Employees might be thinking about benefits packages more than ever. So, employers should be doubling down on efforts to strengthen their offerings. By doing so, you can reduce attrition while improving morale.
What are benefits packages? Simply put, they include all forms of compensation apart from salary itself. Health insurance, paid time off, and retirement benefits are the most central features. Let’s explore what makes up competitive benefits packages—and how to build one.
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Why Benefits Packages Are Important
We’ll discuss three key reasons why benefits packages are so critical. They pertain to legal obligations, recruitment, and employee satisfaction.
Meeting Legal Requirements
Are benefits packages required by law? Some specific benefits are, while others are optional. Mandatory benefits include the following:
- Social Security contributions
- Workers comp insurance
- Unemployment insurance
- Unpaid, job-protected leave under FMLA
Under the Family and Medical Leave Act (FMLA), employees can take up to 12 weeks of unpaid, job-protected leave per year for specific family and health reasons.
For companies with 50 or more employees, offering health insurance is mandatory under the Affordable Care Act (ACA). Otherwise, they may face a fine. Most other types of benefits are optional, notes SHRM. However, benefits like disability and life insurance are cornerstones of the typical benefits plan as well.
Reflecting Your Employer Brand
A strong benefits package reflects your desired employer brand. In essence, you’re showing employees how much you value them as a human as well as a worker. With careful planning, your benefits package can set you apart from the crowd. In turn, talented employees will flock to your company.
Today’s employees want more than just a paycheck. They care deeply about achieving a high quality of life. For many, this means spending more time with friends and family or travelling. So, they want benefits that will accommodate these needs. At the same time, they want enhanced security that supports physical, mental, and financial wellbeing.
Consider that 92% say benefits are crucial to their job satisfaction. That should urge employers to carefully craft benefits packages.
Key Features of Benefits Packages
What goes into great benefits packages? Here are some of the benefits that employers might offer:
- Health insurance
- Dental and vision insurance
- Retirement plan contributions
- Paid time off (PTO)
- Maternity and paternity leave
- Life and disability insurance
- Wellness programs
- Child care assistance or daycare
- Perks such as catered lunch
- Education assistance
- Employee stock options
- Loan repayment assistance
- Sabbatical options
- Conference travel
- Performance-based incentives
- Four-day workweeks
- Transitional retirement
Some of these options, like family benefits, are well-established options. Others, like sabbaticals and four-day weeks, are growing in popularity.
Flexible PTO, a quickly growing feature, provides time off for various reasons. For example, some employees might use PTO to care for an aging parent. (Consider state options for paid elder care leave so you’re not reinventing the wheel.)
Wellness programs can offer nice extras that help improve quality of life. Yoga and meditation classes can help tame workplace stress, for instance. Or, a program might provide one-on-one sessions with a nutritionist. Chiropractic and massage benefits are other options.
Don’t rely too heavily on special perks. That would water down the value of your plan in employees’ eyes. However, a couple of “fun” benefits might be much appreciated! For instance, you might occasionally deliver lunch to their door.
Flexible hours and the option to work remotely can be considered benefits, too. But they’re becoming so common that we’re not considering them a perk. Likewise, we’re not considering DEI efforts and growth plans to be “benefits” or “perks.” Rather, they should be a given!
Examples of Amazing Employee Benefits Packages
Here are a few of our favourite highlights from companies with great benefits:
- Netflix offers one of the most extensive parental leave policies in the U.S. New parents can take an indefinite leave of absence during their child’s first year. The company also provides good health coverage, PTO, retirement plans, and meals at the office.
- Costco provides great options, too. They offer long-term care insurance, stock options, and the perk of free memberships.
- In addition to extended health care, Hootsuite offers an on-site nap room and yoga studio.
- Campbell’s provides full health coverage, along with healthy meals, cooking lessons, and other perks.
- Akraya provides a cleaning service to employees every two weeks, on top of other benefits.
But what if you’re a small business that can’t offer all of these perks?
Benefits in Small-Medium Businesses vs. Large Corporations
Large corporations tend to have more buying power when shopping for benefits. For instance, they can provide health plans at a lower price point per employee. But SMBs may be eligible for support under the Affordable Care Act, as we’ll discuss in a moment.
SMEs and SMBs can absolutely offer competitive benefits plans. We advise working to strengthen the following core areas:
- Paid leave
- Health plan options
- Wellness options like mental health care
- Retirement plans
These areas address employees’ core needs. You don’t have to add lots of bells and whistles. On the other hand, you might add one or two creative ideas that don’t cost much. Do many of your employees have dogs? Consider a dog walker service to help them out.
