A survey conducted by the Bureau of Labor Statistics in 2018 found that the average cost of employee benefits to employers is $11.60 per hour. That number jumped to $13.17 by 2022, an increase of 13.5%.
Recently, employee benefits have been the belle of the ball in employee recruitment. Many plan sponsors and human resource professionals may have felt increasing pressure to expand their benefits. But with that pressure comes the tension of the expense of employee benefits. This conflict usually arises over the budgeting process. Now, with pressure on many managers and executives to cut expenses, this tension between advancing employee benefits while also trimming extra expenses may be creating even more tension. The average company spends 8% of its budget on benefits programs. We know that human resource professionals cite benefits packages, including retirement and health care, as a key perk that keeps employees from leaving.
Statistics make this tension even clearer. The cost of benefits has increased over the recent past. A survey conducted by the Bureau of Labor Statistics in 2018 found that the average cost of employee benefits to employers is $11.60 per hour. That number jumped to $13.17 by 2022, an increase of 13.5%. The takeaway is that benefits must be part of the budget process. To ease that tension, we’ve reviewed experts’ suggestions on budgeting for benefits. In general, many of these suggestions could be implemented now, before the year-end budgeting process begins.
For example, experts suggest proactive measures to support maintaining benefits at their current level. Some of those actions include tracking the value of benefits programs through interviews and surveys with employees. An additional option may be to collect information about prospective employees who chose other companies in a recruiting or interviewing process. Asking them for information about the role of benefits in their decision-making process can provide valuable insight into the competitiveness of your benefits programs. There are new options for tracking this information, including cloud-based AI program Alight that uses analytics and predictive modeling to provide insight in real-time and pointing to areas that can be eliminated or reduced without impacting employee satisfaction. HR may also want to consider collecting research about other benefits programs to ensure competitiveness.
Customization is also key. Many plan sponsors may want to consider customizing their plan offerings. Surprisingly, customization may cut costs, not increase them. While the burden on the plan participant may increase in terms of choosing options, this method has been shown to reduce costs.
Benefits professionals may also want to review budgets and employee retention details from years where benefits were cut. This research into the past impact of benefits reductions can be time intensive, and preparing it ahead of time can be helpful. For example, if a company cut benefits during the 2008-2010 recession, there may be information from surveys that discuss the role of benefits in employee satisfaction. There may also be information from exit interviews conducted during that time that help shed light on the role of benefits. This information can help show that the cost of benefits may be preventing losses in other areas of the budget, including productivity or retention.
HR expert Wolters Kluwer also suggests digging into real-time performance data. “Before you can create your budget, you’ll have to perform an analysis of HR performance data and budget actuals as they are in real-time. This analysis should include revenue, both departmental and organizational expenses, staffing (recruiting, hiring, turn-over), and employee compensation.”
These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.
Before leaping into the unknown, we recommend a thorough examination of your plan. Because we are experts in the field, we know the marketplace and know what your existing vendor is capable of offering. Through this examination, we can help you optimize the service you receive.get xpress proposal