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4 Ways to Get the Most Out of Your Benefits Budget

We know it might be difficult this year to get more budget for benefits. Here are four ways to optimize your existing budget.

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Open enrollment looms in the fall for many HR teams, and budget and benefits planning is long underway. Industry standards recommend adding 20-50% to each employee’s salary to budget appropriately for benefits. Once you get past the benefits required by most states like disability insurance and workers’ compensation, you’ll likely move on to health insurance, retirement plans, and paid leave. Finally, you’ll want to factor in all the top perks like health and wellness programs, home office stipends, commuting benefits, and professional development opportunities. 

Offering a competitive benefits package is a necessity in today’s market, but the costs can be a source of stress. Against the backdrop of an uncertain economic climate and a wave of layoffs in the tech industry, your HR team may need to do more with less this year. Here are four ways you can get the most out of your benefits budget without breaking the bank. 

1. Consider tax-advantaged programs

The two items that come to mind immediately for most employers are health insurance plans  and retirement accounts. However, there are a few other avenues for tax savings. These include health savings accounts (HSAs) and flexible spending accounts (FSAs). An HSA is a tax-advantaged benefit account that works like a personal savings account for health-related items. Employees can spend money from an HSA on a wide range of eligible costs, including doctor’s visits, new glasses, and flu shots. Unlike FSAs, employers do not own HSAs; employees own and control the money in their accounts. 

An FSA is another tax-advantaged benefit account offered by many employers. Employers can reduce the amount of Social Security, Medicare, and other payroll tax they’re expected to pay since they don’t pay tax on the employee’s FSA contributions. Other fringe benefits that reduce taxable income and result in higher take-home pay include dependent care assistance, adoption assistance, commuter benefits, and college savings accounts. 

2. Increase flexibility

Sometimes a budget is so tight that adding new programs simply isn’t a realistic option. Many employers don’t realize that many benefits can be provided to employees at no additional cost. 

Increased flexibility is a free benefit that provides a world of opportunity. Flexibility can come in the form of remote work, job sharing, or flexible scheduling in work shifts. Another option is to scale and expand your current benefits plan. Consider a lifestyle spending account (LSA) program. Many employers already have programs that target fitness, wellness, professional development, food, WFH, or mental health. Often, companies work with multiple vendors to provide these benefits or offer discounts at single merchants. This increases costs and admin burden for HR teams while providing limited options to employees.   

With an LSA, you can get far more juice out of these dollars. Employers design the program and define spending categories, then employees are free to spend the funds on what matters to them most. At any time, you can easily expand these categories to allow employees to spend on an even wider variety of items and services. This makes your existing program feel like an entirely new benefit, without the extra costs or admin burden of finding new vendors. 

Here are a few examples of what this can look like in practice:  

  • Company A provides food benefits through a corporate DoorDash account. They move this program to an LSA and allow employees to spend on groceries, home meal kits, or local restaurants, giving employees more freedom to purchase the food they want. Employees enjoy having more choice and feel that the new program gives them healthier food options and opportunities to bond with their family over cooking. 
  • Company B supports fitness by offering discounted gym memberships through a partnership with a national health club. They move this budget to an LSA and create a fitness and wellness pillar that now allows employees to purchase gym memberships, yoga classes, home exercise equipment, personal training, meditation courses, massages, diet consultations, vitamins, and more. The program receives greater engagement because employees have more freedom to tailor the benefit to their unique goals. 
  • Company C provides professional development benefits through a platform that hosts a variety of continuing education and leadership training courses. They decide to administer this benefit through an LSA, which employees now use to purchase individual courses, MasterClass subscriptions, industry conference tickets, career counseling, and more. Employees are happy that they can pursue the professional development opportunities that make the most sense for their career.

An LSA also gives you more power to adjust your benefits at moment’s notice to reflect what is going on in the world. The Community Group (TCG) is a private, nonprofit organization creating opportunities through education since 1970. TCG offers a flexible LSA program through Benepass. The flexibility has allowed the team to pivot and change or add lifestyle pillars as needed. For example, rising gas prices led the team to add a new eligible spend category, with no extra budget on their part. 

Giving your employees the power of choice allows them to spend the benefit where they need it most, creating a happier and healthier workforce at no additional cost for your team. With a flexible benefits program, companies see average engagement rates of 85%, compared to 15% with a traditional benefits program. This ensures you’re getting the most out of the dollars you put behind employee wellness. 

3. Realize savings from forfeiture

Some companies choose to provide stipends by adding money to their employees’ paychecks. While this might seem like an easy approach, employees may forget about the benefit or have it come and go from their bank accounts without ever realizing it arrived. The funds will always be spent, but employers have no way to know how employees are spending the money or if it’s being used as intended. 

By moving existing programs to an LSA, you can provide 100% of the benefit to employees while also experiencing cost savings from forfeiture. Employers pre-fund the accounts, but they can design the program so that funds expire at the end of the month (or any other time frame). If employees don’t spend the money within the specified time frame, employers get that money back in their pockets. 

This allows you to provide a competitive benefit that contributes to your employer brand and recruitment and retention efforts without wasting money on programs that employees may not have use for. 

4. Communicate, communicate, communicate

Senior leadership often needs to see strong engagement with any benefits program to allocate more budget. Frequently, a lack of engagement with perks programs is due to poor communication. Consider going beyond email updates with Zoom training sessions, lunch n’ learns, Slack updates, games, videos, and more. For example, we’ve seen leading organizations offer monthly updates on unique ways employees are using LSA dollars to inspire their colleagues. It’s also critical to establish champions across teams and departments to advocate engagement with new programs. Finally, reducing the number of steps needed for employees to sign up can help increase engagement. If you can automate enrollment, your employees can start using their benefits in just a few clicks. 

A well-structured benefits program that takes into account employee personal preferences and feedback will serve you for years to come. With Benepass, all spending accounts are managed in one centralized platform, improving the employee experience and reducing HR admin time. While you may not be able to control the larger economic forces at play, you can get the most out of your existing budget by reimagining the way you administer your current benefits. Want to learn more? Please reach out to us here or at sales@getbenepass.com

Benepass Team