Why Benefits Benchmarking Is Important for Employers

Finding top talent is a challenge. But retaining them can take just as much work, if not more. Offering competitive salaries just isn't enough anymore. More and more job seekers often choose where they apply based upon the benefits package. Health insurance, employee assistance programs, mental health services, bonuses, work-from-home opportunities, and retirement savings are just a few of the popular benefits programs. But just knowing the different programs isn't enough. It's far more valuable to know how your specific benefits offerings compare to those of your competitors. Employee benefits benchmarking data can provide insights into your plan performance, employee benefits data and participation, and other key measurements. This data can help you and your HR department determine which plans are the best fit for your business.

What is benefits benchmarking and why use it?

In brief, benefits benchmarking is an analysis of how your employee benefits offerings compare to those of other employers in your industry or in similar industries. It takes several factors into account, including total benefits costs, cost-sharing measures, plan designs, voluntary offerings, and worker’s compensation. Depending on the data used in the analysis, you may be able to view costs and savings on a granular level. For example, it's not uncommon to be able to break down benefits data based on geography, job title, and industry. While benefits benchmarking can be costly at times, there are a number of benefits to using this data.

Evaluating ROI and benefits strategy

One of the most important benefits of benchmarking is that it allows employers to measure their return on investment (ROI). For example, employers can better evaluate their benefits spending and see if it is helping them with employee retention or recruitment.

Having a measurement tool in place allows you to discern if you need to improve your benefits packages or scale back.

You may also spot gaps in your current benefits packages, which can cause you to lose top talent to competitors. On the other hand, you may be offering more benefits than what is necessary, causing you to spend more each year. Having a measurement tool in place allows you to discern if you need to improve your benefits packages or scale back.

Find undiscovered competitors

Another benefit of benchmarking is that it may allow you to discover competitors that you didn’t know existed. Oftentimes employers focus their attention on those they believe to be their biggest competitors. This can allow other emerging competitors to go undetected. Comprehensive and industry-specific benefits benchmarking reports can help you identify these potential competitors and develop strategies to stay ahead.

Spot and adapt to trends

A solid benchmarking report acts as the pulse of the workforce. The data collected can help you understand how your employees may be feeling and help you determine your benefits strategy. For example, according to an internal survey of 1,100 small business employees, we discovered that health insurance continued to be the most desired benefit. However, there are shifts in what plans businesses are investing in. For years, Health Maintenance Organizations (HMOs) and Preferred Provider Organization (PPOs) have been the most common types of plans. But more and more employers are switching to High Deductible Health Plans (HDHP). These reports also contain specific numbers to rising costs, regulations, and potential ways to offset rising costs in benefits.

A solid benchmarking report acts as the pulse of the workforce. The data collected can help you understand how your employees may be feeling and help you determine your benefits strategy.

What employee benefits should you benchmark?

COVID-19 has changed the way many employers conduct business. This is especially true in what benefits employers offer to their workers. Health benefits are a high priority for workers and what employers offer can mean the difference between an employee choosing to remain at their job or seek employment elsewhere. Therefore, when deciding what benefits your company will offer it’s important to find out what your competitors are offering by benchmarking. Retirement is also important to employees so benchmarking the current 401(k) plans in the market will help you determine how well yours is structured. Parental leave, sick leave, and vacation/paid time off are still considered top benefits. So all of these should be on your list.

What are the possible downsides to benchmarking?

While there are many benefits to benchmarking, the cost of accessing these reports can feel overwhelming to many small businesses. At the same time, you can't really afford not to review these in-depth reports. If a poor or outdated benefits package is holding you back, you're losing more money than you might have spent on the benchmarking report. To control costs, it’s important to set clear goals and objectives so you don’t spend money gathering data that isn’t essential. Another issue is that many reports solely focus on big-ticket items, such as health plans and 401(k)s — ignoring other benefits such as on-site services and flexible scheduling. When determining how to improve morale for your future and current employees, keep in mind there are benefits to offering flexible workplace environments.

Get started with our free 2021 Benefits Benchmarking report

Out of all employee benefits, healthcare has proven to be the most desired benefit. And the pandemic only reinforced this perspective. However, as medical premiums rise and new plans emerge, small businesses need more information than ever to make a well-informed decision on their health benefits.