Many businesses struggle to attract and retain top talent, and those that do often face high turnover rates, resulting in significant costs. According to Gallup, the cost of replacing an individual employee can range from one-half to two times the employee’s salary.
This means that an organization could lose as much as $180,000 when losing an employee with an annual salary of $90,000. Employees leave their positions for a wide range of reasons, ranging from low income to feeling undervalued.
One of the most common reasons that people quit their jobs is due to better benefits and company perks available elsewhere, including from competitors. Benchmarking employee benefits can help employers better understand how to keep their employees satisfied and how to properly invest their benefits budget.
Reasons for Employee Benefits Benchmarking
Finding talented employees is just the first step in growing a successful business. Companies must also find ways to retain their talent, and offering an appealing salary is not always enough.
Today’s job seekers are on the lookout for hefty benefits packages that include perks like mental health services, employee assistance programs, work-from-home opportunities and retirement accounts. Knowing what benefits competitors are offering is key to gaining an advantage in the market and minimizing employee turnover.
Here are just a few reasons why it is important to perform employee benchmarking:
Strengthening Your Job Market Competitiveness
Employee benefits benchmarking provides organizations with an analysis of how their benefits compare to other companies of a similar size and industry. These insights can give companies a glimpse of their competitors’ plan performance, participation rates and other critical information.
Using this data, companies can discover who they are competing against, which could give them a strategic advantage in many areas, including employee benefits.
Evaluating the Effectiveness of Current Employee Benefits
One of the best ways to evaluate the effectiveness of an employee benefits plan is to measure the company’s return on investment (ROI).
When performing an employee benefits benchmarking analysis, companies not only learn more about their competitors’ benefit offers but also the current state of their own benefits plan. This unique perspective can help employers determine what is working, what is not working, and if any gaps are present in the current strategy.
Keeping Up to Date with Trends and Best Practices
Having access to valuable benchmarking data can help highlight patterns that would otherwise go unnoticed. These employee benefits patterns may focus on specific areas, such as employee age, region, demographic or job title. They may also be more general but insightful, nonetheless.
Studies and data points pulled from employee benefits benchmarking can give employers in-depth information about their competitors’ specific plan elements, such as their maximum out-of-pocket costs, deductibles and monthly premiums. Businesses can then find ways to stay competitive in these areas.
How to Benchmark Employee Benefits
In its most basic form, an employee benefits benchmark provides a benefits comparison between one organization and its competitors in the industry. Depending on the goals of the company, a benchmark can be extremely broad or highly detailed. Some of the most important aspects of a benchmarking analysis to consider include:
- Employee benefits plan costs
- Compulsory benefits
- Voluntary benefits
- Benefits plan structure
- Workers’ compensation
Consider the type of data that the company will be assessing to determine how in-depth the analysis will be. Here are some steps to get started with the benchmarking process:
Understanding Your Relevant Data and Metrics
The first step in benchmarking existing employee benefits is to gain a better understanding of collected data and metrics. It is important to benchmark all current benefits to get a more in-depth view of the company’s offerings, including health benefits, financial benefits, paid leave and vacation time, educational benefits, insurance programs, work flexibility perks, and other perks, such as LSA programs and personal enrichment.
Analyzing and Interpreting Benchmark Results
Once benchmarking has been performed, a company will need to analyze and interpret the results. This process involves comparing the company’s existing benefits to those of competitors in the industry.
There are several ways that companies can find their competitors’ information, such as through raw data sources like the Bureau of Labor Statistics, reports from industry experts like the Society for Human Resource Management (SHRM) or from a hired industry expert that has been paid to compile information and deliver a report.
It is important to remember that no business can offer all the benefits they would like to; however, there are ways to prioritize what is most important to the workforce as a whole. Consider which elements are the most critical to the business and its employees, and how these benefits will improve employee engagement and retention.
Applying Insights to Improve Employee Benefits Programs
Insights discovered from employee benefits benchmarking can be used to determine if an organization’s benefits are at, below, or above the average in their industry. It is important to look at how certain benefits rank above or below the median. Companies can then use this information to determine how best to redistribute benefits dollars in a way that will improve employee recruitment and retention.
Types of Employee Benefits Benchmarking
When it comes to employee benefits benchmarking, companies can take several approaches to analyze the performance and overall quality of their benefits. Internal benchmarking and external benchmarking are the most common types of employee benefits benchmarking used to gain a comprehensive analysis of the company’s current benefits package status.
Here is a look at each of these types of employee benefits benchmarking and the benefits of each:
Internal Benchmarking
Internal benchmarking is the most important type of employee benefits benchmarking, as it helps companies determine how satisfied employees are with the current benefits offerings. One of the best ways to determine if employee benefits are effective is by obtaining personal views from employees themselves.
Internal benchmarking is performed by asking employees to complete a survey that includes important questions regarding their benefits. For example, a survey question may ask employees what they desire most in a health plan (e.g., access to certain facilities or a better plan selection?)
External Benchmarking
External benchmarking is the most recognizable type of benchmarking by businesses. This type of benchmarking involves an analysis of how a company’s benefit offerings compare to other businesses. This often includes competitors or businesses that are of a similar size, industry or location.
With external benchmarking, companies can gain a reference point to determine how their current benefit offerings compare to other companies.
During the benchmarking process, it is important to answer several important questions, such as whether the company is paying too much for certain benefits, if there are additional benefits that the company should be offering employees, and how the benefits package can be better designed to recruit and retain talent.
Consult with the Employee Benefits Benchmarking Professional
Maintaining good health, well-being and financial stability is a top priority for most employees. Offering workers an attractive benefits package is one of the best ways to help workers and their families stay physically, mentally and financially healthy.
The experienced professionals at New City Insurance offer companies a proven benchmarking system designed to boost employee engagement and deliver high-impact solutions to organizations. For more information, request a consultation or call 888.210.2765.