Do you need a cost-effective employee benefits program? The decisions you make regarding what benefits to offer employees can have massive repercussions throughout your business. Aside from being one of the largest business expenses you’ll have to contend with, they can also heavily influence employee recruitment and retention. 

Regardless of your organization’s budget or employee headcount, it is crucial that you remain strategic when considering what benefits to offer. Any well-designed benefit package should be:

• Focused on transparent goals
• Financially achievable
• Competitive
• Clear about which benefits are required and which are optional
• A piece of your total compensation strategy

Step 1. Review Your Budget and Objectives

The first thing you need to do is get clear about your benefit budget and objectives. Understanding what you want to accomplish and the constraints you have to operate within allows you to stay focused on what is important and ensure that the employee benefits program you’re building is realistic. 

If you aren’t sure what your primary objectives should be, here are some examples for inspiration:

• Bolster recruitment and retention by offering trending benefit options
• Minimize costs
• Ensure compliance with federal and state laws
• Appeal to the most qualified prospective employees
• Differentiate yourself from competitors in your industry

Setting a benefits budget is a complicated task that will vary widely from organization to organization. For smaller businesses, it is worth acknowledging early on that you won’t be able to compete directly with larger companies in this space. There are, however, some perks that you can offer employees that big companies can’t (more on this in step 4). What’s important here is that you understand what your competition is offering so that you know what you’re up against and how to handle any disadvantages you face. 

Step 2. Factor in the Required Benefits

Several employee benefits are required by federal, state, and local laws. Factoring the required employee benefits into your plan first allows you to create a baseline from which you can make decisions about optional benefits. Some examples of required benefits include:

• Family & Medical Leave of Absence
• Social Security
• Unemployment insurance
• Workers’ compensation
• Disability insurance (required in some states)

Keep in mind, benefits compliance is constantly changing. Since it’s a moving target, it’s best to work with a highly qualified broker who can advise on the most up-to-date annual compliance changes.

Step 3. Explore Employee Needs

Now that you’ve set your baseline you know how much of your budget is left over to allocate to optional benefits. There is no one-size-fits-all approach to this, but it is important to inquire about the needs of your employees in order to offer benefits that are attractive and valuable to them. What you think an ideal benefit package looks like might be very different from what your employees think. 

Conducting a survey is an extremely efficient method for gathering these opinions. Analyzing usage statistics from previous years can help you identify under-utilized benefits that might be good candidates for elimination. Lastly, you should investigate what your competitors are offering and consider incorporating any aspects of their plans that are working well.

Here are some optional benefits that should be at the top of your list of your employee benefits program:

• Health Insurance – Due to skyrocketing healthcare costs, health insurance has become a must-have in the eyes of most employees. There’s a balance to be struck here between deductible costs and premium costs, and finding the sweet spot will require understanding your employees’ needs and business goals in depth. Selecting a high-deductible plan helps keep premiums low, but it also means that your employees will pay more out of pocket to cover their healthcare costs. One strategy to offset these costs is to contribute money to their health savings accounts (HSA). 
• Life Insurance – Good life insurance policies pay out a minimum of around $20,000, which covers the cost of funeral expenses, and are a popular optional benefit because their premiums are typically very affordable even for small businesses.
• Disability Insurance – The importance of disability insurance varies from industry to industry, as employees who work physically demanding jobs are more vulnerable to being unable to perform the duties of their job in the event of sickness or injury. If you intend to offer disability insurance, a good rule of thumb is to select a plan that covers at least 60% of an employee’s annual salary. 
• Retirement Savings Plans – Retirement plans like 401(k)s have the dual benefit of helping your business stay competitive while also encouraging healthy financial behavior among your employees. Matching your employees’ contributions can transform this optional benefit into a true difference maker in terms of recruitment and retention, but it is important that you do your research and speak with qualified tax professionals to figure out which is the best plan for your business and employees. 
• Paid Time-Off (PTO) – For most employees, the expectation is that at minimum you’ll offer PTO for national holidays as well as vacation time and sick leave. PTO can be used effectively as a reward for excellent performance while reducing the risk of burnout. 

Step 4. Feature Employee Benefits Program Perks

“Perks” are aspects of working at your company that can’t be listed in a job ad but still provide benefit to your employees. This is where you can set your business apart from competition and offer perks that even big companies can’t match. Can your company offer enhanced work schedule flexibility through flex hours or remote work? Small businesses can sometimes offer employees the chance to experience things they could never find at a larger enterprise, such as the opportunity to work directly with executives. Leaning into the perks of working at your company can enhance your workplace culture and help you be competitive against organizations with more resources. 

Step 5. Provide a Statement of Total Compensation

Regardless of how you go about building your employee benefits program, it is important that you help your employees understand how it fits into the total compensation picture. Issuing an annual statement of total compensation allows you to show all earnings and benefits translated into a total dollar amount and puts your benefit plan into context. Without this, your employees may not realize how much value the plan adds. Your total compensation statement should be written as a formal report and needs to include: 

• Health insurance amount – This is the total contribution you make as the employer to your employees’ insurance benefit premiums. Best practice is to provide both the total amount paid each month and also the percentage of the premium that this represents. 
• Leave amount – Based on the employee’s salary or wages, this is the total amount of compensation available for paid leave in one calendar year. 
• Disability insurance amount – Here you’ll calculate and report the amount of compensation that the employee is eligible to receive in the event of a disability, as well as the amount that your company pays each month in disability premiums to provide the coverage. 
• Life insurance amount – Report the company’s monthly contribution to the employee’s life insurance benefit
• Retirement contribution amount – This figure will represent the total amount of matching contributions that have been made to the employee’s retirement account

The take-away message from this statement should be that the employee’s total compensation is much higher than their annual salary/wages indicates. Even well-designed benefit plans can fail to bolster recruitment and retention if their value isn’t clearly communicated to both current and prospective employees.