When we think of benefits, we often think of healthcare, vacation days and sick days. There are countless types of employee benefits! As the professional world continues to evolve, employees are looking for more than these traditional standards, and are looking to use an employee benefits plan while they are still working. Supporting and maintaining employee health is more important than ever.
In case you are wondering how to set up an employee benefits program, you should see this post on how to do employee benefits planning!
Benefit plans can seem complex, and choosing which one works best for your company can be overwhelming.
In this article, we’ll provide guidance and information you need for understanding employee benefit programs.
Read on to learn more about this topic! Click on the sections below to jump right to your specific question.
First off, What is an Employee Benefits Program?
At the most basic level, it is a grouping of economically useful goods and/or services that employees receive in addition to their income. This is not to be confused with salary packaging or salary exchange, where workers negotiate different benefits in lieu of a portion of their salary. An employee benefit program is separate, and additional to, employee wages.
What is the Importance of an Employee Benefits Program?
Employers and brokers alike quote the main purpose for implementing an employee benefit program is to recruit and maintain employees. According to research, 60% of candidates say that benefits and perks package (check out these quirky perks by the way) are a major factor when considering a job offer. Well designed benefit plans have a large effect on company culture and employee productivity. Employees that are satisfied with their benefit plans are more content in their overall positions, causing less burnout, higher involvement in the company, and a higher retention rate.
In terms of company profit, higher productivity speaks for itself. It goes hand-in-hand with burnout (or lack thereof). Retention rate is also important; according to ADP, on average, it costs over $4,000 to hire and train a new employee. With less employee turnover, your company is not only avoiding these costs, but also retaining employees with increased knowledge and history.
Also, you should offer employee benefits irrespective of the size of your company. Here is our ultimate guide to small business employee benefits.
Types of employee benefits
Benefits required by Law
All companies are required by law to provide the following benefits:
- Workers’ compensation insurance
- Social security and medicare contributions
- Minimum wage requirements and overtime pay
- Unemployment insurance
- Disability insurance (state-dependent)
Additionally, companies with over 50 employees must also provide Health insurance packages and Family and Medical Leave.
The most common type of employee benefit, medical insurance has a large range and typically is broken down into healthcare, vision, and dental. Employers can also offer an HSA, HRA, or FSA account.
There are a few different options of life insurance policies, including group term, group accidental death and dismemberment, business travel accident, and split-life dollar.
These benefits are typically one of two things: a 401K or a pension plan. The main differences between the 2 plans is the control that the employee has. 401K plans are mostly under the jurisdiction of the employee; though oftentimes employers do match employee contributions.
There is both short- and long-term disability insurance. Short-term is intended to cover the employee following injury or illness that prevents them from working. It typically covers periods of three to six months. Long-term disability is typically for more serious disabilities that leave a person unable to work indefinitely or permanently. It typically covers periods of 5, 10, or 20 years.
This is not currently a federally-mandated benefit, however, there are a handful of states (NY, NJ, RI, CA, HI) that require employers to offer some sort of disability insurance.
This is where we get into the good stuff! Fringe benefits are anything outside of the traditional norm; here is where you start to draw interest from potential employees. Because it is a catch-all, fringe benefits can include stock options, wellness programs, paid time off (PTO), education costs, relocation assistance, work from home costs, commuter benefits, and childcare.
The Most Popular Employee Benefits
Progressive companies are constantly upping the ante when it comes to employee benefits. In addition to offering higher wages, these companies are also aware of the growing need to provide a benefit package that stands out from the crowd. Nearing the end of 2022, Millennials make up the largest portion of the workforce (about 35%). Another 27% of the workforce will be Gen Z by 2025. These two generations are sick of the traditional views of working their lives away. They are demanding higher salaries, better work environments, and more benefits. If your company hopes to compete, make sure your benefits include the following most popular benefits.
Top of the List: Health Insurance
We saw that one coming. However, health insurance is more than just accident and sick coverage. The need for sufficient mental health coverage is becoming more and more important. According to a recent poll released by the American Psychiatric Association, 77% of all Americans said private health insurance offered through an employer or union should cover mental health.
Second Place: Flexible Hours
This includes the ability to work from home, and flex time. Gone are the days that everyone worked a strict 9 to 5. Luckily for employers, advanced technology allows employees to work effectively from any location with internet access. Employees that work from home report higher productivity. Not to mention the cut-down on commuting, which can be both expensive and frustrating. Companies have shut down their offices, saving thousands in rent and utilities. Flex time also includes flexible annual leave: floating holiday policies, unlimited time off, or extra holidays (ranging from holidays observed by non-Christian religions to birthdays).