Meanwhile, other benefits, like four-day work weeks, may cost nothing at all!
Trends in Benefits Packages
In September 2021, McKinsey conducted a study on changing priorities in benefits management. In the survey, 66% of employers saw benefits as very important to talent management, compared to 55% in 2019.
Eighty percent offer a specialized health management program or would like to offer one. These include programs for managing specific issues, such as the following:
- Mental health
- Musculoskeletal health
Opt-in programs like these can give employees the customized support they need. Plus, they can reduce insurance costs for the employer.
Additionally, interest in member advocacy services is rising, McKinsey found. A member advocate serves as a single point of contact when employees have questions about their benefits.
Customizing Benefits Packages
To build comprehensive benefits packages, begin with a needs assessment, as SHRM urges. Consider factors like these:
- Your industry
- Geographic location
- Your budget
- Current agreements you have with employees
- Employee satisfaction with their current plan
- Whether costs are rising for any key benefits features.
We can group these factors into three main categories: employee needs, competitors’ offerings, and your budget.
Assessing Employee Needs
Use data from pulse surveys to assess employee needs. For instance, you can use Primalogik’s software to create questionnaires. Then, have conversations with employees.
You could also hold a focus group-style discussion with a sampling of employees. Or, you could have private one-on-one conversations. Additionally, having a virtual idea box will let people share input at any time.
You can also review how employees are actually using current benefits. “Knowing the frequency a particular benefit is used and to what extent may help the employer determine cost-saving design practices,” says SHRM. “For insurance plans such as a medical plan, the carrier will often provide a utilization review for the employer.”
And if you have benefits admin software, you may have the answers at your fingertips.
Conducting Market Research
Conduct market research to assess competitors’ benefits plans. What do the most attractive plans look like? What are companies in both your region and industry offering? Create a spreadsheet of competitors’ plans showing their key features.
Considering Your Budget
Can you afford to spend more on benefits right now? Or is your budget maxed out? Consider whether increasing your benefits budget is a vital investment for improving retention.
Strive to give employees the option to customize their own benefits, too. After all, they know their own needs best!
Costs of Benefits Packages
How much do benefits packages cost? Let’s first look at what today’s employers pay. Then, we’ll examine how to find affordable options.
What Companies Pay for Benefits
Benefits can account for a whopping 40% of compensation costs, says SHRM. For union workers, companies pay $20.60 per hour, according to the BLS. Meanwhile, for nonunion workers, they pay $10.65 per hour. Benefits make up 40.2% of total compensation for union workers and 28.2% for nonunion employees.
The cost ranges depending on the size of the business, says the BLS. Small companies with fewer than 49 employees pay an average of $7.82 per hour worked. Large companies with more than 500 employees average $19.41 per hour.
Even as benefits costs rise, employers are becoming less concerned about costs, says McKinsey. Why? They’re becoming more deeply aware of how crucial benefits plans are to employee satisfaction and retention.
Finding Affordable Benefits Packages
How can you save on the cost of benefits? The federal government provides guidance on affordable health plans for small businesses. Look for health plan options that bundle mental and physical health care. You might also consider a health reimbursement arrangement (HRA).
This tax-free reimbursement model compensates employees for qualifying expenses, including insurance premiums.
Plus, small businesses may be eligible for a tax credit for providing health coverage.
Conduct a cost/benefit analysis of potential plans. For example, will you reduce recruiting costs by adding better benefits? In many cases, the answer is yes.
Once you’ve established your benefits plan, explain it clearly to all staff. Make sure managers are equipped to answer questions and share resources. This will enable employees to fully utilize and appreciate all of their plan’s features.
Negotiating A Great Benefits Package
New hires may be forthcoming about the benefits they want. In some cases, current employees may reach out to renegotiate their benefits, too. How can you negotiate with them to ensure the best outcome?
- Embrace the discussion. They’re showing trust by explaining their needs. And you’re gaining hard data on what they actually want!
- Consider what is fair. You want to accommodate them, but not at the expense of other employees. Make sure you’re not going far above what you offer others. (That could even become a discrimination issue.)
- Share and discuss several options. HR usually has more expertise in benefits planning than employees. You may put options on the table that they hadn’t thought of.
- Consider whether to reevaluate all employees’ benefits. The data you’re getting from these negotiations can inform your efforts.
Designing a benefits program based on employees’ needs will show that you care about them. As a result, satisfaction is likely to rise. In turn, your improved benefits plan will positively influence recruitment and retention by enhancing your employer brand.