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The Complete Handbook to Optimizing Your Employee Benefits Package

Imagine a world without employee benefits. Go ahead, close your eyes. Think about it. No retirement savings. No health care support. No Medical. Dental. Vision. No wellness support—physical, financial, mental, or emotional. No pensions, life insurance, disability, 401ks, 403bs, FSAs, HSAs, PTO, EAPs, or any of the other acronyms. Just every employee getting a salary for their work—and let’s be real—living wildly more stressful lives. Employees would spend far more time and effort worrying about their personal lives, while employers would simply compete for talent with hourly wages. If you ask me, it makes for a dreary picture of work.

If you’ve stumbled across our corner of the internet, you probably care about benefits. Maybe you’re a CEO wanting to attract great employees or an HR leader thinking deeply about voluntary wellness benefits and crafting an industry-leading benefits strategy. You might be in the early stages of your benefits journey, with the basics like health insurance and a 401k, but not much more. Others of you might be playing on expert mode and shopping for more niche offerings like pet insurance, ketamine treatments, or free in-office dining. Wherever you are on your journey, we hope this guide will provide some food for thought:

We’re here to:
1. Give you a quick overview of some of the core benefits categories to consider and optimize;
2. Offer tactical suggestions around evaluating your benefits strategy;
4. Offer tips for effective implementation;
5. Talk about how to measure impact:
6. Wrap with some legal considerations to keep in mind;

Before we dive into the heart of this guide, let’s briefly look backwards at the evolution of employee benefits (it’s the history major in me)!

The Definition and Importance of Employee Benefits

Without getting too meta—what is an employee benefit anyway? We’d consider it any perk, support, or non-wage compensation that an employer offers systemically to their employees. In short—if you’re getting something other than your salary/wage, you’re getting a benefit. This comes in many forms, ranging across additional compensation or favorable tax treatments for certain behaviors, insurance offerings, scheduling flexibility, time off, or additional services (often at free or reduced rates).

The origin of “employee benefits” is hotly debated, but many historians harken all the way back to Caesar offering Roman soldiers pensions after major wars and shared funeral expenses among soldiers. Others look to a more modern and corporate founding of story pensions in white-collar industrial-era Britain. or to the blue-collar example of U.S. labor unions in the 1800s. 

Wherever you choose to start the benefits saga—there’s no question that the 20th century has been gangbusters for the rise of the employee benefit. 

Evolution of Employee Benefits

In the 1900s, employee benefits offerings expanded rapidly in America, both through organic popularity and legislation. In the first half of the century, businesses began to take a more activist approach to employee care—Montgomery Ward offered employer-sponsored life insurance, Henry Ford shortened the work week to the new 40-hour standard, and paid leave and early EAPs began to become standard.

Add in the Social Security Act in 1935, and the boom of the U.S. corporate economy after the return of the GIs from World War too—and more robust standardization of benefits hit corporate America. At the end of the century, paid parental leave, stock options, and a variety of specialized savings accounts were commonplace. One Fast Company article noted, “In 1996, SHRM [the leading HR association] tracked 60 perks and benefits. In 2018, that number had swelled to over 300.”

All that to say, benefits have certainly boomed in the last decade or two—and they’ve become a critical piece of evaluating a role and company for job seekers. Today, employers ignore thoughtful benefits strategies at their peril.

So, where should employers begin?

Understanding Different Types of Employee Benefits

While there are hundreds of vendors offering unique employee benefits, we recommend you focus the bulk of your time and attention across 6 categories:

  • Health benefits
  • Retirement benefits
  • Financial benefits
  • Work-life balance benefits
  • Wellness benefits
  • Professional development benefits

This is a classic case of the Pareto Principle - 20% of the benefits will make 80% of the difference. If you can dial in these 6 categories, we believe you’ll see the most value for employees—and, in turn, the most ROI for your business.

In this next section, we’ll give you a high-level overview of key benefits to consider and why they’re important to consider in your benefits offering. If you’re a benefits pro—feel free to skim :) And if you’re looking for more specialized or unique benefits ideas, take a flip through our 47 Unique Company Perks ebook!

