How to Design an Employee Benefits Plan for Your Business
Key points about creating an employee benefits plan:
- A competitive employee benefits plan can help you attract and retain talent.
- To create the benefits package that’s best for your business, set goals, define a budget, and survey your employees.
- Design your plan based on these criteria and share important changes with your employees.
A well-designed employee benefits plan is key to attracting and retaining talented individuals. In fact, 60% of applicants say that benefits and perks are a major factor in deciding whether or not to accept a job offer. And 78% of employees say that they’re more likely to stay with their employer because of their benefits program.
But employee benefits aren’t cheap—they account for roughly 30% of your total compensation costs. While it may be tempting to provide only the bare minimum or to invest in the trendiest benefits, it’s important to design your plan carefully.
To make the most of any benefits you provide, create a plan that meets your budget and strategy while addressing your employees’ needs. This can be a tough balance to strike, but the steps below can help you get started.
6 Steps to Design an Employee Benefits Plan
Step 1: Set goals
First, outline objectives for your employee benefits plan. Defining your objectives will help you pick the benefits best suited to your business and ensure you stay on track throughout the process.
In this stage, you don’t need to list every single benefit you want to provide. Instead, focus on how an employee benefits program will support your business strategy and employee needs. Ask yourself:
- What is my main reason for providing employee benefits?
- In what ways/areas do I want to support my employees most?
- How do I want to support employee health and wellbeing?
- Is there anything missing from our current plan (if applicable)?
After you answer these questions, develop your goals and objectives. Your objectives should take into account your business size, industry, location, and any collective bargaining agreements. Your goals aren’t set in stone, though. As your business changes, your benefits goals can change, too. Some example goals include:
- Provide affordable benefits that promote employee financial security.
- Aid employee wellbeing by offering a variety of easy-to-access mental health benefits.
- Protect against age-related health risks while addressing the employee need for flexible work hours.
Step 2: Define your budget
In many cases, your budget will determine which employee benefits you can provide.
If you already have an employee benefits plan in place:
Compare your current costs with your projected costs. How much of a price increase can you comfortably sustain? What is your budget for next year, and how will a change in benefits costs affect it?
If you’re creating an employee benefits plan for the first time:
Estimate a benefits budget. You may want to get a few quotes for basic benefits so you know what price range to expect. A benefits broker can help you get started and find options in your price range.
Step 3: Conduct a use assessment & survey your employees
While it’s important to create a benefits plan that meets your organizational needs and budget constraints, it’s just as important to invest in benefits that your employees will actually use. Conducting a use assessment and obtaining employee feedback will help ensure you’re on the right track. Most employees will use your medical or health insurance, but how many use your retirement plans and life insurance?
If you already have an employee benefits program, try:
Conducting a use assessment
A use assessment determines how much your employees actually use the benefits you offer. A use assessment makes it easy to identify benefits you don’t need, which can help you design a more cost-effective plan. If no one uses a certain benefit, you may not need to keep it in your new program. Some carriers will conduct use assessments for you.
Surveying your employees
Get employee feedback through questionnaires or personal interviews. Your employees’ responses can help you understand how they feel about their current coverage and what they want to see in the future. Consider:
- What benefits do your employees like?
- Do they think anything could be improved?
- What benefits would they like to see in the future?
- Did they use the benefits they selected during the last open enrollment?
If you don’t already have an employee benefits program, try:
Surveying your employees
Even if you don’t have a benefits plan right now, getting employee feedback is still a great place to start. Through surveys, questionnaires, or interviews, ask:
- What benefits do your employees need?
- What benefits do they want?
- What’s most important to them (their health and wellbeing, affordability, accessibility)?
Step 4: Consider compliance & additional factors
In addition to use assessments and employee feedback, other factors will influence your ability to design a strong benefits program. Whether you’re designing a plan for the first time or changing an existing program, consider the following:
Laws and regulations may require you to provide certain benefits. The Affordable Care Act (ACA), for instance, requires employers with 50 or more employees to offer affordable healthcare to their employees. Many states and localities also require employers to provide benefits like paid sick leave. Check Federal, state, and local laws to ensure your benefits plan is compliant and you don’t incur any unnecessary fees.
Different age groups and generations may prioritize different benefits. For example, younger employees may want flexible work hours, paid time off, and tuition assistance. In contrast, more tenured employees may prefer robust retirement plans, disability and life insurance, and health insurance. You can analyze your workforce demographics to help you make strategic benefits decisions.
