In today’s tight market for talent, employers need an exceptional suite of benefits to entice new hires, as well as retain existing employees. However, it can be challenging to determine which benefits to offer.
One way to approach this decision is to analyze the return on investment, or ROI, of each offering. While it may be difficult to put a specific dollar amount on the return, we’ll provide a framework to help think about the potential for a given benefit.
We’ve selected five top employer-provided benefits to compare:
- Health Insurance
- 401(k)/Retirement investments
- Public transportation
- Wellness programs
- Pet Insurance
Health insurance is by far the most requested and sought-after benefit, given how valuable it is to employees. The total cost of employer-sponsored health care benefits including premiums and out-of-pocket costs for employees and their dependents is expected to approach $15,000 per employee in 2019, according to the Society for Human Resource Management (SHRM). If they do offer it, employers cover a percentage of those benefits—larger employers typically cover 70% of this cost. Even if an employer covers just 50% of the cost, it’s a significant hit to the bottom line.
- Estimated annual cost per employee: $7,500
- Estimated annual cost for 50 employees: $375,000
SHRM also reports that, according to a survey by the National Business Group on Health (NBGH), some companies are taking on these high insurance costs by contributing to employees’ health savings accounts.
- Estimated annual cost per family: $24,000
- Estimated annual cost for 50 employees: $288,000
This is definitely one of the most expensive benefits: so why do companies offer it? For one, it’s one of the best recruitment and retention tools. Health Insurance is expensive for companies, but are even more expensive for individuals, and they can get group health insurance which helps drive down cost. Plus, there are plenty of associated tax benefits.
401K / Retirement investments
Historically 401(k) plans were cost-prohibitive for smaller companies. Thankfully that’s no longer true. With help from companies like Human Interest, it’s now easier for companies of any size to offer employees retirement plan options. And, since a 401(k) is one of the most requested benefits after health insurance, it can also serve as great recruitment and retention tool.
Additionally, a 401(k) can cost less than other popular benefits – often times less than a single employee’s health insurance, making it an extremely high ROI benefit to offer. Using Human Interest’s typical price breakdown, it’s easy to see the value.
- Estimated annual cost for one employee: $1,488
- Estimated annual cost for 50 employees: $3,840
As you can see, with the low financial cost, tax benefits for you and for your employees, and the desire of workers to save for retirement, a 401(k) might be the most effective benefit to implement at a company.
Employers can offer commuter benefits in a variety of methods. The employer-financed and tax-free benefit for public transportation occurs when a company directly pays for employees use of public transit, vanpool, or parking. The IRS sets a designated tax-free maximum, and the benefit is not reported as part of the employee’s gross income. These maximum benefit values change each year.
- Estimated annual cost per employee: $265
- Estimated annual cost for 50 employees: $13,250
- Estimated annual cost per employee: $742
- Estimated annual cost for 50 employees: $37,100
- Estimated annual cost (paid by employee): $180 for cats; $300 for dogs.
Every employee will have a different commute to work: some will have longer, more expensive travel needs while others might be closer and not utilize the benefit. For those travelling farther, this benefit can make them truly feel like you care about their wellbeing and show how much you value their presence at work.
SRHM reports that more than nine in 10 organizations offer at least one type of wellness benefit. Often companies tackle wellness by categories such as physical, social, financial, emotional, and mental wellbeing. This might be access to workshops about managing finances or providing gym memberships, or free sessions with dieticians. According to SHRM managers see benefits, but the cost-benefit is tough to quantify.
Wellness takes many different forms, but when employees feel their best, they’re able to perform their best. This benefit is aimed mostly at recognizing that people have needs outside of work, and that they are a valued part of seeing your employees as more than just workers.
Most companies that offer pet insurance to employees do so directly through providers. The benefit is at a discounted rate, but unlike health insurance employers don’t subsidize premiums. According to HR Dive, pet insurance premiums vary based on the type of pet, age, breed, and location.
This is one of the newer benefits companies are looking to implement, and in fact research shows that pets in the office lead to increased morale and productivity.
Finding the Benefits with the Best ROI
With information about the costs of benefit offerings in hand, it’s now time to determine the value of those benefits within your organization. Understanding the cost of benefits, as well as the value they add for your unique employee population, will help you determine which benefits your organization should offer. Check out this article to learn about the benefits approach at Human Interest, as well as the thought process behind the offerings.
Benefits offerings have a huge impact on recruiting and retaining employees. Four in five U.S. employees surveyed said they would prefer new or additional benefits more than a pay increase. To get the most return on your benefits program investment, start by asking employees what they want. During exit interviews, ask people if there were benefits they wished they’d received or which would have made them stay. You want to spend your money on the benefits that employees value most.
While you may want to offer employees all the benefits they want, it’s also important to balance between employee desires and what your organization can afford. That’s why in addition to gathering input from employees, you should conduct a cost analysis. In some cases, it makes sense to work with an outside organization that can help you gather the data necessary to conduct an unbiased and detailed assessment of the costs against value.
For a basic understanding of what benefits deliver the most value, consider any tangible returns on investment (ROI). Look for positive impact a benefits offering may have on line items such as sales and revenue.
You also want to assess the value of the investment by focusing on intangible measures such as engagement (e.g., productivity, absenteeism, and turnover).
Some offerings—such as a 401(k) plan—provide important benefits without costing too much money. Be sure you leverage any available tax deductions to offset the costs. In the case of both 401(k) and transportation benefits, employers can also receive valuable tax deductions which reduce the overall investment required.
Communicating the Value of Your Benefits
To get the most value out of your benefits, you also need to communicate the value of what you offer to employees. Help them appreciate your investment in them by providing an annual statement of total compensation.
Include all of their wages, as well as the dollar amount you contributed to other benefits, such as your employer 401(k) match. This report serves to remind employees that you’re investing in them above and beyond their annual wage or salary. When these other benefits are included, their total compensation is actually higher than they may realize.
As you implement and update your benefits offerings, take time to examine the costs, evaluate the ROI, and then communicate the value you’re providing. A strategic benefits plan allows you to use employee benefits as a tool that supports your business goals, engages employees, and positively impacts the bottom line.