Health Benefits

Health Insurance Coverage
When an employee or close family member has a major health crisis, not only do you want them to get better (and, coincidentally, back to work), but you don’t want to bankrupt them in the process. Offering health insurance support, while expensive, is a core building block of showing employees you care about them.

Dental and Vision Benefits
While less common than medical insurance coverage, dental and vision can be large expense categories for employees and get even more so when routine care isn’t done to avoid major issues down the line. These programs are often significantly more affordable to employers than medical insurance, are often optional to the employees, and can be a great way to tactically support employees and their families.

Wellness Programs and Initiatives
Call us biased, but wellness initiatives get a bonus mention in health benefits. Not only does supporting physical health reduce health issues, claims, and company health premiums, but employee stress from money worries, mental health challenges, and socio-emotional friction can meaningfully impact employee physical health. Read more about that impact here—and dive deeper into wellness below.

Retirement Benefits

401(k) Plans or 403(b) Plans
Tax-deferred savings? Sign me up. Retirement plans like a 401(k) or 403(b) (for non-profit entities) allow employees to defer compensation tax-free to save for retirement. They’ll still need to pay taxes later when they take the money out of the account, but when that money is invested, it offers years for the power of compound interest money to work its magic. Too many Americans are off-track on retirement planning, in fact, 1 in 4 don’t even have $1,000 saved for retirement. These accounts (and an enticing employer match to contributions), can make a big difference in on-time retirement for employees. 

Pension Plans
Pensions were originally one of the first modern benefits offered—and they increasingly seem to be going out of vogue. A pension typically is paid for by an employer and offers employees a guaranteed income during retirement. With the modern trend of employees working for many employers during their lifetime instead of just one or two—it’s understandable why many businesses are looking to support employee retirement through other strategies. But if you’re lucky enough to be in an industry or business that offers a pension, this is an absolute cornerstone of your benefits offering.

Other Retirement Savings Accounts
The variety of retirement savings vehicles has only increased as of late. SEPs (simplified employee pension plans) are less common today, while IRAs (individual retirement accounts) are popular. IRAs offer tax deductions and deferments until withdrawal. Roth 401(k) and IRAs are also popular—in short, these accounts are funded with after-tax dollars, but grow and can be distributed (with certain limitations) tax-free. The HSA (Health Savings Account) is also worth an honorable mention—which is “triple-tax advantaged” (pre-tax dollars that grow and distribute tax-free—again with certain limitations). IRAs, Roths, and HSAs can all be vehicles worthy of consideration to supplement employee retirement planning. 

Financial Benefits

Stock Options and Equity
Offering employees the chance to own a piece of your company is not only a financial incentive, it can be a powerful productivity driver—tightly aligning the employee’s long-term interest with the company’s. Stock options that vest over a period of service are a common mechanic for this ownership, but other alternative structures exist. Just ask your friendly neighborhood CFO. 

Bonus and Incentive Programs
Outside of standard base compensation, company and personal performance bonuses are a common way to offer financial incentives for high-quality effort and output. Again—many flavors of these programs are possible. Payouts might be tied to sales quotas, revenue attainment, goal attainment, project completion, metric performance, qualitative feedback, or manager/executive discernment. It might be paid quarterly, yearly, ad hoc, or anything in between. My take—consider some sort of variable compensation for all employees to incentivize the behaviors and outcomes you want more of.

Employee Stock Purchase Plans
This is another way to allow employees to own a piece of your company. Often, these plans might offer discounted or otherwise favorable pricing for the purchase of company stock. Again—the more ownership of the company an employee has, the more their financial outcomes are tied to the companies. This is a powerful behavioral motivator and cultivates more ownership behaviors that often can be lacking in less invested (figuratively and literally!) employees.  

