Many employers see that benefits are the “extra,” beyond pay, that employees receive. But, from the employee’s perspective, benefits are a part of their total compensation package that they consider when taking a position. In order to attract and retain top talent within your industry, you will need to develop a strong, dynamic employee benefits program (and, no, you do not have to spend a fortune—you only need to make a thoughtful, strategic-minded investment).
For most small businesses, trying to cobble together the confusing selection of benefits programs into one package can be a real nightmare. You can make the process much easier with an all-in-one HR, benefits, and payroll platform like Zenefits. It offers health benefits packages from over 250 nationwide insurance carriers and lets you filter and compare plans based on deductibles, premiums, and more to help you find the right ones for your business. Start a free trial today.
Quick Tips When Developing Your Employee Benefits Program
When developing your benefits package, consider how employees (and job candidates) look at benefits and how employers look at benefits. Have a look at our breakdown below.
Job Candidates: Benefits That Are Important
What Employers Offer
88% of employees report healthcare benefits are very important when considering an employer.
41% of employers offer healthcare benefits.
66% reported that paid parental leave is important.
Only 13% of employers offer parental leave.
88% said that paid time off is important.
Only 36% offer paid time off in their benefits package.
So, obviously, there is a large divide between what employees and employers think about benefits. As you work to narrow this gap in your own workplace, keep these three guiding principles in mind:
- Start slow, there is no going back: Once you offer new benefits, taking them away (due to expense or other factors) is not an enjoyable endeavor. Employees do not like having access to a benefit one minute and it vanishing, regardless of the reason, the next.
- Assess the true cost of each benefit: Many employers will cling on to an idea for a new benefit and will expose employees to it without first knowing the true costs of the benefit. That is, how much will this benefit cost the company if all eligible employees partake? Will there be administrative upkeep for the benefit?
- Don’t just look at what others are doing: Although this is a wise action to take, do not let this be your only vetting and reconsidering related action. Ensure that your benefits are supported by your team (which we get into more later) so that your benefits are serving your employees’ unique needs and desires the best way possible.
Each of these three guiding principles are found with the six steps below. Do not double back on launched benefits, finance them on paper first, and check both what others are doing and what your employees are asking for (or would ask for if you bothered surveying them).
6 Steps to an Awesome Employee Benefits Package
There are many helpful tips out there as it relates to building a solid employee benefits package, but ensure that you take these six tips and apply them to whatever decision-making paradigm you use. These are strong suggestions that, if ignored, will often revisit decision-makers down the road if not considered at the outset.
1. Learn Legally Required ‘Employee Benefits’ You Must Offer
Fringe benefits are benefits that you are not legally obligated to offer. These benefits are voluntary in nature. The only legal aspect to them is that if you offer these, you must offer them equally and fairly to all employees.
Legally required benefits are benefits that are mandated of all employers or of employers with certain headcounts (for example, if your organization has healthcare benefits and 20 or more employees, you are required to offer COBRA benefits when qualifying events take place).
- Social Security and Medicare benefits: Every employer, regardless of employee headcount, must—typically through the payroll process—match their employees’ Social Security and Medicare (FICA) contributions. Employers who fail to withhold appropriate taxes may face steep fines and may also place their employee in legal jeopardy.
- Healthcare Insurance (The ACA and COBRA): Employers with 50 or more full-time equivalent employees (or “FTEs”) are required to offer “acceptable” health insurance to their employees working 30 hours or more per week. Provisions such as the insurance provider fee or the branded prescription drug fee, may affect your organization. For a list of ACA tax provisions, visit the Affordable Care Act Tax Provisions page.
- COBRA benefits: Employers with 20 or more employees and subject to the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) must comply. It allows employees to maintain insurance coverage at the employer’s group rates for a period of up to 18 months.
- Workers’ Compensation Insurance: If an employee gets injured while at the workplace or while performing work, then they have protection under the employers insurance (workers’ compensation) and not their own. Regardless of employee headcount, a company must maintain workers’ compensation insurance.
- Unemployment Insurance: All employers must carry unemployment insurance. They pay into the state’s unemployment insurance fund, and these funds provide compensation to unemployed workers when they are between jobs.
- Family Medical Leave Act (FMLA) Benefits: The FMLA, a federal labor law, requires private-sector employers, with 50 or more employees in 20 or more workweeks in the current or preceding calendar year, unpaid, protected time away from the workplace for certain events, i.e., the birth of a child; to care for a spouse, child, or parent who has a serious health condition.
- Disability Leave Through the ADA: The Americans with Disabilities Act (ADA) requires employers to consider and manage reasonable accommodations for employees with disabilities. Although not too common, extended leave from the workplace can be one of many forms offered as a reasonable accommodation.
