As your employee base begins to grow, a natural next move is to offer benefits outside of traditional compensation. From an employee’s perspective, benefits are a part of the total compensation package they consider when taking a position. To attract and retain top talent within your industry, you will need to develop a robust and dynamic employee benefits program. You do not have to spend a fortune—you only need to make thoughtful, strategic-minded decisions.
For most small businesses, trying to piece together the confusing selection of benefits programs into one package can be daunting. You can make the process much easier with an all-in-one HR, benefits, and payroll platform like Zenefits. Get started today with a free 14-day trial.
Looking for the types of benefits to include in your package? Check out our guide on employee benefits.
When designing your benefits program, follow these six steps and apply them to whatever decision-making paradigm you use:
1. Set Up a Budget
Now that you have decided to build a benefits program, you need to create a budget. Regardless of the types of benefits you provide, you’ll need to determine how much your small business can contribute toward a comprehensive benefits package. The least expensive are one-time items, such as a company T-shirt or lunch-and-learn. The most expensive (and frequently most valuable to employees) are health-related benefits, like medical insurance, and long-term savings plans, like a 401(k).
Essentially, this is a needs assessment—based on what the company can afford and the standard benefit offerings from employers. Many benefits are available as pre-tax options, lowering an employee’s overall taxable income.
Employee benefit deductions are subtracted before tax withholdings and are calculated on the employee’s paycheck (reducing the company’s payroll tax liability).
Cost Analysis Per Benefit (Employer vs Employee)
It’s important to do a cost analysis per benefit when determining your budget. Recently released data from the Bureau of Labor Statistics shows 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.
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
Employers may contribute or employees pay premiums.
Employers may contribute or employees pay premiums.
FSA and HSA Savings Accounts
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.
2. Decide Which Benefits to Include in Your Program
At this stage in planning, small businesses should decide which benefits to include in their package. There are many different benefits employers can offer to their employees. Below is a list of popular options:
- Medical/Dental/Vision: Many employers contribute to the medical portion of this program (for instance, 50/50) while keeping dental and vision employee-paid only. Keeping the program affordable will likely increase employee participation.
- Paid Time Off (vacation days, sick days, and holidays): Having a robust PTO policy creates a good work/life balance. Employees need time to disconnect from work and focus on their personal desires. Offering a progressive PTO package can produce a better-quality work environment and increase production.
- Retirement Savings Options, e.g., 401(k) or 403(b): More and more individuals are looking for ways to save money for the future. 401(k) plans are a good option as the employee can save a certain amount per year. Many companies also have 401(k) matching, meaning the company will match employee contributions up to a certain percentage amount (usually a 5% cap).
- Flexible or Health Savings Accounts (FSAs or HSAs): FSA and HSA accounts help employees with out-of-pocket medical expenses. The employee contributes a certain amount per year, and typically the company will also contribute.
- Life Insurance/Disability Insurance: This is a good option to offer employees to help with expenses (medical, funeral, etc.). It can be company-sponsored and/or employee-contributed.
- Additional Work/Life Balance Perks: Options can include flexible work schedules, remote work, professional development, employee clubs/activities/gifts, food/beverage, etc.
For a 401(k) solution that your employees will love and won’t cost you a fortune, you may want to check out ShareBuilder 401k. It offers low-cost plans, friendly one-on-one service, and professional expertise.
Offering Unique Employee Benefits
Although not all businesses offer the benefits noted below, there is competition 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 with your benefits philosophy and that your employees will love.
Some less common benefits (or perks) that you may want to consider are:
- Free snacks or beverages in the workplace
- Free gym memberships or on-site gym
- Student loan or tuition assistance
- Companywide retreats
- Free daycare services
- Sabbatical: company-paid stipend to use for vacation
- Paid maternity and paternity leave
- Remote work options
- Unlimited PTO
- Team bonding events
- Pet-friendly workplaces
REMINDER: Certain benefits may be required by law and include:
- Social Security
- Unemployment insurance
- Workers’ compensation
- Short-Term disability insurance (required in California, Hawaii, New Jersey, New York, Rhode Island, and Puerto Rico)
- Leaves of absence (FMLA required in California, Hawaii, Massachusetts, New Jersey, New York, Rhode Island, Washington, and Washington D.C.)
- Disability Leave
3. Analyze Total Compensation
When talking to job candidates and employees, it is essential 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 elements of how the employee is paid, which is more than just the employee’s paycheck and required benefits.