Work-Life Balance Benefits

It’s tempting to want employees at their desks, stations, or production lines as much as possible. But not only will ensuring healthy work-life balance lead to happier employees, it will lead to more productive behavior when they’re back at work. Here are a few key policies to consider:

Paid Time Off Policies
Another one of the early benefits offerings, this is a phenomenal way to show employees that you recognize the importance of their personal life and their need for rest and recuperation away from work. Paid time off is typically reserved for salaried employees and comes in many forms. Some companies offer a set number of days, while many companies have explored “unlimited” or “flexible” time off policies. We could write a whole post about the pros and cons of each of these strategies—there’s a lot of nuance! Read up a bit, then thoughtfully consider what makes the most sense for your company. 

Family and Parental Leave
Becoming a parent is a life-altering time in an employee’s life. Displaying compassion for employees during this time and offering time away from work is an invaluable gift that can create lifelong employee loyalty and positive feelings toward your business when done right. While these are certain legal minimum requirements and protections, particularly for maternal leave, many companies choose to go above and beyond these requirements—offering paid time off, paternal parental leave, extended leave, quota adjustments, and more. Increasingly, alternative family leave for adoption, elder care, and bereavement is being recognized and/or legalized. Again—take the law into account, then consider what’s the right fit for your business. 

Flexible Work Arrangements
We’ve made it halfway through this post without mentioning how COVID has impacted benefits—impressive! Needless to say, the lockdowns of 2020 brought remote and flexible work arrangements to the limelight. It’s important to communicate clear expectations around flexible (or inflexible) work to employees as easily as their interview process. Pundits have spent the last 4 years debating the pros and cons of being in-office versus remote—and in many roles and industries, remote work is simply not possible. Align with your executive team around flexible work arrangements, and recognize that for some employees, flexible work can be a life-changing benefit. 

Wellness Benefits

This is our area of expertise, and we work with hundreds of clients on developing effective wellness programs and strategies. We typically think of wellness efforts in four areas:

Financial Wellness
Call us biased, but we’re partial to this one. Money is the #1 employee stressor in the U.S., and offering employee helpful financial software, coaches, and education can go a long way to help employees tackle the biggest worry that keeps them up at night. Successful financial wellness programs reduce debt, 401(k) loan requests, and employee churn while boosting financial confidence and retirement preparedness. Financial stress has a measurable negative impact on employees, but financially stable employees will make a massive difference to your business culture and performance.

Physical Wellness
Proactive physical wellness programs not only boost employee happiness but employee health. By offering fitness memberships, incentives, or perks, employees are more likely to be in better physical shape and see less long-term health costs to your business. 

Mental Wellness
Mental wellness offerings, like access to therapists, meditation app, in-house yoga, and more specifically address the mental health challenges that employees face. Whether these challenges are work-related or personal, giving employees access to the mental care they need is not just a good thing to do—it will make them better employees. 

Social wellness
Helping employees find connection, psychological safety, and camaraderie at work can go a long way toward their happiness, engagement with, and retention at your business. Whether through ERGs (employee resource groups), team outings, birthday celebrations, or other regular opportunities for employees to connect with their peers, anything your business can do to foster human connection will increase your employees' happiness and productivity at work.

Professional Development Benefits

Training and Educational Opportunities
Offering employees the opportunity to learn a new skill on the company dime can be a massive win-win. The employee gains a marketable skill for their career and the company gets a higher trained employee! There are many flavors to these sort of opportunities, from bringing in in-house training to partnerships with specific schools or programs to offering a certain amount of reimbursement dollars for the employee to use as they see fit. Whatever the case, paying for employees to grow their skills is an appreciated and valuable investment as a company.

Career Advancement Programs
Another variety of training program is the career advancement program. Typically, these programs are in-house programs that prepare employees for more advanced career paths, for example management roles or a specific specialization. These programs have the benefit of training and developing existing talent that is already in your organization. This path to grow within the company is appreciated by and motivating employees—and will hopefully keep them top talent within your organization rather than looking for another job elsewhere.

