The discussion around employee benefits has dominated the wellness space for years, and with good reason. While employers spend over 10 million dollars annually on employee benefits, traditional perk programs often miss the mark because they’ve become commonplace. Take options to work remotely, for instance. Pre-COVID, this was a coveted perk in most workplaces. With today’s hybrid workplace, even industries requiring in-person attendance now have at least 20% of their team working remotely or all of the time.
Since the novelty wore off, you can no longer impress employees with this perk. Instead, smart leaders are rethinking outdated models and seeking alternatives that support holistic wellness, such as lifestyle reimbursement programs. But, implementing a successful program is more of an art form than one might think. Read on to learn more about how to effectively manage one…
What is an Employee Lifestyle Reimbursement Program?
A lifestyle reimbursement program is a type of benefits program where a company provides financial reimbursements or subsidies for costs related to employees’ overall well-being and life outside of work. Typically, these programs allow employees to get reimbursed for expenses in categories such as:
- Fitness (gym memberships, exercise classes, sports leagues)
- Wellness (nutrition counseling, weight loss programs, mental health services)
- Professional Development (courses, training, coaching)
- Family Care (childcare, elder care)
- Hobbies/Leisure Activities
- Home office setup
- Transportation/commute
- Meals and team-building expenses
But why offer an employee lifestyle reimbursement program?
The idea is to support employees’ personal lives, reduce stress, and promote a healthy work-life balance. This can increase employee satisfaction, engagement, productivity, and retention.
Note: Many companies provide a fixed lifestyle reimbursement allowance per year. Employees are then free to use it toward approved expenses. The reimbursements are treated as a non-taxable benefit in many jurisdictions.
Potential Challenges When Implementing a Lifestyle Reimbursement Program
Running an employee lifestyle reimbursement program requires careful planning and implementation. Even then, you can still encounter challenges that make it hard to achieve your expected outcomes. Let’s explore some of them:
1. Defining Qualified Expenses
Determining which expenses qualify for reimbursement can be tricky. For instance, gym memberships and tuition reimbursements are clear, but what about hobby classes or vacation costs? Unless there are clear policies in place, abuse of the program is a real threat.
2. Managing the Reimbursement Process
The administrative process of an employee lifestyle reimbursement program can also be cumbersome. While you need clear and effective policies, you must also ensure you create a seamless system that doesn’t create bureaucratic headaches. For instance, what’s the process of handling proof of purchase and documentation requirements? Employees are more likely to give up on the program if they often experience delayed expense reimbursements.
3. Controlling Costs
Budgetary constraints can reduce the impact of a lifestyle reimbursement program. On the one hand, you want to set an appropriate annual reimbursement allowance per employee. On the other hand, you don’t want the program to become a budget drain if the participation rates change. Balance is key.
4. Ensuring Fair & Equitable Access
Fairness and accessibility are major pillars of a successful wellness program. This means making the program open to all employees, considering any unique wellness needs, and ensuring everyone participates equally. However, it can be hard to accommodate everyone’s needs, especially if you have remote/distributed workforces.
5. Measuring ROI & Program Success
How do you measure the reimbursement program’s efficacy? While return on investment (ROI) can indicate the program’s success, that alone might not be enough. Sometimes, you may have to define other KPIs of success, such as engagement, productivity, and retention, to quantify the program’s impact.
Key Strategies for a Successful Employee Lifestyle Reimbursement Program
Despite the outlined obstacles, you can still implement a successful reimbursement program. Here are key strategies to consider:
1. Set Clear Program Policies
Start by specifying eligible and ineligible expense categories (e.g., fitness, mental health, and professional development). Next, outline documentation requirements like receipts, proof of payment, and class schedules. If possible, develop a multi-step approval workflow with automated triggers for different expense amounts.
2. Seamless Reimbursement Process
No one wants to jump through hoops before they can access their reimbursement. Given everything they must do daily, employees appreciate a hassle-free and user-friendly reimbursement platform or integrated software solution that simplifies the process. Where possible, allow employees to easily upload receipts and documentation from mobile to streamline the process further. Most platforms offer an intuitive tracking page for viewing the reimbursement status. You can also consider enabling direct deposit reimbursements to employees for seamless payouts.
3. Effective Communication
Clear communication is the backbone of any successful business. The same is true for your reimbursement program. Even if you’ve involved your employees in the planning stage, ensure you continue to promote the program through emails, intranet, new-hire orientation, etc. Create comprehensive training resources – guides, videos, FAQ. Facilitate discussions to clarify doubts about qualifying expenses and ensure everyone is on the same page.
4. Robust Reporting & Analytics
Analytics helps you assess the program utilization in a given period. You want to track data points like reimbursement amounts, popular expense categories, participation by department/location, etc. Monitor ROI metrics tied to recruitment, retention, productivity, and even healthcare costs. These insights will be helpful if you need to negotiate better corporate rates with partners/vendors.
5. Periodic Program Review
As the program grows, so will the needs. In any case, the employee population does change as new team members come in and others leave. Ensure you conduct periodic surveys and gather qualitative employee feedback. Assess if policies need refinement based on spending trends and common inquiries. And to ensure you remain relevant, benchmark your program’s competitiveness versus peers and industry norms.
6. Use Appropriate Tools and Platforms
Thanks to tech advancements, you can easily oversee your lifestyle reimbursement program with minimal effort. Here are the top tools to consider:
- Benefits Administration Platforms: Solutions like BambooHR, Benefitfocus, and Gusto have modules for managing lifestyle/wellness benefits. They allow setting allowances, enabling employee reimbursement requests. Also, provide employer reporting and analytics.
- Lifestyle Spending Accounts (LSAs): An LSA is a tax-advantaged account that allows employees to set aside pre-tax funds to reimburse lifestyle expenses. It enables automated payroll deductions and reimbursement processing. It can also be administered by the employer or an external LSA provider.
- Expense Management Software: Platforms like Expensify, Concur, and Zoho Expense allow employees to submit reimbursement requests digitally. Capabilities include receipt upload, approval workflows, reporting, and policy enforcement. Integrate with accounting/ERP systems.
- Point Solution Vendors: To round up our list, consider specialized wellness reimbursement vendors like IncentFit, Forma, and Compt. While they’re more niche, these platforms handle allowance setup, reimbursements, compliance, reporting, etc. They may also integrate with payroll and HRIS systems.
Pro tip: You don’t need every tool in this list. The key is identifying solutions that fit your processes, workforce requirements, and existing tech stack.
Final Thoughts
Implementing an effective employee lifestyle reimbursement program requires an upfront investment of time and resources. However, the long-term cost-savings make it a worthwhile endeavor.
Since you can’t have a perfect program from day one, don’t be afraid to start small and adjust as the program grows. Most importantly, promote your program as a tangible demonstration of your organization’s commitment to its people’s holistic health. When employees feel cared for, they’re inspired to bring their best selves to work each day.
Curious to see if lifestyle reimbursements are right for your organization? Feel free to schedule a call with one of our Benefits Experts today. Let us help you create a productive, healthy, and happier workplace!