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Cost Of Providing Employee Benefits

Top Benefits And What They Cost

How much do employee benefits cost?

Providing employee benefits is crucial for both attracting and retaining top talent, especially given the labor shortage that many companies are grappling with. Solid benefits can help increase productivity, and keep your employees happy. So what types of benefits are people looking for, and how much do they cost? We cover some of the most in-demand benefits below.

What Benefits Are Required By Law

While some employee benefits are nice-to-have, others are legally required for all employers.

  • Social Security, Medicare and Federal Insurance Contributions Act
  • Unemployment Insurance
  • Workers Compensation Insurance
  • Family and Medical Leave Act Protections

Sometimes, employers are also required to provide employees time off to vote, serve on a jury and perform military service, depending on which state theyre located in.

Retirement savings and emergency savings may also soon be entering the mix with the RISE & SHINE Act of 2022. Congress is debating automatic enrolment of retirement savings and pension-linked emergency savings given the savings crisis in America.

The takeaway here is that the benefits landscape is complex and, based on the size of your organization as well as the states your employees reside in, you may be required to provide thing like health insurance benefits under the Affordable Care Act, and disability insurance, and more. HR leaders need to find trust-worthy ways to stay up to date with benefits requirements on a regular basis.

Impact Of Benefits On Hiring & Retention

Benefits can have a profound impact on your hiring and retention goals, especially if we think beyond the scope of traditional benefits to address the needs and preferences of different demographics and individuals within our organizations. For example, by offering flexible parental benefits, companies may be able to make strides toward retaining more women in the workforce and creating a more equitable playing field for all parents.

As WTW highlights in their Benefits Trends Survey findings, A focus on DEI will help employers address the different needs and preferences of todays diverse workforce and shape a benefit portfolio that meets employees where they are.

Wondering how to follow through on DEI initiatives? Read this post.

avinSalary and wages are important pieces of the puzzle but todays workers are looking for more than just financial incentives. Comprehensive health care benefits may be more important to an employee with a chronic illness than salary alone. For another employee, flexible work hours and location may be a top priority.

As the economy shifts, offering benefits such as work-from-home or hybrid work opportunities can boost employee happiness. A 2022 report from Condeco on Attitudes to Hybrid Working found that 63% of hybrid workers would recommend their company as an ideal work destination. Of course, remote work isnt feasible for every role or company. Health, financial or other benefits can have similar impacts on employee satisfaction.

Also Check: Social Security Disability Benefit Amount

Why Offering Employee Benefits Is Worth It

Obviously, benefits packages cost a lot of money and take serious time and effort to put together. However, in todays competitive job market, an employer cannot afford to not offer employee benefits coverage.

The first argument for offering a considerable benefits package is the fact that employees really, really want them. If you want to attract and retain the best talent to help take your company to the next level, then a strong employee benefits package is crucial.

It can also make the process of getting top-tier talent on board much easier for your recruiters.

In a study conducted by the Society of Human Resource Management 92% of employees indicated that they consider employment benefits as crucial for their overall job satisfaction. And job satisfaction isnt just a feel-good vanity metric, its a crucial factor for both the productivity and retention of employees. In fact, in the same study, almost 30% of employees cited benefits as the main reason they started looking for a new job.

Employee benefits also help keep high-level employees reimbursed adequately without raising their salaries to prohibitive levels. Employees who have good health insurance, a steadily growing retirement fund, and options to buy stock will be happy to accept these tax-advantaged options over higher salaries.

The True Cost Of Providing Employee Benefits

The REAL Cost of Employees

When hiring a new employee, its essential to think beyond the cost of their base salary. In a modern workforce, where millennials occupy the largest chunk of the U.S. labor force, the businesses that offer the best benefits packages often boast the happiest, most skilled, and dedicated employees on their payroll.

Firstly, the cost of employee benefits depends on what a company is legally required to offer and what it chooses to add on as extra incentives. Businesses pay most of the premiums or contributions in cost-share, meaning that benefits packages can represent an expensive aspect of the entire business operation. Lets take a closer look.

Also Check: State Of Tennessee Employee Retirement Benefits

Employee Benefits Package Examples

As weve discussed, there is no one size fits all benefits package that will work for every company. Instead, its helpful to consider the needs of your existing workforce and the people you hope to attract.

Heres one example of an employee benefits package designed to attract and retain employees:

  • 401K plan with employer matching
  • Medical, dental and vision insurance with a range of coverage/co-pay options for employees
  • $100/month gym or fitness reimbursement
  • 10 days paid time off annually
  • Paid sick leave
  • Workers compensation insurance
  • Family and Medical Leave Act protections

In practice, employee benefits packages can be very complex, particularly for organizations with a diverse workforce spread across multiple jurisdictions.

How Much Do Benefits Cost A Company

According to a 2019 report by the Bureau of Labor Statistics, employee benefits in the U.S. make up 30% of total compensation costs. Insurance benefits accounted for 8% of compensation costs and legally required benefits were at 7.7%.