Total compensation comprises all kinds of benefits that a company may offer, including those listed above. Additional compensations include:
- Profit-sharing distributions
- Tuition assistance
- Child care assistance
- Public transit credits or reimbursements (commuter benefits)
- IT reimbursements (home Wi-Fi, cellphone, personal computer, etc.)
- Gym or club memberships
- Employee assistance programs (EAP)
4. Consider External Resources
Creating a comprehensive benefits package can be stressful. To help alleviate some of the headaches and make sure HR laws are followed, consider using an external resource for your benefits program.
Professional Employer Organizations (PEOs) manage all aspects of HR administration and provide access to group benefit rates small businesses wouldn’t otherwise qualify for. To find out which PEO would be right for your company, take our PEO quiz below.
Which PEO Provider Is Best for You?
Answer a few questions about your business, and we'll give you a personalized product match.
5. Finalize Your Benefits Program
Now that you have created your budget and identified which benefits to include in your package, it is time to finalize your plan before rolling it out to employees.
If you are not using an all-inclusive company for your benefits, you will need to talk with healthcare providers to determine the best plan for your company. Once you decide which company you will offer to your employees, you will need to gather paperwork, sign them, and determine the start date of your plan. This step should be followed for each type of benefit you are providing to your employees.
6. Roll Out the Plan to Employees
Once your program is established, paperwork has been signed, and you are ready to incorporate your benefits package into the employee experience, communicating what has been developed, as well as how and why, is 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.
Follow these steps to deliver critical information to your employees:
- Notify your employees. Hold a group discussion meeting to deliver the details of the benefits program to your employees and answer any questions. Be enthusiastic about your program, and your employees will be as well.
- Provide details of the plan. You should provide your employees with physical or digital copies of each benefit available, including the cost to the employee and the amount the company will contribute.
- Double-check for understanding. Once the news has been shared, ensure that there is adequate follow-up to see if everyone understands their benefits, coverages, how dependents may be covered, etc.
- Utilize a portal or online resources. Once you have shared the news and launched your benefits program, publish it. Make sure 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. Potential employees are becoming savvier as they research companies online. As job candidates and casual job seekers check out your Careers Page, you will want to ensure that your top benefits are listed and easy to understand.
- Mention benefits in your job advertisements. Although job advertisements are primarily about the job you want to fill, always include a brief yet informative blurb about your benefits. It is what attracts jobseekers. (Note that a Glassdoor survey found that 50% of jobseekers reported that the lack of pay or benefits information in a job posting is the most significant cause of frustration.)
Quick Tips To Follow When Developing Your Employee Benefits Program
When developing your benefits package, it is important to consider how employees (and job candidates) look at benefits. Equally important is how other employers see benefits. Take a look at our breakdown below:
Job Candidates: Important Benefits
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 essential.
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.
There can be a divide between what employees and employers think about benefits. As you work to narrow this gap in your 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 actual cost of each benefit. Many employers will cling to an idea for a new benefit and 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 sign up? 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 method. Ensure that your benefits are supported by your team so that they are serving your employees’ unique needs and desires in the best way possible.
Research Data on Your Employee Demographics
There are countless ways to determine 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.
There are endless comparisons regarding what men and women prefer as the most desirable benefits in the workplace. Harvard Business Review (HBR) reported some differences, with women placing more value on insurance and flexibility over other benefits.
In addition, there was a survey issued by the International Foundation of Employee Benefit Plans that lists Transgender-inclusive benefits:
- 90% request Mental Health benefits
- 86% request Gender Reassignment or Affirmation Surgery benefits
- 14% request Cosmetic Surgery benefits
According to Forbes, non-binary employees now want to see changes in the wording on traditional paperwork, with gender designations other than male or female. For example, X. They are also looking for domestic partnership options for healthcare and insurance.
Employees within the baby boomer generation and employees within Generation Z want different types of fringe benefits. There are plenty of overlapping examples, such as PTO or vacation time and paid holidays, as all employees want those benefits. However, Boomers value 401(k) and healthcare more than Gen Zers, who desire skill development, work-life balance, and mobility.
Statistics show that preferred benefits vary by pay scale within organizations as well. The numbers below break down the pay scales into three categories: Under $40,000; $40,000–$70,000; and Over $70,000.
Survey Employees for Benefits Ideas
Surveying your employees is the quickest way to get a clear understanding of what they are excited about in terms of employee benefits and their total compensation. Surveys can be shared in several 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 SurveyMonkey to execute the survey for your organization. You can customize your survey questions and then launch them online for employees to anonymously participate.
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.
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 of your organization should be to create your own sustainable version of an inclusive and dynamic employee benefits program that speaks to your employee base while maintaining your company’s budget.