Benefits 101: A Guide to Employee Benefits Benchmarking + 11 Tips From HR Leaders
Benchmarking is a crucial step in building competitive benefits packages. Here’s everything you need to know.
Benchmarking is a crucial step in building competitive benefits packages. Here’s everything you need to know.
Think of the time it takes to introduce new benefits at your organization: months of reviewing your options, running cost-benefit analyses, evaluating vendors, campaigning for internal buy-in, setting budgets, going through implementation, and enrolling employees in the benefit. Now imagine that you do all that, only to find that employees aren’t utilizing the benefit and it has zero impact on talent recruitment and retention.
Luckily, there are ways to avoid this scenario. Running an employee benefit benchmarking report can help you learn more about who is using your benefits, how they are being used, and what your organization could be doing better. As more companies are getting creative with the way they take care of their employees, this exercise is essential for finding new ways to attract and retain talent.
In this guide, we’ll cover the benefits of benchmarking and share insights on how to get started. We’ll also share tips from several HR leaders who are responsible for designing competitive benefits packages at their companies.
Employee benefits benchmarking is an analysis of how your benefits compare to other companies of your size and industry. Some reports even break down by specific geography, job title, and experience. The more granular you can get, the more you can tailor the results to your specific needs.
There are many benefits to investing in benefits benchmarking. We’ve outlined a few below.
Return on investment (ROI) is the biggest question HR teams have about the benefits they offer. Are employees utilizing the benefits? What are the rates of participation? Some benefits, like a wellness program, may have specific goals in mind such as reducing health care premiums for the company. Evaluating ROI can help determine if these goals have been successful. They can also help HR teams build a budget for the following year.
Outside of monetary ROI, employee engagement is critical to evaluate. Employee engagement has historically been more difficult to measure, but it can still be gauged through employee surveys and absence statistics. Absence statistics provide a clue as to whether significant mental stress and unhappiness are causing your employees to miss work and if additional physical, mental, or financial wellness benefits could help reduce absenteeism and increase presenteeism.
Once ROI is calculated, it becomes clear which programs aren’t utilized to their maximum potential. At YorkHoist, company leaders realized that almost no one was using the benefit of a free company phone. Instead of wasting dollars on phones, the company added WiFi as a pillar of their lifestyle spending account (LSA) program so that employees could cut costs when using their phones while working from home.
Optimization is key, says Rob Heir, VP of Total Rewards at Bright Health.
“We have to optimize,” he said. “You’re going to see a trend of reducing or eliminating underappreciated or underutilized programs, so we can invest in other programs that employees value more. Do I know exactly what those will be? No, I don't, but you look at your monitor list of the benefits that have been provided historically. What is being utilized, what’s not being utilized, and what are we being asked for? You’re always going to have your core benefits like retirement and healthcare, but those other benefits are probably going to evolve around that.”
Examining costs may also cause employers to think about current programs differently, especially in a post-COVID and increasingly remote or hybrid work world. If your workforce is hybrid, it might be time to reevaluate expensive on-site perks like a cafeteria or geographical benefits that are focused on gyms or food establishments near the office. Home office, food and grocery, and health and wellness stipends may receive greater rates of participation since employees have more freedom over how they spend them.
Data can quickly highlight emerging patterns across your workforce. Some of these patterns may be general, but others may be centered on certain regions, age demographics, job titles, and more.
For Michelle Kerr Stenzel, CHRO at Turnberry Solutions, this data is a crucial way to understand what’s trending among other companies in her sector.
“We polled a lot of data points and got studies from our broker to help us know who we’re competing within our industry and sector,” she said. “What are the max out-of-pockets? What are the deductibles? What are the employee costs of premiums per month? For us, we would look at professional services firms and technology companies and really make sure we’re competitive on those things I’d call core benefit offerings.”
In an increasingly competitive market, it’s best to stay ahead of the competition and offer a leading benefits package. A benefits benchmark report can give smaller organizations a unique edge here. Some employers (like a nonprofit or startup) simply may be unable to offer a large salary, but other characteristics such as increased flexibility, great company culture, and creative benefits can make them an employer of choice.
Below are a couple of steps that can put you on the right track in designing competitive employee benefits that help you attract and retain top talent.
The first step is to benchmark your current benefits. Basic categories include:
An employee benefits survey is one way to gather information about the effectiveness of your current programs. A comprehensive survey can be a useful tool for measuring employee satisfaction and gaining insight into the kinds of benefits your employees are looking for.
At LinkedIn, regular employee surveys are an opportunity to collect employee feedback and assess opportunities for improvement. For example, the company recently added a vacation spending category to their perks allowance program based on feedback from employees.
“We listen to our employees because we want to make sure that we’re providing adequate feedback and response to those surveys,” said Judy Mendoza, Sr. Manager of Global Benefits at LinkedIn.
Kelly Wakefield, Senior Manager of Global Benefits at Moderna, also believes employee surveys are a crucial step in designing a competitive benefits package. The company conducts total rewards optimization surveys, which are an in-depth way of understanding how employees perceive and value the benefits Moderna offers. They then use this data to refine their benefits strategy.
“We took the time to propose different offerings to answer questions like, ‘Do employees in this age group or salary range value retirement savings over other groups?’” said Kelly. “I think it’s really important to understand your different employee populations. Why build a benefits package that no one is going to utilize because they don’t value the benefits? We use those data points to determine what employees value most and that helps inform our design. Benefits are not one size fits all.”
For inspiration, below are a few common questions you might find on an employee benefits survey. You can adjust these to reflect your company’s unique benefits. These surveys are commonly structured with a Likert scale, which includes a list of statements accompanied by reply options ranging from “Strongly Agree” to “Strongly Disagree.”