Mentorship and Coaching Initiatives
Lastly, one way to make a difference in employee development is one-on-one mentorship or coaching programs. This is a systematic way of pairing more senior or experienced employees with more junior employees to pass on key behaviors, experiences, and feedback. Not only will this help younger employees prepare them for future roles, but it offers a fresh perspective on their current role while allowing senior leaders to keep a pulse on up-and-coming talent.

Crafting an Effective Employee Benefits Package

Now that we’ve reviewed the six core benefit focus areas—let’s talk optimization. With thousands of configurations for offerings, plans, and benefits strategies, we recommend initially evaluating your benefits offering with the following “ABC” plan—assessing, benchmarking, customizing:

Assessing Employee Needs and Preferences
Want to know what benefits will make the most difference to employees? Ask them! This could come in the form of a survey, qualitative interviews, or other quantitative data about your employee population. For example, you might learn that 20% of employees are millennials looking to have children soon—that might bump paid family leave to a top priority. 

Benchmarking Industry Standards
The backbone of economics is supply and demand—and labor markets are no different. Knowing what benefits offerings your industry competitors or local market offer are an important consideration when attracting the top pool talent in your corner of the world. Younger workers are more closely scrutinizing benefits offerings alongside compensation and culture as they evaluate new companies—it’s important for your benefits strategy to be informed by the benefits at other companies they might consider working at!

Customizing Benefits to Suit Company Culture
If your company P&L is like every P&L I’ve ever seen—you can’t afford ALL the benefits. So in addition to evaluating which benefits can make the most impact on employee attraction, retention, and productivity, consider which benefits share values alignment with your culture. For example, here at Your Money Line, we’re big into financial wellness and preparedness, so we’ve prioritized generous matching of retirement funds. Other companies might be well-suited to certain benefits (like free flights for airlines or free food at a restaurant). Be sure you step back, do an authenticity check, and make sure the values you’re prioritizing align with the values of your company. 

Implementing and Communicating Employee Benefits

Rollout Strategy
Rolling out a new benefit thoughtfully can make a big difference in long-term adoption and employee engagement. Our rule of thumb here is “communicate, communicate, communicate.” Use a variety of distribution channels—ad nauseum—to ensure employees have heard about newly available benefits. This includes email, Slack/Teams, benefits guides, presentations, all -company meetings, team meetings, webinars, flyers, snail mail and more! We already recommend a launch event like a “lunch and learn” to focus employee attention on the new benefit. If you have a more advanced benefits program, you have a benefits portal or wellness incentives to utilize to encourage participation as well. In short—the more you compellingly remind employees about the benefit, the more they’ll sign up to use it. 

Employee Education and Engagement
After rollout, reminding employees about an existing benefit is a great way to trigger reengagement. Again, “lunch and learn” type education events (either live or virtual) can be a stellar way to offer employees insights or skills on a certain topic. We love the format of a monthly thematic event that rotates between different elements of benefits and wellness: one month might be chatting about student loans and how to manage debt, while another month might be the value of meditation and mindfulness. This regular cadence not only offers the benefits leader strategic opportunities to promote benefits, but is a touchpoint of showing employees that you care about their holistic wellbeing. One piece of advice—don’t just make this an hour-long commercial for a benefit. Offer real education and helpful advice; provide value. This will keep employees coming back month after month.

In addition to events, email, Slack/Teams, ongoing webinars, or notifications in a benefits portal can also play similar roles of adding value and educating employees on wellness and benefits-related topics that will remind them of the available benefits that you’ve curated for them.

Regular Evaluation and Adaptation
Once you have a benefits program up and running—it’s time for a check-up. We recommend quarterly check-ins and more formal yearly reviews with each of your benefits vendors to ensure you’re getting the adoption, continued engagement, and outcomes that you’re looking for from each element of your benefits program. If you find that engagement has slowed, you might want to run a “one-off” engagement event or incentive to nudge employees back to utilization. In addition to reviewing each specific program, it’s also valuable to more holistically measure the impact of benefits on your organization. Read on for more…

Measuring the Impact of Employee Benefits

The more you can use data to evaluate the effectiveness of your benefits program, the more you’ll be able to make high-fidelity decisions, and showcase the impact of benefits to more numerically inclined stakeholders, like a CFO or CEO. Here are a few golden sources of data:

Employee Satisfaction Surveys
Do employees like working at your company? Employee satisfaction surveys or eNPS (employee net promoter scores) is a common way to measure—are you employees happy here? You can specifically use these surveys to ask about benefits. What do employees use? What brings them peace, makes a difference, and offers value? Getting qualitative and quantitative feedback from employees is a gold mine for justifying investments in benefits.

