behind the new policy has been the mushrooming cost of traditional benefit plans, especially for health programs. U.S. companies paid an average of $6,627 per employee for benefits in 1981, according to a study released last year by the U.S. Chamber of Commerce. Those payments equaled 37% of the typical worker's salary, up from about 30% a decade ago. Wyatt Co., a consulting firm based in Washington, notes that health-care expenses have climbed at an annual rate of 18% over the past five years. Says Lance Tane, a Wyatt analyst: "Benefits used to be considered the condiments of any pay package, but suddenly they were becoming part of the meat and potatoes."

The flexible fringes save firms money mainly by shifting corporate outlays away from medical plans with rapidly rising costs. Executives at SCM Corp. (1982 sales: $1.9 billion), a New York City-based conglomerate, expect that the cafeteria-style program launched this year will save the firm $600,000 in 1983 and $1.2 million each year after that. The new package requires employees to pick up part of their health insurance premiums, which the company had previously absorbed, but increases the benefits available under SCM's employee savings plans.