Until recently, employers were faced with an incredibly tight labor market and the benefits offered by your firm could make the difference in attracting new hires and retaining existing employees.
Fast forward a few months, and rising interest rates and falling stock markets have meant layoffs in a number of industries which has increased the talent pool. What hasn’t changed, however, is the increasing diversification of the workforce along with greater employee expectations since the pandemic.As an employer, how do you remain relevant, compete for talent, and control costs? One important tool is comprehensive benchmarking of your employee benefits plan.
In its simplest form, benchmarking provides employers with an understanding of the standard benefits offered for their particular industry, region, and size. Benchmarking can be used by new firms or firms without a current benefits plan to determine what types of coverage they should be including in their overall compensation plan to help attract and retain staff. It can also be a powerful tool for companies with existing plans to determine the competitiveness of their offering and to identify changes in the popularity of certain benefits over time.
Employee benefits benchmarking can help your firm to determine if its benefits offering is at, below, or above average. There are a number of services available that provide benchmarking data. Depending upon the service or publication utilized, most will breakdown the data so that you are able to compare each of your organization’s benefits to the median or determine the quartile in which you rank.
While most firms are concerned if some or all of their benefits rank below the median, it is equally important to look at places where you are above the norm. There may be opportunities to redistribute benefit dollars in a way that is more meaningful for your current and future employee population.
In addition to identifying how your benefits compare to the median, benchmarking can also identify any gaps in coverage or, conversely, any benefits that you are offering that most firms do not. One such example of the latter is retirement plans. Only about 20% – it varies by industry – of small and medium sized businesses offer a retirement plan. Therefore, if your firm assists its employees with saving for retirement – regardless of your position relative to the savings median – this is a benefit that potentially places your company ahead of its competitors.
Depending upon your industry and the database upon which you are relying, it is not always possible to drill down to a granular level. If the sample size is too small, you may need to rely on more general information such as benchmarking nationally rather than at a provincial level or using a broader category, for example construction rather than roofing.
Another issue is that benchmarking only tells you what other companies are doing. It does not provide insight into which benefits are most desired by your people. Nor does it inform you which parts of the plan are utilized the most, or the least, by your employee population.
One piece of data that has a direct impact on the overall costs of an insured benefits plan and influences perceptions by current or prospective employees is the cost sharing arrangement. In other words, how much of the overall premiums are paid by the employer and how much by the employee. Most databases do not include cost sharing arrangements based on industry or employee count.
When developing an employee survey to determine which benefits are most desired, a comprehensive benchmarking report is a good place to start. It will help you to list popular items for a health and wellness plan as well as develop strategy for your overall compensation including leave policies and flexible working arrangements.
For organizations that have existing plans, it can help identify areas where your plan may need to be updated or changed. Trends such as increasing mental health resources or adding additional complementary health practitioners may be ways in which your plan can be seen as more relevant. It can also potentially help to control overall costs by introducing more wellness related initiatives to reduce absenteeism and take pressure off of long term disability claims.
Benchmarking is an important first step in creating or updating a benefits plan. It will help your organization to identify areas where your plan falls short or where it has been overly generous. When done every few years, it can also help you to spot trends and to update your plan to remain relevant. When combined with employee survey data and an analysis by your benefit’s advisor of how your plan is utilized, benchmarking will help to ensure that your organization’s compensation strategy remains relevant over the long term.