Next to adequate wages, employee benefit packages are vital
to attracting and retaining employees in a competitive market. Some of the
perks include medical insurance, retirement savings plans, and paid time off.
However, you'll need to balance these perks with cost-conscious
decision-making.
This article reviews how to make the perfect employee
benefits package while cutting costs.
The Elements of a Perfect Employee Benefits Package
The best employee benefits packages contain a few key
elements. You'll need to consider your employees' diverse needs and preferences
while balancing them with your company's goals and finances. There isn't
exactly a one-size-fits-all answer, and each element impacts the employee and
your organization.
But there are a few key things every employee benefits
package should have, including the following:
• Health
Insurance. Employers should ensure their package contains a broad range of
medical, dental, and vision services. This helps to mitigate the high cost of
care to ensure health and well-being. Employers can potentially pay less for
these services by negotiating them with a wide range of medical providers
before comparing prices and making a choice.
• Retirement
plans. This element enhances overall satisfaction by promoting financial
stability for employees during their retirement years. In most models, both an
organization and the employee will make specific financial contributions to a
retirement fund for the employee. Companies should encourage this process
regularly to ensure costs can be analyzed and managed.
• Paid
time off. A robust PTO system would be of significant value for every
employee's benefits package. In the U.S.A., there are no laws stating that
employers must offer PTO to their employees, as opposed to certain European
countries. However, companies that provide vacation and sick leave have a
competitive advantage in attracting and retaining qualified employees.
• Additional
compensation. Many companies choose to give other payments to their employees
in addition to their base salaries. This includes sales commissions, bonuses,
gifts, or awards. These, in turn, motivate employees to produce better results.
Companies can cut costs by tracking improved results and analyzing percentages
that benefit both the employee and the company.
Employee benefits packages should comply with the regulations of the labor department and their plan examples. Companies can
easily follow the guide to ensure the most effective elements. Employers can
also ask in an online community where you can post questions and receive
answers on almost any topic.
How to Save Money for Employee Benefit Packages
Making the ideal employee benefits package is no easy task.
Every organization and employee is different. You'll have to consider the needs
of the employees and the company to create a proper assessment. For example,
additional compensation might work best for improving an unmotivated work
environment. At the same time, medical insurance can heighten well-being
altogether and minimize employee turnover.
Here are a few critical strategies for saving money with
employee benefit packages.
Eliminate Any Unwanted Employee Benefits
Since every business is different, workers may or may not
value a particular employee benefit. Companies can easily cut costs by
eliminating any extra benefits employees don't prefer.
Consider the demographic and age of employees for more
insight. Older employees might place much more emphasis on health insurance
covering critical illnesses. In comparison, younger employees will instead
value a flex-spending account.
Employee Benefits and Income Should Be Aligned
Many companies spend money on employee benefits packages but
still have retention problems with highly-skilled workers. This is because the
cost of these benefits is not proportional to each employee's income.
For example, a highly skilled and experienced employee might
not be satisfied with $2,000 life insurance policy. At the same time, a fresh
new talent with lower wages might be happy with such a policy.
To counter this problem and increase retention rates,
employers can create sub-divisions based on salary, experience, and longevity.
This allows them to potentially cut costs on some benefit packages while
increasing retention with others.
Using Defined Benefit vs. Defined Contribution in Employee
Benefit Packages
There are two main strategies when presenting an employee
with a benefits package: defined benefit and defined contribution.
Defined benefit only covers the type of service for a
specific plan and places less emphasis on the price. For example, a health
benefit might cover up to $1,000 a year for a particular therapy. It requires a
company to pay a yearly premium even if the employee doesn't use it. These
rates frequently fluctuate and can take a toll on spending.
Defined contribution precisely states how much a company is
willing to reimburse the employee for a certain benefit. By starting a health
spending account, employers don't need to lose money if an employee doesn't
fully utilize the allowed amount for the health service. For example, a company
can introduce a benefit stating that they'll reimburse a maximum of $1,000
yearly for a particular therapy from the account. The company will save money
because it is not subject to a yearly premium.
The Big Deal About Employee Benefits
Benefits packages are a form of compensation for employees
apart from their regular salary. Technically, most aren't mandatory by law, but
they pose a market advantage for human resources by playing a significant role
in attracting and retaining employees. However, planning them out correctly can
take time, effort, and considerable expense.
Here are just some of the other major long-term reasons to
pay extra attention to employee benefits:
• Good
benefits contribute to long-term employee well-being and satisfaction. With the
right benefits package, employees will feel more valuable at your company.
Specific benefits such as health insurance and retirement plans can heighten
employee productivity while also retaining them.
• A solid
work-life balance. Many employee benefits packages offer paid time off and
sometimes even flexible work hours. This allows employees better personal time
management and better performance.
• Creates
a positive company culture. The benefits employees offer their talent should
reflect their values, vision, and integrity. They help to create a positive
work environment and will help increase commitment to the company while
fostering cohesion.
It's worth mentioning that a Glass Door study revealed that
63% of those looking for work pay extra attention to employee benefits when
reading job descriptions.