2. Budget for Your Benefits Program and Win C-Suite Alignment
Regardless of the types of benefits you provide, you’ll need to create a budget. The least expensive benefits are one-time items, such as a company T-shirt or an employee pizza party. The costliest (and oftentimes most valuable to employees) are health-related benefits like medical insurance and health savings plans.
Here are price ranges to help you budget for each of the following employee benefit types:
Employee Benefit Costs by Type
How It Works
≅Monthly Cost per Covered Employee
Employers typically share costs with employees, such as 50/50.
$500 and up
Dental and/or Vision Insurance
Employers may contribute or employees pay premiums.
Employers may contribute or employees pay premiums.
Either employer or employee can contribute; subject to annual limits.
$50–$200 is common
Employers typically contribute a dollar amount or percent, e.g., matching 2–5% of earnings.
Varies, based on rate and earnings
Employees are reimbursed for commuter expenses; required in some locations.
Life and Disability Insurance
Some employers pay for a fixed benefit amount, such as $50,000, providing an option for employees to purchase additional coverage.
Recently released data from the Bureau of Labor Statistics show the various amounts that employers pay for different kinds of employee benefits. The percentage that employers spend is well upward of 30% of each employee’s total compensation. For example, for an employee making $35 per hour, the average employer pays an additional $13 per hour in employee benefits.
For a 401(k) solution that your employees will love and won’t cost you a fortune, you may want to check out Human Interest. Its dedicated account managers will provide compliance support and help your employees choose great low-fee options for their investments. For a company with 20 employees, it would cost $200 per month.
Professional Employer Organizations (PEO)
A PEO is an external organization that manages HR, payroll, and employee benefits for you. PEOs can help budget, manage, and administer benefits. PEOs pool together small businesses to offer big-company benefits—like medical and life insurance—at a lower cost. They also ensure your business stays in compliance with tax, state, and federal laws, like workers’ compensation and overtime.
PEOs vary greatly in price from under $100 per employee, per month to thousands of dollars a year. However, in the long run, they can save you money on health insurance and workers’ compensation rates. With some remote staff and a home office in NYC, Fit Small Business uses a PEO to help us offer great benefits to our distributed team in the most cost-effective way. You can learn more about PEOs in our guide to the best PEOs.
If you think a PEO is the best option for your business but don’t know which PEO provider to use, take the quick four question quiz below. It will offer you a customized recommendation based on the responses you give.
Which PEO Provider Is Best for You?
Answer a few questions about your business and we'll give you personalized product match
3. Think (and Plan) in Terms of ‘Total Compensation’
When talking to job candidates, as well as employees, it is really important to include all of the many aspects of compensation (or the company’s benefits package). The concept of total compensation speaks to all of the aspects of how the employee is remunerated. This, of course, speaks to more than just the employee’s paycheck and required benefits.
Total compensation is made up of all kinds of benefits that a company may offer. It can include the following:
- Paid time off (vacation days, sick days, and holidays)
- Retirement savings options—generally 401(k) or 403(b)
- Flexible (FSA) or Health (HSA) Savings Accounts
- Profit-sharing distributions
- Insurance (medical, dental, disability and/or life)
- Tuition assistance
- Child Care assistance
- Public transit credits or reimbursements
- IT reimbursements (if you use your home Wi-Fi, cellphone, person computer, etc., then those costs can be reimbursed)
- Employee assistance programs (EAP) that offer, for free, financial and legal advice, counseling, retirement planning coaching, etc.
- Gym or club memberships
- Flexible or remote work options
4. Survey Employees for Benefits Ideas
Surveying your employees is the quickest way to get a clear understanding of what your employees are excited about in terms of employee benefits and their total compensation. Surveys can be shared in a number of ways, but their true attraction is the fact that employers receive valuable feedback from employees about what they want to see more of and employees can share their honest thoughts, feelings, and ideas anonymously.
The two most common ways of surveying employees that we have found to be effective are:
- Hosting employee surveys in-house, often led by HR.
- Utilizing a third-party surveyor such as Survey Monkey to execute the survey for your organization. You can customize your survey questions and then launch it online for employees to anonymously participate in.
Quantum Workplace reports that employees are 38% more engaged and 28% more likely to advocate for their employer’s organization and brand when they feel that their employer cares about their health and well-being. Employee surveys help you display this interest in your employees’ well-being in a way that they can personally experience.
5. Select Agreed-Upon Fringe Benefits and Assess Costs
Essentially, this is a needs assessment—based on what the company can afford—and what is standard benefit offerings with employers. Many benefit options, such as the first five benefits shown below, are available as pre-tax options, lowering an employee’s overall taxable income. Employee benefit deductions are subtracted before tax withholdings are calculated on the employee’s paycheck (this can also reduce your payroll tax liability).
