Employee Benefits Strategy: A Complete Guide
What Is An Employee Benefits Strategy?
An employee benefits strategy refers to an organization’s approach to developing a total compensation package that effectively utilizes employee benefits in addition to other forms of compensation.
Types of benefits could include health insurance, retirement plans, wellness programs, flexible working conditions, and learning and development opportunities.
A well-structured benefits strategy is tailored to the needs of the workforce and aligns with the organization's financial capabilities and strategic objectives.
Why Is An Employee Benefits Strategy Important?
According to the Bureau of Labor Statistics (BLS), employee benefits for private industry workers averaged $12.77 per hour worked in December 2023. This works out to 29.6% of total compensation ($43.11 per hour).
Benefits are a significant investment for organizations and can significantly impact recruitment, retention, engagement, and productivity.
This is why developing an employee benefits strategy is so important.
How To Develop Your Employee Benefits Strategy
Developing a coherent benefits strategy means balancing what’s best for your organization and workers.
Here’s how to approach that.
Assess needs and preferences
A good starting place is reviewing your existing benefits package and assessing its effectiveness.
Some methods to achieve this:
- Analyze benefit utilization data: Asses enrollment numbers and usage rates of different benefits and request regular utilization reports from benefits providers. Benefits administration software can help you here.
- Conduct surveys: Gather feedback from current and potential employees to understand what benefits are most valued and how they’re feeling overall.
- Analyze workforce demographics: Consider the needs of your workforce, including age, lifestyle, and family status, to tailor your benefits package.
- Benchmark against industry standards: Research the industry and benchmark your benefits package with industry standards and competitors.
- Assess other HR metrics such as turnover, engagement, and absenteeism.
The aim is to determine where your existing package is and isn’t contributing to business goals and success.
Set goals
Now you’ve got the lay of the land, determine what you want to achieve with your benefits strategy.
If you’re finding it hard to attract talent or absenteeism is high, could employee benefits help with these issues?
Common goals of benefits are:
- Help attract the right talent
- Aid in employee retention
- Support employee health and well-being
- Keep you compliant.
Establish some KPIs that you can later use to help monitor the effectiveness of your benefits package.
Establish a budget
Offering generous benefits can help sway talent toward your organization, but they obviously come at a cost.
Consider the total costs, including employer and employee contributions, and how these expenses will fit into your overall payroll budget.
We’ve seen that the average is 29.6% of total compensation, but market research will come in handy here.
Research and select benefits
- Core benefits: Start with core benefits such as health insurance, retirement savings plans, and paid time off.
- Additional benefits: Consider adding other benefits based on employee feedback and your objectives, like dental and vision insurance, life insurance, flexible working hours, wellness programs, and professional development opportunities.
- Legal requirements: Ensure that your benefits package complies with all local, state, and federal laws.
Monitor and evaluate
Now you have your strategy in place, regularly review it to assess its effectiveness in light of the goals.
This also covers keeping informed about changes in laws and regulations that could affect your benefits obligations.
Adjust as Needed
Be prepared to make adjustments to the benefits strategy based on feedback, changes in your workforce, the latest trends in benefits and financial considerations.
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