You can also ask employees to rate their benefits to get a sense of which benefits are the most valuable to them. Answers would be provided on a scale of 1-10, with 1 being least important and 10 being most important.
Another popular format is to ask employees how they feel their benefits compare to other companies. Answers can follow this scale: Much better, Better, About the same, Worse, Much Worse.
Finally, open-ended questions such as these can solicit ideas for improving your benefits and allow employees to express their opinions more openly.
The next step is comparing your benefits to others in your industry. There are several options for finding competitive data.
1) Use raw data sources: This is a highly manual option, but you can do a deep dive into sites like the Bureau of Labor Statistics.
2) Download reports (sometimes free and sometimes paid) from industry experts like SHRM.
3) Find a professional provider: Many organizations select to hire an industry expert or ask their broker to review benefits and pull together the report.
When examining your final benchmark report, it’s important to remember that not one organization can (or has the budget to) do it all. Instead, you’ll need to examine which elements are the most critical to you and your unique workforce and how those can be improved for maximum retention, employee engagement, and recruitment.
We gathered more tips from benefits leaders to help you get started with employee benefits benchmarking:
“We do employee surveys on a regular cadence throughout the year. It’s important to hear employees and what their wishlists are so you could make sure to prioritize those and say, ‘Okay, what is important to our employees? What are we seeing trending? What are other companies doing as well in this space?’ Then assess the financial viability from a company perspective.” – Judy Mendoza, Sr. Manager, Global Benefits at LinkedIn
“It’s really important to set short- and long-term goals. While you may want to offer unlimited time off to your employees, that may not be the best financial solution for you at this point. But set yourself a target to revisit this initiative on an annual basis or whatever makes sense for you and your organization. Do what is attainable.” – Judy Mendoza, Sr. Manager, Global Benefits at LinkedIn
“Benefit planning tends to almost become more of a year-long activity where yes, you're doing your open enrollment in a very tight timeframe. But throughout the range of the year, you monitor how your benefits are being utilized, what's going right and what's going wrong. And then research and analyze external trends in the market that you may want to also evaluate or adopt.” – Rob Heir, VP, Total Rewards at Bright Health
“I really dislike picking benefits for everybody's lifestyle because you can't help but think about what a certain population needs. Then you go for that, and you know you're isolating other populations. People really expect personalization now.” – Anita Bahr, VP, HR at Millerbernd
“Fluid communication with colleagues will be important and essential. It should not be limited to stating what benefits are being offered. Companies need to provide rationale for choosing the offerings or ‘the why’ and how it is going to create a win-win for the colleague and the company.” – Padma Thiruvengadam, CHRO & Board Advisor at Takeda, Lego Group
“Given our growing footprint, it no longer makes sense to provide super-local perks and benefits everywhere. It’s just not scalable, and that approach doesn’t work when you’re a global company. We had to revisit what would work best for our diverse teams, and the lifestyle spending account seemed like a really unique offering that would allow people some flexibility to choose what matters most to them. They can create their own path to well-being by being able to put their LSA funds toward things like yoga classes, nutritional supplements, or at-home meal kits.”– Kelly Wakefield, Senior Manager, Global Benefits at Moderna
“Not only do we do our education sessions as part of open enrollment, we do a monthly HR newsletter that talks about benefits to our employees. We’re always trying to plug little bite-size bits to employees, whether it’s in our town hall or our employee newsletter. Just like all employers, I haven’t solved the engagement problem and we’re always evaluating, ‘Is this the usage we would expect?’ And tinkering our communication program based on that. You have to communicate with employees in a variety of ways, both formally and informally, and also in different mediums.” – Michelle Kerr Stenzel, CHRO at Turnberry Solutions
“People are looking for more and more flexibility, and that flexibility allows them to focus on what their priority is at the time. Are they focused on retirement? Are they focused on health benefits? Are they focused on flexible work? The more flexibility that your package provides, it allows people to migrate to what's important to them.” – Rob Heir, VP, Total Rewards at Bright Health
“I think generational gaps are having major impacts on benefits. I think maybe a couple of years ago we could have said, ‘These are your core benefit offerings.’ I feel like that space is evolving and employees are now wanting more than just your core medical, retirement, life, and disability, which is why LinkedIn and a lot of tech companies are focusing more on softer benefits because they attract talent and retain employees within your company. Employees want more than just your cookie-cutter normal type of offering.” – Judy Mendoza, Sr. Manager, Global Benefits at LinkedIn
“I think there’s an expectation from younger generations for more than just the traditional core offerings. They really want flexibility and choice, and they want their employer to meet them where they're at. When you want high-performing employees, you need to make it easy for them to access the support they need, when they need it. I think it's a generational shift and a change from coming out of a pandemic; people are much more aware of and more vocal about their well-being.” – Kelly Wakefield, Senior Manager, Global Benefits at Moderna
“One of our five core values is inclusion, so we look at our benefits from that lens of, ‘Are our benefits really inclusive for all the ways that families come to be? Are our benefits really inclusive for all family structures or couple structures?’ We took a hard look at our benefits a couple of years ago with that in mind.” – Michelle Kerr Stenzel, CHRO at Turnberry Solutions
While there may be a wealth of information about traditional offerings like health insurance plans, perks such as LSAs are relatively new. Companies may struggle to understand what kinds of perks they should offer and how to design these emerging programs.
We created the 2022 Benepass Benefits Benchmarking Guide to help HR leaders craft perks programs that make the most sense for their business. The report breaks down how companies of all sizes are creating programs for wellness, LSA, WFH, personal enrichment, meals, and more, with a special focus on perks in the tech and health care industries. The report also includes a deep dive into how employers are designing LSAs, which more companies are turning to when they want to provide max flexibility to their employees. Download the report to get started.