Bronze Level: Training and Development
This is a win-win situation, as employees are looking for transferable skills, and companies are looking for well-rounded employees!
Honorable Mention: Pleasant Working Environment
Despite the desire to work from home, employees are still looking for a good working environment. Endless studies show the positive effects of a positive physical and mental environment on employees. Physical examples include natural light, plants, and a clean space. This also includes ergonomic furniture such as sit/stand desks, ergonomic chairs, and keyboards. For a positive mental work environment, office culture takes the cake. Send out a company culture survey to assess your employees’ perception, take the feedback seriously, and create a board to work on the continuous improvement of company culture.
Last but certainly not least: Wellness Packages
Rounding off the list of most important employee benefits are wellness packages. This is truly where companies begin to stand out. Larger companies have on-site facilities, including gyms and stocked kitchens. If this is not feasible for your organization, a wellness benefit is a good alternative. It encourages employee physical wellness (as well as mental, as we all know how happy endorphins are released in a workout!). You can take this one step further by offering wellness rewards for completing wellness activities. If you are curious to gauge your employees’ thoughts on wellness benefits, it would be a good idea to use an employee benefits survey.
Designing an Employee Benefits Program in 5 Easy Steps
Step 1: Identify Budget and Objectives
Creating an ideal benefit package can be fun, but if it is out of budget, then it would be a waste of time. First determine what your company can afford. Then, determine what the objectives are. As opposed to a list of actual benefits, the objective is to provide an overview of offering benefits that meet both the employer and the employees’ needs.
A sample objective would be: To establish and maintain a competitive employee benefit program based on employees’ needs for flexibility and mental wellness.
Step 2: Conduct a Needs Assessment
Probably the most pivotal step, conducting a survey or series of surveys to gauge your employees’ needs guides you on the decision-making process. Creating a benefit plan that does not cater to your employees will not reap any of the benefits discussed in this article. It is also important to keep in mind the demographics of your employees, as employees in varying life cycles may value different things.
Keep in mind accessibility and how the average participant may differ from those with accommodation needs.
Step 3: Formulate a Benefits Plan
Using data collected from step 2, you are now ready to begin planning your benefits program in order of priority. This step is probably the most complex. The following questions should be considered:
- Can benefits that are underused or not valued by employees be eliminated?
- What are the administrative costs for the benefits?
- What cost-containment features can be put in place?
- Will employees have to contribute, and how much?
- Are there resources to administer in-house, or will a third-party administrator and broker be necessary for certain plans?
Step 4: Execute your Benefits Plan
The way a benefits plan is implemented has a large impact on employee buy-in. Without the buy-in, all the effort extorted in steps 1 through 3 would be wasted. Hopefully employee feedback was a large part of the decision-making process; share these statistics and data with your employees when communicating the new benefit plan.
- Create awareness of the new plan
- Provide a high level of understanding of the offered benefits. Include FAQs and an administration contact for any questions
- How does eligibility for the program work? Does this cover only the employee, or is it offered to their spouses and a dependent as well?
- Is this an addition to an existing plan, or a rework entirely?
- Is the information you are providing available on their employee portal/website?
- Encourage the use of the benefit plan
Step 5: Create an Evaluation Process
Benefit plans may need restructuring after implementation. This is to be expected, and if you want to keep ahead of the curve, necessary. Attitudes and needs change more often than we realize. Change in the business climate, the economy, the regulatory environment and workforce demographics all create dynamics that affect benefits offerings. (SHRM) For example, who would have thought about the high value of a work from home environment prior to 2020? To manage your newly implemented benefits program, establish a way to receive feedback on the new plan. This can be through surveys, meetings or focus groups. Provide an open environment where participants can share their experience and provide feedback. Update the benefit plan if necessary.
Interested in how to use Wellness to promote an engaged workforce? Check out the “Definitive Corporate Wellness Landscape” for a high-level view of all of the options on the market right now! (Pro tip: look for the comparison table to which products are most common with companies your size.)
Want to learn more about corporate wellness? Take our three-part Wellness Foundations Webinar Series for HR managers. It’s a kickstart for anyone who wants (or needs) to dive head first into the industry.
Interested in speaking with a benefits expert for more one-on-one support? Schedule an introductory call with IncentFit. We’ll learn a bit more about your company’s unique needs and point you in the right direction.