If you want to design a benefits package that will help you attract and retain employees, research your competitors’ benefits plans. You can also analyze the benefits that are popular in your industry, along with any relevant market trends. Without this research, you won’t know if you’re actually offering a competitive plan.
Step 5: Design your employee benefits plan
Once you’ve set your objectives and assessed your needs, you’re ready to start designing your employee benefits plan. To get started, make a list of the benefits you want to include in your plan. Place them in order of priority and then determine how much they will cost. Compare this total with your budget to see what you can afford. You may need to repeat this process several times until you come up with the right compromise between benefits and costs. You may also decide to increase your employer contribution towards existing benefits rather than adding new benefits.
The benefits you choose will depend on your objectives, employees, and any other needs specific to your business. However, common benefits include:
- Medical and health insurance
- Dental insurance
- Vision insurance
- Disability insurance
- Life insurance
- Paid time off
- Retirement plan benefits
Once you decide on your core benefits, you may also want to provide supplemental benefits or perks. These are additional benefits that can be a nice value-add for your employees. They also tend to cost less than something like medical insurance. These perks may include things like:
- Wellness programs
- Mental health programs
- Pet insurance
- Training programs
- Tuition reimbursement
- Telecommuting reimbursement
Questions to ask
Designing your plan can be overwhelming because there are so many moving parts to keep track of. Throughout your decision-making process, revisit your initial goals and objectives. It can be easy to get off track, and reminding yourself of your end goal can help steer you in the right direction. When deciding which benefits to add, change, or remove, ask yourself questions like:
- Can I make any changes that will make my plan more cost-effective?
- Are there any benefits my employees don’t use that can be eliminated from my projected plan?
- Can I administer the plan myself, or will I need help from a benefits broker or other third party?
- How much will it cost to administer the plan?
- How much will employees have to contribute (if applicable)?
Step 6: Communicate with employees
Without employee buy-in, your plan, however well-designed and cost-effective, won’t gain any traction. In order for your employees to opt in to your benefits program, they need to understand what it includes and how it can help them.
While you’re required to provide some information about the benefits you offer (such as a summary plan description), a more detailed communication plan will help you increase employee awareness and support. To develop a thorough communication plan:
Show employees how their feedback influenced your benefits plan
Tell your employees if you used their input to drive your benefits decision-making process. Doing this will show them that you took their feedback seriously and listened to their concerns. In short, they’ll feel heard and know that their voice matters in your company.
Explain how your plan helps meet organizational and individual goals
You know that a competitive benefits plan can improve recruiting, retention, and employee satisfaction—but your employees may not. Show them how your plan supports your organization’s values and explain how lower costs or more robust coverage can help them individually.
Provide educational materials and resources
When it’s time for open enrollment, help your employees make smart benefits decisions. Explain terminology like premium, annuity, and limits. Explain Health Savings Accounts (HSAs), short-term disability insurance, and 401(k) retirement accounts. If your employees don’t understand their benefits, they may not make the best decisions and they won’t get as much out of their chosen plans.
It may be helpful to hold a company-wide meeting where you explain the basics of your benefits package and share additional resources. You can also connect employees with a benefits specialist who will be able to answer personal questions in a private setting. As you think about what to include in your communication plan, consider questions like:
- What’s changed about your benefits package?
- Have you added any new benefits? Have you removed any benefits?
- Has the cost of employee and employer premiums changed? By how much?
Step 7: Re-evaluate your plan each year
After you implement your benefits package, reassess it every so often. Changing market trends, prices, and regulations can quickly transform the benefits landscape. Your benefit needs may change as your business and employees do, too. When you re-evaluate your plan, ask yourself:
- Is your benefits package still meeting your goals and objectives?
- How many employees enrolled in your benefits plan?
- Are your employees satisfied with their benefits and coverage?
- Is your plan still competitive?
Designing an Employee Benefits Plan with Sentric
There’s a lot to consider when developing a benefits plan, whether you’re creating one from scratch or revamping an existing program. Working with a benefits expert can help make the process less overwhelming.
Sentric’s licensed benefits brokers work with you to design a comprehensive benefits package perfect for your business. We support you through open enrollment and beyond, providing consultative meetings and educational materials to help you and your employees make the most of your plan. Our all-in-one HRIS SentricHR also makes it easy to manage benefits, payroll, and everything HR in one place.
For more information about what we do, speak with one of our benefits experts today!