6-Step Guide to Building a Budget-Friendly Benefits Package

In today's tight labor market, attracting and retaining top talent has become a key battleground for small and medium-sized businesses (SMBs). While it can seem impossible to compete with large corporations that offer hefty benefits packages, SMBs can still compete for top talent by crafting strategic, cost-effective programs that resonate with their workforce. 

This guide delves deeper into navigating the delicate balance between offering competitive benefits and staying within budget.

Step 1: Understand Your Workforce

Before deciding on specific benefits to offer, it's crucial to understand your employees' needs and priorities. A one-size-fits-all approach rarely works. Here's how to get valuable insights into what is important to your employees:

• Conduct Employee Surveys: Develop surveys that gauge interest in specific benefits and uncover any pain points regarding employees' current well-being. Tools like SurveyMonkey, Google Forms, or employee survey software make creating and distributing surveys easy.

• Host Focus Groups: Gather a diverse group of employees to get qualitative feedback. This allows for in-depth discussions and a clearer understanding of the "why" behind their preferences.

• Analyze Demographics: To effectively tailor your offerings, consider your employees’ average ages, family status, and lifestyle factors. For example, younger generations might prioritize student loan repayment assistance, while older employees might value long-term care insurance options.

• Perform an Audit: If your company already provides employee benefits, evaluate what existing benefits employees use the most and find the most impactful. Don’t pay for benefits that employees aren’t using!

Step 2: Prioritize Benefits

Once you have a clearer picture of your employees' needs, it's time to build your program. Begin with the first and most significant benefit you can offer: health insurance.

While health insurance is the cornerstone of any benefits package, it can be a significant expense for SMBs. However, not all employees will want or need the most comprehensive (and expensive) coverage. 

Here are some more cost-effective options to consider:

Group Health Insurance 

Partnering with an insurance provider to offer group health plans can leverage economies of scale and potentially lower costs. However, this approach may require a certain number of employees to participate.

Limited Medical Plans

Explore options like Health Maintenance Organizations (HMOs) or Preferred Provider Organizations (PPOs). HMOs often have lower premiums but require referrals for specialists, while PPOs offer more flexibility in choosing providers.

Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs)

Employees who don’t seek healthcare often, particularly younger and healthier employees, often choose FSAs or HSAs over more comprehensive healthcare plans. These allow employees to set aside money from their paychecks for qualified medical expenses, providing tax advantages and potentially lower monthly premiums while saving money for future medical expenses that may arise.

Health Reimbursement Arrangements (HRAs)

This is another cost-effective health coverage option to consider. Employers contribute money to the HRA, and employees use these funds to pay for qualified medical expenses. These expenses can include premiums for individual health insurance plans, deductibles, copayments, and coinsurance.

The key benefit of HRAs is that employers' contributions are tax-deductible, and employees' reimbursements for qualified expenses are tax-free. This can save both employers and employees money on healthcare costs.

Vision and Dental Insurance

While often overlooked because they are not legally mandated, vision and dental coverage are some of the most utilized benefits by employees and are relatively inexpensive to provide. Since health insurance is designed for unexpected, often expensive medical needs, many employees may just use it once a year for a checkup, or not at all. 

Vision and dental insurance, on the other hand, focuses on preventive care like cleanings and exams. Since these are routine procedures recommended every six months to a year, employees are more likely to use their vision and dental benefits. Additionally, many vision and dental plans are set up as "use-it-or-lose-it" plans. This means any unused coverage for cleanings or exams expires at the end of the year. This encourages policyholders to schedule appointments to get the most out of their premiums.

Step 3: Think of Benefits Beyond Health Insurance

Health insurance is a critical foundation for employee well-being, but a comprehensive benefits package must go beyond just medical coverage. 

Voluntary benefits, also known as fringe benefits, offer employees the opportunity to customize their coverage and address specific needs, often with employee contributions. This allows companies to keep overall healthcare costs manageable while still providing valuable options for employees.

Life insurance, even basic coverage, demonstrates an employer's commitment to employee well-being and can provide peace of mind for employees and their families. A survey by MetLife found that 60% of employees report feeling more valued by their employer when life insurance is offered.

Retirement savings plans are another powerful tool for attracting and retaining talent. While implementing a 401(k) plan can involve administrative costs, there are ways to make it cost-effective. Starting with automatic enrollment with a small employer contribution can be a low-lift way to introduce the benefit and encourage participation, especially for new hires. 

Step 4: Implementing a Cost-Effective Benefits Plan

For many organizations that are looking to establish benefits offerings for the first time, it is often best to start by offering a core set of essential benefits that are the most valuable to your employees, like health insurance and PTO. As your business grows and your budget allows, you can strategically add or enhance these offerings to include other offerings such as fertility benefits and retirement plans. This phased approach lets you demonstrate value to employees from day one while maintaining control of your budget.

When implementing any change in your organization, clear communication is key, and benefits are no different. Clearly explain your benefits package and offerings to new hires through employee handbooks and onboarding sessions. 

Additionally, keep existing employees informed of any changes or updates via multiple channels like announcements and company-wide meetings. Ensuring everyone understands the value proposition of your benefits package allows you to better foster employee satisfaction and loyalty.

