Finding the best employees and keeping them happy at your company is most likely a top priority. Offering competitive wages will always be a good way to catch a prospective employee’s eye, but beyond that, how do you stand out from your competitors, who are also trying to hook the interest of the most talented people in the business?
Benefits are becoming an increasingly important part of every individual worker’s employment decision. According to a Forbes Advisor study, 40% of employers say that employees leave their jobs to find better benefits, and 1 in 10 workers would take a pay cut if it gave them access to improved benefits.
So what does a good benefits package look like, and how much will it cost you as an employer to provide it?
Providing the staff who power your organization with benefits is something that most employers want to do, and want to do well — but it’s not free.
One standard benefit for many companies is health insurance coverage. Companies offering health insurance coverage might pay some or all of the health insurance premium (the monthly fee that the insurance company charges for providing coverage) for the worker and even their family members, but in some cases, employees end up covering the entire premium themselves.
According to the Kaiser Family Foundation, the average annual health insurance premiums in 2022 were $7,911 for individual employees and $22,463 for families. The most recent Bureau of Labor Statistics (BLS) data show that employers pay an average of $6,822 per year in healthcare costs for each civilian worker and an average of $13,561 per year for healthcare for each state and local government worker.
The health insurance deductible, an amount of money that is paid toward health care costs before the insurance company starts covering fees, is usually the employee’s responsibility.
Then there are the administrative costs of providing health care: Your human resources team will need to spend some of their working hours setting up plans for employees, answering questions, and possibly negotiating with the insurance companies on premiums and deductibles. Some companies create self-funded health plans — in other words, the company itself is also the insurer — and while this can be a more flexible way to provide healthcare to staff members, it’s also an additional burden to the employer from an execution standpoint.
Saving for retirement is a significant goal for many workers, and employers that can help them save more effectively can get an edge over the competition. The BLS tracks both defined benefit and defined contribution retirement plan costs for employers.
A defined benefit plan is one under which the employee will receive a specified amount of money on retirement, which is funded by the company. By contrast, in a defined contribution plan, employees fund most of their own retirement, usually through an account such as a 401(k), and the employer might or might not contribute a certain amount (typically calculated as a percentage match) toward employee savings.
According to the most recent BLS numbers, employers spend an average of $2,621 every year for each employee’s defined benefit plan, and an average of $1,851 for each employee’s defined contribution plan.
How much paid time off, including sick and vacation time, will employees get as part of their benefits package? There is no legally defined standard in the U.S., though many employers try to offer two weeks or more of paid time off, also known as PTO.
The BLS buckets vacation time and holiday time (when offices are closed) into PTO, as well as sick and personal time that’s been taken away from work. According to the most recent data, employers spend an average of $5,179 per year per worker for vacation and holiday time off, and an average of $1,435 per year per worker for sick and personal time off, for a total average of about $6,594 per employee per year.
Overall, the BLS estimates that employers spent an average of $27,394 per civilian worker per year in order to provide that worker’s benefits in 2022.
Health insurance coverage and access to a retirement savings plan are considered basic components of most benefits packages. Ancillary benefits are additional offerings that you might or might not include in order to entice new talent and keep current employees happy. For example, vision and dental insurance are technically ancillary benefits; most health insurance plans in the U.S. don’t cover dental or vision.
Apart from basic health insurance, some companies might also provide life insurance policies for staff members. Short-term disability insurance and long-term disability insurance are two more insurance policies that companies might fund for workers as a part of the benefits package. Per the BLS, life insurance costs employers an average of $104 per employee per year, long-term disability insurance also costs employers an average of $104 per employee per year, and short-term disability insurance costs $166 per employee per year.
What other ancillary benefits might you offer? The options range from pet insurance coverage to wellness programs to additional savings plans, including access to an emergency savings account. The cost for these ancillary benefits varies depending on the size of your business and the number of employees enrolled in the plan, where you’re located, and a number of other variables.
After meeting what’s legally required, and understanding what’s left in your budget, how do you decide which benefits will be the best to attract talent to your company?
One way to determine what to offer is to analyze what your competition is doing and then match or beat their benefits package. A competitive analysis of industry benefits can help you understand what you’re up against and figure out how to budget for your own benefits package.
Employee demographics can also help you make decisions when it comes to which benefits to offer. Consider your staff’s age, gender identity, sexual orientation, racial identity, income level, and other factors that might help you understand which benefits your employees would value most.
It might also be useful to consider how you can alleviate stress for your workers, which has a negative impact on productivity. This can help you create a benefits package that top talent is drawn to and also benefits the employer.
Examples of life stresses that might weigh on employees include chronic illness or injuries, divorce, or an increase in financial obligations. Providing quality healthcare coverage, access to legal services, or an employer-sponsored emergency savings plan are workplace benefits that can help alleviate those causes of employee stress almost instantaneously.
After attracting the best employees to your business, consistently paying attention to your benefits package vis-a-vis your competition will also help you retain those employees. Using employee surveys, educating managers, and staying in touch with your human resources department can give you a sense of what employees expect from a benefits package — and what extras will thrill them into long-term loyalty to your enterprise.