Below are examples of common employee benefits to consider offering (note that the list below differs from the one in step 3):
- Health insurance: Including medical coverage for the employee and family
- Dental and vision insurance: Including coverage for the employee and family
- Life and disability insurance: To cover the employee and spouse in case of accident/death
- Retirement plans: 401(k), SIMPLE IRA, or profit-sharing plan
- Alternative health benefit options: Such as flex spending or health savings accounts
- Paid time off: Such as paid sick time and vacation
- Paid holidays: For example, offering the Fourth of July and Christmas off is common
- Commuter benefits: Such as bus or light rail fare, carpooling, or bicycle maintenance
- Fringe benefits: Logo jacket, sporting event tickets, or a holiday party
- Work-life balance benefits: Such as flex time, remote work, or pets at work options
If you are on the fence on deciding which benefits you would like to offer, visit our article on company benefits stats to see what other businesses are doing and also to determine which benefits might bring you the most value based on your employee demographics, company size, and industry.
6. Communicate Your Benefits to All Employees and Candidates Clearly
Once your program is launched and you are ready to incorporate your benefits package into the employee experience, communicating what has been developed, how it was developed, and why it was developed are essential.
Our tips for ensuring that you implement an effective communication campaign for your employee benefits program will help you cover the most important aspects of your employees’ experience as they absorb this news.
- Utilize many forms of communication: Do not just send out one email to your staff expecting it to be the only thing required of you. It is wise to use email, but we recommend sending multiple reminders about the new benefits package or program. Utilize many forms of communication, including physical handouts, social media, breakroom lunch and learns, and in-person or Zoom meetings.
- Connect face-to-face: Ensure that you also gather all employees who do not use computers all day long and explain, step by step, what their benefits package is made up of and how it serves them.
- Double-check for understanding: Once the news has been shared, ensure that there is adequate follow up to see if everyone understands their benefits, their coverages, how dependents may be covered, and so on.
- Utilize a portal or online resources: Once you have initially shared the news and have launched your benefits program, publish it. Make certain that employees have a place to return to in order to get additional questions answered as well as to independently learn more about what and how their benefits can enhance their quality of life.
- Update your company’s Career Page: On-lookers and candidates are becoming more and more savvy as they research companies online. As job candidates and casual job seekers check your Career Page out, you will want to ensure that all of your benefits are listed and are easy to understand.
- Mention benefits in your job advertisements: Although job advertisements are mostly about the job you want to fill, always include a brief, yet informative blurb about your benefits. It is what draws the attraction to job seekers. (Note that a Glassdoor survey found that 57% of job seekers reported that benefits are one of the most important aspects to whether they take a job offer.)
Employee Demographics to Be Mindful Of
There are countless ways to carve up this topic in determining how and what you want to offer by way of employee benefits to your team members. Although we help you look at this topic from a few different angles, the most straightforward numbers to view are the ones that point to the most popular benefits to employees.
Another common perk that is offered is retirement planning. We broke this statistic off from the others to focus on it specifically.
Employee Benefits by Gender
There are endless comparisons regarding what men and women prefer as most desirable benefits in the workplace. The fact is, the longer you look at research in this demographic, the more information you will find that does not entirely match up. We like to refer to Harvard Business Review (HBR) for hard-to-pin-down-stats, and we have shared one regarding gender below.
If we look closely, we can see in this graphic that there is more in common between genders on when selecting what’s important in benefits.
Generational Employee Groups
One of the most encapsulating ways that we like to review regarding benefits and employees, is that of generational preferences, and their differences, of workplace benefits. It stands to reason that employees within the baby boomer generation and employees within the Generation Z will not want the same types of fringe benefits.
Of course, there are plenty of overlapping examples, such as PTO or vacation time, paid holidays, and so on, as all employees want those benefits. However, Boomers value 401(k) and healthcare a lot more than Gen Zers who desire skill development, work-life balance, and mobility.
Employee Benefits Considerations by Salary
Statistics show that preferred benefits vary by pay scale within organizations as well. The numbers we are sharing break down the pay scales into three categories, Under $40,000, $40,000 to $70,000, and over $70,000.
Companies With Unique Employee Benefits
Although not many companies offer the benefits noted below, there is a competition, as previously noted, among companies to be creative, dynamic, and flexible with employee benefits. No, not all companies want “dog-friendly” workplaces or can offer free lunches every day, but there are creative ideas that are worth looking at that may fit within your benefits philosophy and that your employees will love.
There are a number of ways to approach putting together and then maintaining a benefits package that current employees will love and job candidates will be attracted to. Many companies have solid, creative, and engaging benefits packages, and they all look a little different.
The goal for your organization should be creating your own sustainable version of an inclusive and dynamic employee benefits program that speaks to your customer base (in this case, your employees). This mindset will set you on a path as you launch your business into the future.