When structuring your company's benefit package, your budget is important — but there's more you need to know in order to be competitive. The value of a benefit package helps companies attract talent, retain employees and even provide enough value to offset wages.1 These benefits can also help companies stay competitive.2

Benefits packages on average represent more than 30% of a company's employee costs, according to the Bureau of Labor Statistics.3 This is a significant chunk of a budget. That's why it's important to make the most of what you spend by targeting your benefits package strategically. Augment the areas that are most attractive to the employees your company wants to attract. Doing so can help you draw in and retain high-quality employees.

How should a company decide on benefits?

When deciding on benefits to offer to employees, start by doing some research. These questions help you identify where you should focus your benefits budget in order to assemble a competitive package.

  • What are the industry standards? What do similar companies offer? If your company is dipping into the same pool of candidates as competitors, you need to know what the industry is offering. Potential hires may expect you to provide certain benefits that other businesses provide, and if you don't, it may be a deal-breaker for a candidate.
  • What do your employees value? Understand the demographics of your employee base. Be sure you can meet the needs of your target employees by understanding what's important to them and what they're seeking from employers.
  • How many employees do you have? Employment laws may dictate certain requirements in reference to the benefits you provide. Understand where your company fits in to be sure you're properly accounting for these requirements.

Required offerings

All states and the U.S. government require employers to cover certain things, which are also sometimes called mandated benefits. These benefits include collecting and paying FICA taxes, which fund Social Security and Medicare; paying unemployment insurance; paying workers' compensation insurance; making certain allowances for people serving in the military and complying with provisions in the Family and Medical Leave Act. If a company employs 50 or more people full-time, it must also provide health insurance.4

Even though these seem like standard offerings, these are considered benefits because they're costs the employer covers on behalf of the employee. Many companies opt to offer a host of other benefits along with some optional offerings to employees, too.

Building an attractive benefits package

Employers usually offer benefits packages that include standards such as health insurance, paid time off for illness or vacations and a variety of cafeteria plans that employees can choose from, at group rates. Retirement plans might include profit-sharing or employer contributions.

Medical insurance: This is the number-one benefit that employees want and the one that employers spend the most on.5 Offering attractive insurance plans is a sound investment in your employees. Not only can it help you attract prospects, but good insurance can also be an incentive for a seasoned employee to stay with your company rather than take another offer.6 When potential hires compare offers, they're likely to weigh the value of the insurance package and employer contribution heavily.

Cafeteria plans: These "flexible benefit plans" let employees choose different types of benefits they want.7 These may include opt-in policies like long- and short-term disability, life insurance, add-ons to medical insurance and critical care plans. Employers may offer these at group rates and may pay a portion of the costs on the employees' behalf. These choices are great options for employees because they can change their plan provisions as their needs change.

Paid time off: Vacation and sick time are often packaged together as paid time off. This allows employees to have flexibility when unexpected medical issues crop up, and they don't have to feel concerned about taking a hit in pay when they need sick time for themselves or their children. This flexibility is an important aspect of a benefits package and ranks highly in significance among employees in today's market.8

Education reimbursement: Another attractive benefit is to offer a set amount per year that employees can spend on training and continuing education. This encourages employees to obtain certifications and attend conferences that, in turn, can benefit their performance and the company.

Retirement: There are several ways employers commonly support employees in preparing for retirement. Employers may contribute to employee retirement plans or match employees' contributions. This is an attractive benefit to employees because these contributions effectively increase their salaries through boosting savings and providing tax benefits.

In addition to benefits that have higher costs, you can augment your benefits package with perks that have no or low cash value but rate highly in creating employee satisfaction.9 Negotiate discounts for dry cleaning and arrange pickup and delivery at the office, or get special rates at memberships to the gym in your building. Turn the old storage room into a relaxation space with calming music playing. Host a monthly game night for employees and their families at the local pizza parlor. Allow employees to flex their schedules as long as high-need business hours are covered.10

Find out what matters most to your workers, and invest in those benefits.

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