Employee purchase program: An outside-the-box benefit
Purchasing Power lets employees buy products via payroll deduction
By Elisabeth Boone, CPCU
Even when the economy is healthy and jobs are secure, most working people need to think carefully about making major purchases like computers, appliances, and furniture. In a tough economy, many workers either defer such purchases or reluctantly put them on a high-interest credit card.
Many larger employers are offering a voluntary benefit that allows employees to buy big-ticket items via payroll deduction, without adding to existing credit card debt or incurring budget-busting interest charges or hidden fees.
Through the Purchasing Power program, employees of participating companies can buy new, name-brand products like computers, home electronics, appliances, and furniture when they prefer not to use cash or a credit card. Also available are fitness equipment, baby and kids' gear, and outdoor living products.
Established in 2001, Purchasing Power offers its program to companies, organizations, and government agencies that have more than 1,000 full-time employees over age 18 in the United States. Target industries are health care, manufacturing, public administration, retail, education, finance, and insurance. The program is marketed through independent brokers and pays a 7% commission for every shipped employee order.
The program is a turnkey voluntary benefit that is administered via payroll deduction at no cost to the employer. Purchasing Power handles marketing, implementation, employee qualification and enrollment, order fulfillment, and customer service.
Individual spending limits are based on the employee's annual income so that payments will be manageable. Because payments come out of the employee's check in equal installments over 12 months, there is no risk of late fees. The employee knows the total cost of the purchase up front, including extended warranties, accessories, taxes, shipping and handling, and the cost of payroll deduction. If the employee leaves the company before completing the payments, arrangements are made with the employee to ensure payment in full so there is no liability to the former employer.
Meeting market needs
Although it's clearly outside the box of traditional voluntary benefits, the Purchasing Power program meets important needs in today's market for employers, employees, and brokers, says Elizabeth Halkos, chief marketing officer.
“At the corporate level, the human resource function is being challenged on a number of fronts,” she comments. “As health care costs continue to rise and provisions of the health care reform law begin to be implemented, HR managers need to keep costs down and still provide a portfolio of benefits that engage their work force. Also, as employees are required to take on a higher percentage of their health care costs, they are becoming receptive to a menu of voluntary benefits from which they can choose products that meet their needs,” Halkos explains.
“For brokers, these trends present both a challenge and an opportunity,” she remarks. “Employers look to their broker to present solutions that will help them control the cost of benefits and at the same time continue to offer a robust benefits package. That's where Purchasing Power comes into play.”
In addition to the attractive commission rate, Halkos notes, Purchasing Power offers the broker a number of other tangible benefits. “Our program gives the broker an edge over competitors who are marketing only the traditional voluntary benefits,” she says. “Twenty or thirty years ago, most employers took a 'one size fits all' approach to benefits, offering everyone the same package of life, health, and disability insurance. Today we're seeing a benefits strategy that's focused more on the needs of individual segments within the employee base. The work force spans multiple generations, from Gen X and Gen Y to baby boomers. How can an employer customize its benefits strategy to address the needs of these different groups?”
Brokers who offer the Purchasing Power program, Halkos explains, “have the opportunity to play a more consultative role by gaining an understanding of the client's employee base: who they are and what challenges they may face. Using this knowledge, the broker can bring Purchasing Power to the table as a solution that can help engage the work force and support the client's HR objectives in a cost-effective way. Offering our program to employees costs the company nothing and helps it build loyalty, morale, and retention.”
In turn, Halkos points out, a broker who is able to deliver these tangible advantages to clients can expect to be rewarded with enhanced loyalty and retention. “In essence, our program helps create 'stickiness' between the broker and the client,” she says.
Brokers who sell the Purchasing Power program have access to resources that help them identify prospects, explain the benefits of the program, and enroll new clients. A monthly e-newsletter highlights the latest news, provides links to relevant industry articles, and contains invitations to Webinars and trade shows.
Kudos from a broker
High praise for the Purchasing Power program comes from Dennis Chartier, FLMI, vice president of client relations at Marsh U.S. Consumer, a division of Marsh that sells and administers insurance products and services to affinity and program businesses. Clients include employer groups, association and membership organizations, financial institutions, transportation and logistics firms, and franchise networks. Chartier oversees a unit of Marsh U.S. Consumer that handles primarily voluntary benefits.
Marsh started working with Purchasing Power in 2005 and began to offer the program to clients early in 2006. “The main reason I was attracted to Purchasing Power is that it's a unique benefit that allows employees to purchase appliances, home electronics, and other products through payroll deduction without having to worry about a credit check,” Chartier says. “The actual purchasing process is very easy for the employee. He or she can research the product and then place the order either online or through the call center.”
In addition to choice and convenience, Chartier says, employees also value the opportunity to buy products without having to pay cash or incur high interest rates.
“This is by no means a discount program,” he points out. “An employee might be able to buy a computer or a TV for less through a discount channel, but he or she would still have to pay cash up front or pay an interest rate that could be 20% or more. Most people today don't have $2,000 in ready cash, and many are reluctant to add to their existing credit card debt. With payroll deduction, they can easily budget for the purchase.”
What's more, Chartier says, “Purchasing Power does a really nice job of communicating the program benefits to employees. For example, at certain times of the year, like the holiday season, people are more likely to want to purchase certain items as gifts for family members. At back to school time, when kids are going to college for the first time, parents may want to give them a laptop. Purchasing Power creates campaigns that focus on these and other times when people may be considering important purchases, and they do a great job of communicating special offers that may be available,” Chartier explains.
“That approach is very attractive to me because it's targeted to specific times and products rather than bombarding people with promotions all year long. This helps both employers and employees view the Purchasing Power program as a benefit instead of a high-pressure sales campaign.”
Also appealing to Chartier are the built-in safeguards that allow employees to purchase only what they can afford, based on their salary and the cost of the items they want to buy. “We can present the Purchasing Power program to our clients as a desirable voluntary benefit with appropriate controls rather than a take-all-comers shopping spree,” he says.
Another key eligibility criterion is an employee's length of service, Chartier notes. “The minimum requirement is one year of full-time employment; in some cases it's longer based on the demographics of the client's work force,” he explains. “This is an important provision for employers in industries where turnover tends to be high, especially among younger workers.”
Chartier adds: “The fact that the program is somewhat outside the box can be appealing to employees because it's different from the usual life and health insurance benefits. All in all, Purchasing Power is an excellent way for an employer to enhance its benefits package and to attract and retain good employees.”
For more information:
Web site: www.purchasingpower.com