Step 5: Going Beyond Benefits

While a strong benefits package is undeniably attractive, a company culture that prioritizes employee well-being and work-life balance increasingly plays a significant role in attracting and retaining talent. Focusing on these aspects in your organization can lead to increased productivity and reduced burnout and turnover. 

While not considered traditional “benefits,” these perks can increase employee happiness and health that can supplement typical benefits offerings without breaking the bank:

• Flexible Work Arrangements: Consider offering flexible work schedules, compressed workweeks, or remote work options. This not only promotes work-life balance; it can attract talent seeking greater control over their schedules, workers with disabilities, and those with caretaking responsibilities that traditional work arrangements may push away.

• Paid Time Off (PTO): Consider a PTO bank system that combines sick leave and vacation days that offers employees flexibility and can simplify administration for your HR team. Most companies give their employees 10-14 days of PTO a year – you can start there and adjust based on your budget and company culture. Beyond just offering PTO, encourage employees to utilize it and avoid glorifying overwork. 

• Wellness Programs: Invest in employee well-being with wellness perks like discounted gym memberships or healthy snacks in the break room. These can foster a positive company culture and potentially reduce healthcare costs down the line.

• Employee Recognition: Implement programs that acknowledge and reward employee achievements through public recognition, performance bonuses, or simply expressing gratitude. Feeling valued by an employer is a key motivator for employees to continue bringing their best to work every day.

• Social Events: Organize team lunches, happy hours, or volunteer days. These events promote team building, create a sense of community, and show your appreciation for your employees.

• Open Communication: Encourage open communication channels between employees and leadership. Conduct regular surveys or hold town hall meetings to gather feedback and address concerns to help your employees feel heard and show that their thoughts are valued.

• Opportunities for Growth: Provide opportunities for employees to learn new skills and advance their careers through internal training programs, mentorship opportunities, or tuition reimbursement programs. Investing in employee growth demonstrates your commitment to their long-term success and one that many candidates prioritize when searching for a role.

Step 6: Tracking the ROI of Your Benefits Package

Once you've implemented your benefits program, it's crucial to track its effectiveness. Here are some key metrics to consider:

• Employee Retention Rate: A low turnover rate indicates that your employees are satisfied with their total compensation package, including benefits.

• Employee Satisfaction Surveys: Conduct frequent surveys on an annual or bi-annual basis to assess employee satisfaction with your benefits program. This will allow you to identify areas for improvement and tailor your offerings to evolving needs.

• Healthcare Costs: Track healthcare claims data annually to see if your wellness programs or preventative care options are leading to cost reductions.

• Absenteeism Rates: Monitor employee absenteeism to see if your benefits offerings, particularly PTO and sick leave policies, are contributing to a healthier and more engaged workforce.

By continually monitoring and refining your benefits program and evolving workforce, you can ensure your offerings remain competitive and deliver a strong return on investment for your business.

Benefits Cost Management Strategies

Crafting a competitive benefits package without blowing your budget often requires a strategic mindset about how your benefits offerings can bridge compensation gaps. In a recent NFP survey, 60% of employees said they were willing to sacrifice higher pay in exchange for time off and better health and retirement benefits. 

When building a benefits plan, be sure to shop around, and don't settle for the first insurance quote you receive. Secure bids from multiple providers to find the plan design that best aligns with your employee demographics and budget, and consider working with a benefits broker who can help you find the best plans for the best rates. Comparing options ensures you're getting the most value for your investment in employee well-being.

For small businesses, it’s possible to unlock tax savings by exploring tax-deductible benefits like Health Savings Accounts (HSAs) and pre-tax contributions to retirement plans. Taking advantage of these options can lower your overall tax burden, freeing up additional resources to invest in other employee benefits.

When it comes to implementing cost-effective benefits plans, technology is your friend. Organizations can streamline benefits administration and reduce costs associated with manual processing by leveraging benefits software or online enrollment platforms. These tools can automate tasks, improve data accuracy, and free up valuable time, money, and resources for your team.

Final Thoughts

Crafting a cost-effective benefits package for your small business requires a strategic approach that involves understanding your workforce and their needs, prioritizing essential benefits, and implementing creative perks. This way, you can create a program that attracts top talent, fosters a positive work environment, and contributes to your business's long-term success. 

Remember, it's not about offering the most expensive benefits – it's about creating a well-rounded package that demonstrates your commitment to employee well-being and professional growth. As your business grows, so too can your benefits program, ensuring you remain a competitive employer in the ever-evolving job market.

Automating Employee Benefits Administration

Ready to see how you can take the next step towards simplified benefits administration in your organization? With an HRIS like GoCo, employers can easily manage benefits administration and all of your benefits in one place, including health, dental, vision, life, accident and disability, HSA, FSA, HRA, commuter benefits, and more.

GoCo equips employees with convenient and comprehensive self-service enrollment, which allows them to view plans at a glance, easily understand coverage, and enroll in minutes. Benefits are also kept in sync with your payroll and insurance carriers within GoCo, which makes the management process easier. Peace of mind comes as a standard as well with ACA compliance and hassle-free solutions. Want to see for yourself how simple benefit administration (and much more) can be with GoCo? Learn more about our automated benefits administration software and take a free tour of our platform today!