Companies winning the talent game are those that offer more than just PTO and a few basic benefits.
Your employee benefits package needs a solid mix of core benefits, fringe benefits, and companywide programs if you want to compete. In this article, we'll show you how to create an effective employee benefits strategy that includes those.
What's included in an employee benefits strategy?
It's the blueprint for your total compensation plan, plus other benefits and perks you might offer. It comprises the following elements:
- Benefit types
- Benefit costs
- Program design
- Communication and delivery
- Legal and compliance
- ROI and employee satisfaction assessments
Perhaps the most important consideration of any benefits strategy is the types of benefits you offer. The goal is to offer benefits that appeal to your current employees and target candidates and reflect your company's core values.
As far as employee benefits offerings are concerned, there are six 6 main types.
1. Legally required benefits
Certain laws — like the Family and Medical Leave Act (FMLA) — require employers to provide certain benefits to their employees.
- Social security and Medicare (taken care of through payroll deductions)
- Unemployment insurance
- Workers' compensation
- Sick leave
- Disability-related leave (under ADA/FMLA)
- Continuation of Health Coverage (COBRA)
- Health insurance (under Affordable Care Act)
Certain US states, such as California and New York, also require employers to offer short-term disability benefits, paid family leave, or unpaid sick time.
2. Health benefits
Aside from Affordable Care Act (ACA) requirements for employers with 50+ employees, many offer additional health benefits to employees.
These might include:
- Employer-sponsored health insurance
- Health and wellness stipends
- Prescription drug coverage
- Dental and vision coverage
- Health savings accounts (HSAs)
- Flexible spending accounts (FSAs)
- Health reimbursement arrangements (HRAs)
- Therapy, counseling, and other mental health resources
- Telemedicine resources
- Pet care stipends or pet insurance
According to research from the Bureau of Labor Statistics, 87% of private sector employees could access employer-sponsored health insurance. Other employee benefits, like stipends and telemedicine, are quickly gaining popularity as well.
3. Financial benefits
Depending on your company's size and structure, you can offer the following:
- Retirement plans (401k, 403b)
- Employee stock purchase plans (ESPPs)
- Profit sharing
- Financial planning assistance
- Spot bonuses
- Annual bonuses
- Rewards and recognition programs
We consider retirement plans to be "table stakes" —most employers offers them (and a lot match your contributions), so you won't exactly stand out for offering one. To compete, consider more unique and impactful financial benefits, like a rewards and recognition program.
4. Lifestyle benefits
Employee lifestyle benefits are the ones they can use to maintain a healthy work-life balance.
Here are some common ones:
- Paid time off (PTO)
- Flexible working arrangements
- Remote/hybrid flexibility
- Lifestyle spending accounts (LSAs)
- Family stipends
- Child care benefits
- Fitness reimbursement
Lifestyle benefits are frequently overlooked compared to the abovementioned categories. But they're usually low-cost to implement and are the most important for employee wellbeing and satisfaction.
5. Work/professional benefits
Employees want jobs that support their day-to-day professional lives and long-term growth. Whether it's helping them do their jobs better or teaching them something new, there are plenty of ways to do that.
- Tuition reimbursement
- Student loan repayment assistance
- Training and certification programs
- Conference and event attendance reimbursement
- Learning and development stipends
- Career coaching and mentorship
- On-site opportunities for career growth and exploration
- Cell phone reimbursements
- Remote work stipends
- Commuter benefits
Like lifestyle benefits, these are ones you might not immediately think of when considering your employee benefits strategy. But more than three-quarters of employees crave career development opportunities, so offering them sets you apart from the pack.
It probably won't make financial sense to cover all of the above. You'll have to carefully analyze which ones will have the most impact, then optimize based on costs.
When deciding which benefits to offer, you'll have to consider:
- Budget. How much are you willing to spend on each employee's benefits package?
- Demographics. What do your employees need? Families might prioritize child care assistance, while new college graduates might prefer student loan repayment.
- Industry and location. Certain industries and regions have different employee benefit norms.
- Employee feedback. Don't be afraid to ask employees what they want! A quick survey can give you valuable insight into what benefits are most important to your team.
Most companies start with the essentials (like health insurance and PTO), then zoom out to include more niche benefits.
This is where you'll get into the nitty gritty of employee benefits planning. You'll not only decide which benefits to offer, but how you'll offer them.
To get started, you'll consider eligibility, contingencies, and restrictions on how employees can use their benefits. You'll also need to consider how employees will sign up for and use their benefits.
Communication and delivery
Your concern here is twofold:
- How will you get your existing employees on board?
- What will marketing and hiring teams do to make sure prospects know your employee benefits plan?
This requires upfront planning before you roll out your benefits.
Legal and compliance
Having a competitive benefits package means offering several different types.
- Some are pre-tax. Others aren't.
- Some you'll give through vendors. Others you can handle in-house.
- Some are federally regulated. Others are state-regulated (and the regulations differ by state!).
If you're offering global employee benefits, it gets even more confusing. You'll have to consider laws and cultural norms (which you might as well treat as laws for benefits purposes) in every country you do business.
Compt is 100% tax-compliant, so you can launch your employee benefits strategy while putting compliance on autopilot.
ROI and employee satisfaction assessments
Part of managing your benefits strategy is making sure you do so profitably. That means regularly assessing your strategy to see how it's helping you.
ROI and employee satisfaction go hand in hand. Satisfied employees are more productive, so finding ways to improve one will likely help the other too.
