How to Offer Employee Benefits

How to offer employee benefits

Strategic employee benefits management can help even the smallest companies create an attractive benefits plan. Take the following five steps to start offering employee benefits to your team. 

Step 1: Determine your benefits management budget.

Employee benefits are expensive, typically accounting for roughly one-third of an employee’s total compensation, along with wages and salary. According to the Bureau of Labor Statistics, the average employer spends roughly $14.41 per hour on an employee’s benefits, with $3.50 going toward health insurance costs. (These numbers are based on a civilian employee who makes an average total compensation of $46.14 per hour.)

While costs vary by industry, employee type and the benefits you offer, here’s a good starting point: 

• Identify your total employee benefits management budget.
• Divide that by the number of employees to determine how much you’ll spend per employee. 

You’ll then be able to identify the benefits you can reasonably afford. Remember that the most valuable benefits — health insurance and the best employee retirement plans — are often the most expensive.

In addition to benefit costs, you must consider benefits administration costs. Many businesses outsource benefits administration functions because this process can be costly and complicated. If your internal human resources (HR) department will handle benefits administration, ensure team members are current on labor and employment laws. 

Step 2: Decide which employee benefits to offer.

After determining your benefits administration budget, you can begin creating your benefits package. Aim to build a plan that includes the necessary benefits to keep your employees healthy and additional benefits that match their specific needs. 

For example, if you have a primarily young, single workforce full of new grads, tuition reimbursement or student loan assistance may be a top priority. Meanwhile, a workforce comprised of families with young children will likely appreciate childcare assistance.

Here’s a look at some of the most important benefits to consider: 

Legally required benefits

You’ll base any benefits package on legally required benefits, including the following: 

• Health insurance (for companies with 50 or more full-time employees, including full-time equivalent employees)
• Social Security, Medicare and federal insurance contributions (also known as FICA)
• Family and medical leave, as designated by the Family and Medical Leave Act
• Workers’ compensation insurance
• Unemployment insurance

Health and wellness benefits

Today’s employees and employers are prioritizing physical and mental health. Here are some popular health and wellness benefits you can offer to keep your employees healthy:

• Medical, dental and vision insurance
• Tax-advantaged health spending accounts, including health savings accounts, health reimbursement arrangements and flexible spending accounts
• Life insurance
• Short- and long-term disability insurance (required in some states)
• Accidental death and dismemberment insurance
• Mental health resources
• Wellness programs
• Employee assistance programs
• Virtual counseling
• Child and elder care
• Family planning services
• Section 125 plans, also known as cafeteria plans
• Gym membership reimbursement
• Resource groups for employees

Financial benefits

Although you should provide a competitive salary, you can also invest in your employees’ financial well-being by offering these financial benefits:

• Retirement plans, including company contribution or matching plans, for example, 401(k) plans, 403(b) plans and 457(b) plans
• Stock options
• Profit-sharing plans
• Financial planning services
• Charitable matching

Work-life balance benefits

Flexible benefits have become a top priority to improve employees’ work-life balance. Here are some popular work-life balance benefits:

• Remote and hybrid work arrangements
• Flexible scheduling
• Transit or commuter benefits
• Unlimited paid time off
• Paid parental leave

Professional development benefits

A lack of advancement opportunities is one of the top reasons employees quit. Fortunately, offering professional development opportunities is an excellent way to retain employees and create leaders among your team. Here are some examples of professional growth benefits you can offer:

• Training and development courses (online or in person)
• Career pathing
• Educational assistance
• Tuition reimbursement or student loan contributions

Termination benefits

When you terminate an employee, you must also terminate their employee benefits. However, depending on the reason, you may want to offer termination benefits, such as these:

• Severance packages
• Job search assistance
• Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage
• Unemployment insurance

Step 3: Choose a benefits provider to administer benefits.

Choosing a benefits provider is just as important as the benefits you want to administer. You must decide whether to administer benefits on your own or partner with an organization to outsource benefits administration.

If you want to go it alone, you’ll need to contact various healthcare and retirement plan providers to find appropriate options for your team. If you prefer to outsource benefits administration, you can choose an HR outsourcing (HRO) service or a professional employer organization (PEO).

Here’s some more information about each outsourcing partner type. 

HRO services

The best HRO services can help you do more than administer employee benefits. They can also handle administrative HR tasks, process payroll and manage talent. HROs are also an excellent option if you need help handling HR compliance challenges.

Here are some of our favorite HROs:

• ADP: Read our ADP review to learn more.
• G&A Partners: Read our G&A Partners review for more information.
• Insperity: Read our Insperity review for details.
• Paychex: Read our Paychex review to learn more.

PEO services

You can also opt to partner with one of the best PEO service providers to completely outsource your benefits administration. However, with this option, you must enter a co-employment arrangement and sign on for additional bundled HR features. Some HROs also offer a PEO model, so it just depends on which type of arrangement works best for you.

These are some of our favorite PEOs:

• Insperity: Read our review of Insperity PEO to learn more.
• Justworks: Our review of Justworks PEO provides more details.
• Rippling: Read our review of Rippling PEO to learn more.
• TriNet: Read our review of TriNet PEO for details.

Step 4: Open benefits enrollment to your employees.

After finalizing your benefits plan, roll it out to your employees. Clearly explain plan options to your team and encourage employees to ask questions. Unless an employee enrolls for benefits when hired, standard open enrollment typically occurs between November and January of the following year.

Some plan options, such as 401(k)s, allow employees to make modifications throughout the year. Other types, such as health insurance, only allow enrollment outside the open enrollment period if an employee is new or experiences a qualifying life event. Qualifying life events include the following:

• Childbirth or adoption
• Marriage or divorce
• Death
• Loss of health coverage
• Changes in residence or citizenship

It’s essential that employees understand their options and their time frame to make benefits elections. 

Step 5: Monitor and modify benefits as needed.

Review your employee benefits package at least once yearly. Tracking participation to see which benefits are being utilized can be a great way to see your team’s most valuable benefits. You can also survey employees to see if they’d like any other benefits. As your company grows and your employees’ needs evolve, modifying your benefits plan to match such changes is crucial.

HR software for managing employee benefits

We touched on HROs and PEOs as outsourced options for managing employee benefits. However, HR software is an additional option that allows you to manage HR functions in-house with expert tools and features. The best HR software will help you digitize recruitment, time tracking, payroll and benefits administration. 

You’ll still need to connect with a benefits carrier, but that company should be able to integrate with your HR software, allowing you and your staff to manage open enrollment, benefits elections and more.

Many of the PEO and HRO services mentioned earlier also offer excellent stand-alone HR software. The best provider and professional agreement for your business will depend on your specific needs.