Retention and Turnover Rates
One of the key ways to see if your benefits are making a difference is to look at employee retention. To put it simply—if employees are leaving for other roles at a rate that makes your team uncomfortable, you might want to consider additional investments in benefits. If your rate of turnover is falling, that is a sign (correlation, not necessarily causation) that your benefits strategy might be on the right track!

Productivity and Performance Metrics
These metrics are often more nuanced, harder to procure, and vary based on employee population. However—they can be essential for measuring benefits success. Perhaps you’re a large manufacturer with attendance issues, watching attendance rates drop could be a sign of benefits progress. Seeing 401(k) loans drop after implementing a financial wellness program is a likely positive feedback signal. Or for a final example, higher sales attainment from mothers year-over-year might show that a new family leave policy is successful. Again—each of these metrics is unique and has nuance. But the more you can tie benefits to measurable business and employee impact, your job as a benefits champion will get easier and easier.

Legal and Regulatory Considerations

Our lawyers made me add this. Okay, not really—legal and regulatory considerations are a massive part of a benefits leader’s job. Especially with the rise of remote work, following all federal, state, and local laws is more complex than ever. We want to be sure to flag the importance of cross-checking your benefits offerings with trusted and expert counsel. We’re not lawyers—but some key benefit elements to ask your own lawyer about include:

Compliance with Employment Laws
Am I compliant with the law? This is a baseline question to ask your lawyer or other expert about all HR and benefits policies—and you should remember that different locales will have different standards.

Tax Implications
What are the tax implications to the business and the employee? Not only do you want to protect your business from unexpected tax consequences, but you can show your employees an additional level of care by considering the potential tax consequences to them of your benefits offerings—and flagging risks or nuances for them to consider as they arise.

Reporting and Documentation Requirements
What reporting burden is required of us? Offering a new benefit can be a massive boon to employee health and business outcomes, but make sure you ask about any downstream requirements for reporting to stakeholders or government entities. Not only do you want to avoid legal missteps, but it could put a non-trivial amount of work on your HR team—or you! It’s best to get clarity upfront so you know what you’re walking into.

If you skimmed this section, that’s okay. TL;DR? Some benefits can be complex, involving a lawyer or expert is valuable.

Summary: Maximizing the Value of Employee Benefits

Key Takeaways

We hope you’ve found value from this overview of how to optimize your employee benefits. We’ve talked about the history of benefits, discussed the 6 core benefits areas (health, retirement, financial, work-life balance, wellness, and professional development), and explored evaluation, implementation, & ROI. If you use this cycle regularly, you’ll see continuous benefits improvement that pay dividends—qualitatively in employee happiness, and quantitatively in your business’ bottom line.

Conclusion: An Ode to the Importance of Continuous Improvement

Like any good high school writer—let’s go back to our original definition of an employee benefit: “any perk, support, or non-wage compensation that an employer offers systemically to their employees.”

While some major categories are increasingly becoming table stakes for a top-tier employer, we’re being a bit broad in this definition because anything can be a benefit. We hope that feels inspiring to you. The opportunity to benefit the lives of your employees aren’t just limited to the standard checklist of “common” benefits. We’re limited only to our creativity to think of things that could make the lives of our employees better.

So, while we hope you do some thoughtful reflection, analysis, and investment every year in the 6 key areas of benefits we reviewed above—we also hope you’ll offer something creative and unique to your business. Your culture and employee population are literally one of a kind. And when you put your best foot forward to take care of employees, more often than not, they’ll do the same for you and your business.