Health benefits especially might average $15,000 per employee in 2019, prompting employers to make changes in order to lower the cost of employee benefits .

Benefits do cost money, and their importance is such that these costs will not be reduced too much. But, not every benefit has to create heavy financial burdens for companies. You can try your hand by introducing cost-effective benefits and perks, such as:

  • Free lunches and/or snacks

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How Can You Offer Benefits On A Budget

Showing how to set a budget for employee benefits can be difficult, and certain basic legal protections such as insurance needs to be factored in, but there is also an element of choice on what you offer people. If you have set a budget and it isnt particularly high, you can still potentially provide some great benefits.

Offering employee benefits can give you a chance to get creative. If you are on a budget, and you need to create an attractive package, then you can think about other things you might be able to offer your employees. Do you offer a service or a product? Is this something you can offer your employees for free? For instance, if you run a gym, it just makes perfect sense to give free membership to all of your employees. If you run a grocery store, you can offer a staff discount.

Other creative benefits could include a profit share, this means that employees are incentivized to work hard, too. A certain percentage of your company profits could be distributed to employees. This does mean a cost incurred, but only if the business is doing well in itself.

Certain types of businesses will find it easier to create benefits at a lower cost, but most can provide some internal benefits that are attractive to current and prospective employees.

Changes In Employee Benefits Costs

Benefits in the new normal Employee wellbeing, resilience and cost optimisation

Benefits Pro noted an increase of 368 percent since 2005 in the cost of employee benefits. During that time, health care alone has increased by 28 percent. This could be due in part to a spike in cases of chronic illness or to higher costs from health care providers.

Changes in unemployment insurance costs to employers are also dramatic, due in part to the 2008 recession and other economic downturns in the last two decades. Since 2004, unemployment insurance costs have risen by 106.8 percent.

Read Also: Federal Employee Health Benefits Program

Build An Employee Benefits Program That Wont Break The Bank: 5 Steps

The benefits you offer potential employees can make or break their decision to work for you. Also, employee benefits are typically one of your heftiest expenses as a business owner.

With so much on the line, its important to be strategic when youre deciding what youll offer your workers, regardless of your budget or the number of people you employ. To do that, your benefits program should:

  • Be centered on clear goals
  • Be financially realistic
  • Be as competitive as possible
  • Differentiate between required and optional employee benefits
  • Fit into the total compensation picture

Take these steps to start building an employee benefits program that wont break the bank.

1. Review your goals and budget

Before you start building your benefits program, you have to know why youre offering employee benefits and how much you can spend. Having goals and a budget will keep you focused and realistic as you choose which benefits to offer.

For example, your objective may be to sponsor employee benefits that allow you to:

  • Stand out in the labor market
  • Operate within the budget
  • Comply with appropriate federal and state laws

2. Know the required employee benefits

Chances are, youre already offering a few employee benefits those required by federal, state and local laws.

These required benefits may include:

  • Social Security
  • Disability insurance
  • Leaves of absence

3. Pick optional benefits

To attract talent and compete effectively, many businesses first elect to offer:

4. Highlight special perks

Extra Focus On Benefit Program

Organizations that focus more and more on the Employee Benefits Programmes in HRM often end up in a default state. It develops a sense of insecurity among employees, which distracts them from focusing on their jobs primary roles and responsibilities. It leads to neglecting the numerous Human Resource functions, and when such a thing happens, employees get ignored, leading to lower productivity.

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How To Determine What Benefits Will Cost You

In order to figure out exactly what youâre going to spend, you have to decide what youâre going to offer. There are several considerations, and everyone has a different idea of what constitutes âbenefitsâ. This could include anything that is additional to a salary and designed as an incentive for employees. Some common examples are listed here:

  • Health insurance

Some of these will be more costly than others, of course, so keep that in mind. In fact, offering someone vacation days, provided that youâre adequately staffed in their absence, isnât costing you anything more than paying them to stay home instead of coming to work.

The bottom line? Stop thinking about what benefits will cost you and start thinking about the cost of not offering benefits to the people who will make or break your business.

Optional Employee Benefits That You Should Consider

The Most Desirable Employee Benefits

These are the kind of employee benefits that can separate your company from other companies within your industry. You can keep in-house talent happy and healthy by promoting a better lifestyle through the benefits you offer.

Such benefits include unlimited vacation time, gym memberships, complimentary lunches, health incentive programs, 401k plans, retirement plans, pension plans, extended maternity leave, flexible work schedules, and many more.

Some of these optional benefits aren’t as costly as they seem. In fact, they offer a tremendous value to your business in exchange for a small expense.

What’s important to remember is that you don’t need to provide all of these optional benefits to retain good employees. All they ask is that you look out for all of their needs and help out where you can.

The thought and effort you’re putting into your employee benefit options will not go unnoticed by your workers.

