All of us here at The Olson Group love employee benefits. It’s literally our job. But even we recognize it can be tough for employers, especially small-business employers, to provide a competitive benefits package compared to wealthier companies. But, if you’re an employer worried about providing affordable, quality benefits, I have good news.
There’s a way you can boost your benefits package without spending more money. In this article, we’ll detail just how much the average business spends on employee benefits, the method you can use to improve your benefits plan for cheap, and how you can ensure this method bears positive results.
The Cost of Providing Employee Benefits
A 2019 Bay Alarm Medical study used data from the National Bureau of Labor Statistics to determine how companies are investing in benefits for their employees. This report included information from roughly 27,200 occupations and 6,600 private industries.
According to the study, almost 70 percent of private industry employer’s compensation costs are from wages and salaries. So, employers’ benefits account for around 29 percent of compensation costs. By a dollar amount, benefits cost the average employer $21,726 annually per employee.
The analysis also found that total costs of benefits to employers have increased 368 percent over the past 14 years. Also, the three most substantial increases in the cost of benefits by industry occurred in the finance, insurance, and utilities industries. These industries saw cost increases of 17, 17, and 15.2 percent, respectively.
Why Voluntary Benefits?
Even before reading those numbers, you likely understood providing employee benefits is a necessary, but costly part of doing business. So, the question remains, how do you provide a better benefits package without spending more? The answer is voluntary or enhanced benefits.
Voluntary benefits are employee benefits an employee can purchase from their employer voluntarily. Usually, businesses provide these benefits to employees at little or no cost to the employer. On the flip side, employees can generally purchase these benefits at a reduced group rate.
This setup provides increased value to employees, which, in turn, makes the voluntary benefits more critical for employers too. Employers can offer a more robust benefits package at little or no additional cost to themselves. Employees, meanwhile, can secure improved coverage at a reduced price compared to purchasing individual coverage.
Plus, voluntary or enhanced benefits, provide both employers and employees with a plethora of advantages. You can read about all these advantages in great detail here. But the biggest reason to offer voluntary benefits is their ability to improve the quality of your company’s employee benefits package, without a hefty price tag.
A complete voluntary benefits portfolio can help organizations both recruit and retain top talent. Plus, these benefits can protect both the physical and financial health of your employees. The better protected your employees are, the more likely they are to be more engaged and productive.
The Importance of Voluntary Benefits
As mentioned above, voluntary or enhanced benefits are critical for any organization looking to create a top-notch employee benefits package without spending a fortune. Because a quality benefits plan is essential to the success of any business. Through an employer’s ability to offer inexpensive, voluntary benefits, companies can provide better coverage to their employees for a fraction of the typical cost.
And these voluntary benefits can have a tangible impact on the lives of both you and your employees. One of the most impactful ways voluntary benefits help is by boosting recruitment and retention. According to Employee Benefits Adviser, 71 percent of workers looking to change jobs in 2019 said more extensive benefits would increase job satisfaction.
Similarly, 55 percent of employees reported in a 2018 Aflac survey, that they would be at least somewhat likely to accept a job offer with slightly lower compensation but better benefits options. And, greater than one-third of these workers said an improved benefits package would help keep them in their current job.
Recruiting and retaining top talent is imperative for virtually every employer, especially in a tight labor market like the one now. Not only is it a lot of work to market, interview, and hire a new employee, but it’s also extremely costly. The financial impact of losing an employee can range from tens of thousands of dollars to 2x the employee’s annual salary.
Why You Need to Educate
So, we’ve now detailed what voluntary benefits are and how they can help both employers and employees. But a key caveat remains; voluntary benefits won’t help anyone if your staff doesn’t understand them. That’s why, to maximize the effectiveness of your voluntary benefits, it’s vital your organization educates employees about your company’s voluntary offerings.
A recent study from Cigna found that many employees don’t understand the role voluntary benefits can play in an employee’s finances in the event of major illnesses or serious injuries. Only 34 percent of employees who are enrolled in employer-offered benefits say they’d rely on voluntary benefits to cover non-medical expenses due to a serious injury or illness.
Instead, these employees would investigate raiding their savings (49 percent), using credit cards (32 percent), or borrowing/withdrawing retirement money from their 401(k) or IRA (22 percent) to handle such expenses. Per the study’s findings, the problem is many employees are familiar with voluntary offerings such as dental, vision, and group term life insurance, but not other kinds of coverage.
The average employee knows far less about other kinds of voluntary coverage that are enacted in the event of a critical illness, hospitalization, or accidental injury. That’s why any company looking to add voluntary benefits to its overall benefits plan needs to understand; simply adding these benefits isn’t enough.
You need to educate your staff about the ins and outs of voluntary benefits to maximize these benefits’ impact. Just building awareness among your staff can increase the likelihood they utilize voluntary offerings. A 2018 MetLife study found 3 in 10 employees chose not to enroll in non-medical benefits due to a lack of promotion from their employer during open enrollment.
If you’re an employer, either small or large, you know how costly providing employee benefits can be. Still, a quality employee benefits package is essential to recruiting and retaining top-level talent. Luckily any employer can use voluntary benefits to boost the quality of their benefits offerings without a subsequent boost in cost.
Educate your employees about the advantages voluntary benefits can provide to your employees and their dependents. And one of the best ways to educate your staff is through a benefits professional. Per the previously mentioned Aflac survey, 45 percent of employees stated they’re more likely to buy insurance if it’s recommended to them by a benefits professional.
So, if you’re ready to implement some voluntary offerings, and help your employees stay financially and physically well, contact The Olson Group today!