Whether you realize it or not, you already have a benefits strategy...
Your company decides how it's going to invest in its employees, and that investment manifests itself in your employee benefit offerings.
The problem is a lot of companies approach it haphazardly. They pick a few things from each of these categories without considering how the different pieces fit together. As a result, they may be paying for employee benefits nobody cares about.
If you don't think you have an effective strategy, it's time to start developing one that truly meets your employees' needs and aligns with your company culture and goals.
Designing and implementing a benefits strategy that works for your company
Assuming you're starting from scratch, here's an in-depth look at the steps and best practices involved in creating a benefits strategy that works for your company and employees.
1. Align your benefits program with business goals
Your employee benefits strategy is ultimately part of your larger business strategy. First and foremost you need your company's benefits to somehow contribute to busienss success.
Depending on the problems you currently face and your long-term goals, you might want to...
- boost employee engagement
- recruit awesome talent for a new project/cohort
- improve benefits enrollment numbers
- incentivize performance
- lower employee turnover
The point of aligning your benefits strategy with these goals is to make sure you can measure its success and optimize it down the road.
2. Set your budget
There are two things that come into play when setting your budget:
- How much you can afford
- How much you need to spend to achieve your business goals
Some benefits, you'll have to spend a lot to offer. For instance, the average employer-sponsored health insurance premium cost employers $7,911 per single coverage and $22,463 for family coverage (in 2022).
Benefits account for around one-third of total comp, so it's a good idea to use that as a benchmark when setting your budget.
You'll also want to consider the following costs:
- Implementation and administration costs
- Compliance overhead (which could include hiring legal help)
- Costs of adding/removing benefits in the future
- Potential price increases from benefits vendors
Note: If you're a smaller or younger company that's hiring in the near future, you should carry out steps 3-5 first. Once you know how much it would cost to offer your ideal benefits plan, evaluate the total cost of bringing on each new employee. Otherwise, you'll have a slow hiring process, high turnover rates, and a hard time staying profitable as you grow your headcount.
3. Find out what's most important to your employees
Personalized benefits improve the employee experience and maximize your enrollment. You can read statistics and look at benefits trends all day long, but you won't really know what your employees care about until you ask them.
The easiest way to meet employee expectations is by running an employee benefits survey.
Ask them questions around...
- their goals for using benefits
- their current experiences with your benefits plan
- their preferences for certain types of benefits and perks over others
- how important they think each benefit is from 1-10
Once you've narrowed it down, talk with your employees about what you can offer based on what the budget allows. See what makes sense, and use the benefits that make the cut as your North Star.
4. Determine your core benefits offerings
Some benefits cost more than others to offer. They're usually your core ones, so it makes sense to tackle those first. Plus, these are the ones you know you have to offer.
Table stakes for an employee benefits package include:
- Healthcare costs (insurance) and FSA options
- Retirement benefits (including a 401k plan)
- Time off policies (e.g., PTO, parental leave, sick leave)
You should also consider your industry. For instance, companies working in the veterinary space or another pet-related industry should place a higher emphasis on pet insurance benefits, even though they aren't considered "must-haves" by most standards.
5. Decide on the nice-to-haves
These are the icing on the cake. They're the perks that improve your overall benefits experience and show your employees you care about their lives outside work. You may not be able to offer all of them, but if you can afford at least a few, they go a long way in keeping your staff happy and engaged.
We have a whole article that explores our favorite unique employee benefits in-depth (with examples), which you can use to guide your decision-making.
6. Make your benefits plan inclusive, but flexible
You have to consider your entire demographic when designing your employee benefits strategy. Even if most of your employees fall within one demographic (e.g., millennials), you shouldn't assume everyone is the same.
Inclusive benefits include:
- A medical insurance vendor that covers a wide array of healthcare services and offers coverage
- Flexible time off policies that consider the diverse needs of your team, such as offering additional PTO days for religious observances or caregiving responsibilities
- Resources for mental health support
- Parental leave, as opposed to maternal/paternal leave
- Using stipend software, so employees can choose how they spend their benefits allowance
- Considering the needs of remote employees (if you have any)
7. Launch your program
To launch your program, your HR team needs to:
- Create a communication plan to explain the benefits program and how it works
- Prepare resources for your employees so they can understand their options, compare plans, and pick what's best for them
- Set deadlines (e.g., open enrollment)
- Collaborate with hiring managers and the marketing team to accurately communicate benefits to new potential employees
Most importantly, make sure everyone has the information they need (including relevant reference documentation like health insurance contracts or employee benefit booklets).
8. Track your numbers
The specifics of your assessment will depend on why you're conducting it. But generally, you'll want to ask yourself:
- Are employees happy with their current benefits? If so, is there a way to get more value for them?
- What does employee engagement look like following implementation?
- What about performance?
- Are your team members using all the different benefits you offer?
- Which ones aren't they using?
- How much are you spending on benefits vs. your budget? If it's less, where can that money go?
9. Touch base with employees
You can get a baseline answer to most of those questions simply by looking at your KPI dashboards and benefits metrics. Talking to employees adds context.
A good time to do this is during 1:1s, QBRs, or the like. Or, if you want to get a better understanding of your benefits' value prop and how employees feel about them overall, send out a survey.
Employee benefits strategies are tough to manage. With lifestyle benefit software, they're a lot easier. Compt is 100% tax-compliant and integrates with your payroll provider. See how it works.