In fact, they’ll likely admire your thoughtfulness and continued focus on finding ways to improve the benefits that you offer. Thats a way to keep them happy!

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Manage Employee Benefits With Helpside

Helpside offers a variety of employee benefits plans at a competitive price. Included in our services are various supplemental benefits such as dental, vision, life, and disability that can improve your employees loyalty, safety, and motivation. If you are interested in learning more about offering benefits through Helpside, or if you have questions about benefits, reach out to Helpside at marketing@helpside.com.

Breakdown: Cost Of Employee Benefits Per Employee

First things firstthere are three types of benefits included in the total cost of employee benefits:

  • Required benefits: Employers are required to offer benefits such as Medicare and social security contributions, unemployment insurance, workers compensation, paid time off, leave, long-term disability coverage, and retirement savings plans.
  • Health Insurance: Once you reach 50 or more employees, employers must offer health insurance.
  • Supplemental or Voluntary Benefits: Benefits like dental or vision coverage, retirement matching, flexible spending accounts, employee assistance programs, tuition assistance, vacation time, and other perks are usually up to the employers discretion to provide.
  • Wages make up about 70% of an employees total compensation. The other 30% or so is made up of benefits. Here is a detailed breakdown of employee benefit costs per employee, per month.

    Note that the actual cost of healthcare insurance per employee per month can be quite a bit higher depending on the rate businesses receive. Average costs per employee based on the open market can be anywhere from $400 to $800 per employee per month.

    Health insurance costs will only continue to rise as premiums increase year after year. But its still an important benefit for employees. The greater the amount that employers can cover on healthcare insurance premiums, the more attractive their benefits package and job offers become.

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    Offer Support Via Your Employee Assistance Programme

    The challenges related to the cost-of-living crisis are likely to leave many people feeling overwhelmed and in need of financial guidance.

    As a one-stop hub employees can access 24/7, an EAP is the ideal place to provide this guidance, as well as mental health support for those in need.

    An EAP service can provide practical advice in the form of signposting to financial education and support such as debt counselling, Randle says.

    It can also provide important psychological support through talking therapy to help manage the effects of anxiety.

    Get Expert Advice On Your Employee Benefits Package

    Ten Low-Cost Benefits to Build Employee Satisfaction

    Pulling together a valuable employee benefits package isnt an easy task. When you factor in the cost of living crisis, its important to get this right. Its also important to communicate your company benefits so staff know whats available.

    At Drewberry, we can help you do this for your team. We help companies set up their employee benefits to ensure workers are receiving the most useful perks. In a time when support is necessary for staff, we can tailor your benefits to your specific business needs. It also means we take a time-consuming task off your hands!

    If youd like some extra guidance, dont hesitate to get in touch with us. You can call us on 02074425880 or email our team at

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    Alternative Health Benefit Options For Employers

    If you are an employer that is struggling to meet minimum health insurance contribution requirements, alternative health benefit options can be helpful.

    For example, instead of paying for a group health insurance policy from an insurance company, employers can turn to an HRAan arrangement in which employers give employees an allowance toward an individual health insurance premium of their choosing.

    Because these arrangements allow employers to personally define their contribution, organizations often find them to be the more predictable and affordable option.

    The following four simple steps outline how an HRA works:

  • The business owner sets an annual or monthly allowance they will agree to reimburse employees for medical costs.
  • Employees purchase their own health insurance plan on a private exchange or the Health Insurance Marketplace.
  • Employees can choose a medical plan from a provider of their choice that has the features they need most.
  • As employees pay their monthly premiums and associated medical costs, the employer reimburses the employee for eligible medical expenses up to their allowance balance. Reimbursements will be tax-free if their health insurance policy meets minimum essential coverage .
  • Below well go over three great health benefit options for employers who choose not to provide traditional group health insurance to their employees.

    What Are The Intangible Costs Associated With Employee Benefits

    Good benefits attract and keep good employees and a key element in understanding employee benefits is understanding the intangible costs associated with these benefits. If you dont offer a competitive benefits package you may find it harder to attract and retain employees. Also, taking care of employees through additional benefits such as financial literacy programs will generally mean employees are happier and more productive.

    Of course, the administrative costs of processing employee benefits also add up, but this is where employee benefits administration software can ease the burden.

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    A Guide On The Average Cost Of Employee Benefits

    Learn about the costs of the most popular employee benefits to build a package that your employees will value and that fits your budget.

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    The labor market is hot right now for candidates, and there are currently more job openings than unemployed workers. When people are looking for their next move, theyre considering many factors, including compensation, location, and various benefits .

    Employee benefits are more important now than ever, with COVID-19 making people reconsider what it means to be part of the labor force. While compensation will always be important, employees are also looking for a company that values them as people with a life and needs outside of the workplace. Below we list sought after benefits and their average cost, so you can build a package that your employees will value and your company can afford.

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