FIVE WAYS TO BOOST EMPLOYEE BENEFITS ROI

Each year, employers commit to spend a certain amount of money on employee benefits. This
investment covers involuntary benefits such as unemployment insurance and family and
medical leave. It also typically covers voluntary benefits such as health care and paid time off.
While this yearly benefits budget may be fixed, the value reaped from the investment is not.
Analyzing data from APQC’s Open Standards Benchmarking® on rewarding and retaining
employees, reveals the following approaches for maximizing return on employee benefits.

1. Review the benefits package at least once a year.

2. Differentiate the benefits package for different segments of the workforce.
3. Give employees more choice in how their individual benefits dollars are spent.
4. Assist employees in understanding all of their benefit options.
5. Communicate the total value of the benefits package to employees.

CONDUCT A YEARLY REV IEW

Evaluate benefits package components at least yearly, more frequently if business conditions
change. Figure 1 shows that most organizations review benefits with this frequency.

Frequency with Which Organization Reviews Benefits Package

Once per year 52.1%

As required by market
22.1%
demands/conditions/external events

Ad hoc 11.0%

More than once per year 5.5%

Other 9.2%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

N=163

Figure 1

Page 1 of 5
K04004 ©2016 APQC. ALL RIGHTS RESERVED
 How the benefits review is conducted is critical to maximizing value. The review should take into
account both the internal and external factors that can influence benefits requirements and
costs. From an internal perspective, organizations need to examine whether the cost and mix of
benefits offered still fits with the benefits budget, HR strategy, and workforce composition.
Specific factors to look at include:

 employee preferences as expressed in engagement surveys and focus groups,

 employee benefits usage data from the previous year,
 changes in workforce demographics, and
 new business objectives.

From an external perspective, organizations should consider legal compliance, market

competitiveness, and financial viability. Specific external factors to look at include:

 changes in the state and federal laws that govern employee benefits,
 the benefits packages offered by other employers, and
 changes in benefits price tags and benefits provider offerings.

DIFFERENTIATE BY WOR KFORCE SEGMENT

A second strategy for maximizing the benefits budget is to vary benefit package components
and/or dollar allotments by workforce segment. Employers using this tactic meet the unique
preferences of different groups of workers while also addressing the organization’s need to
drive different types of behaviors from different types of workers.

For example, the annual benefits review may reveal that tenured employees want more benefits
dollars and choices to help them meet child care and elder care needs. At the same time, the
employer wants to incentivize tenured employees, who it has invested years in training, to stay.
Accordingly, the organization decides to increase benefits based on seniority and years of
service. In fact, it is a common practice for organizations to increase benefits based on years of
service. Three quarters of all organizations differentiate benefits based on seniority while
roughly half differentiate benefits based on tenure (Figure 2).

Page 2 of 5
K04004 ©2016 APQC. ALL RIGHTS RESERVED
 Percentage of Organizations Differentiating Benefits Based on Factor

Figure 2

GIVE EMPLOYEES MORE CHOICE

A third way to reap the full value from benefits spending is to let employees do the
differentiating. Give each employee a set number of benefit dollars to spend on a menu of
benefits options. Employers may offer the same or different allowances and/or menus to
different groups of workers. By allowing employees to choose their benefits, employers
maximize the impact that a set benefits budget can have on employee engagement and
retention. Despite these merits, slightly fewer than half of organizations in APQC’s database
offer employees this kind of benefits choice, making this strategy an opportunity for many
organizations (Figure 3).

Page 3 of 5
K04004 ©2016 APQC. ALL RIGHTS RESERVED
 Percentage of Organizations Allowing Employees to Tailor Benefits

48.4% Yes

51.6% No

N=217

Figure 3

ASSIST EMPLOYEES IN UNDERSTANDING OPTIONS

The fourth way to boost employee benefits ROI is to communicate clearly and often with
employees about all of the benefits that the organization offers. For each benefit, explain why it
might be useful to an employee and detail how an employee would go about using that benefit.
Share this information with employees in a variety of ways. Offer an online benefits portal and a
live benefits help desk. Provide video communications as well as communications that can be
easily accessed via mobile devices. Also educate managers to direct employees to these
different communications and to provide basic support when employees have benefits
questions.

In addition, it is important to extend benefits communication campaigns beyond new hire

onboarding and the annual enrollment period. Consider monthly benefits communications
campaigns. Also valuable is offering a “people like me” campaign that shows how other
employees, similar in terms of demographic characteristics such as age, national origin, or
gender, have accessed and reaped value from different benefits options. Share this information
in many formats—from email to mobile to video.

Page 4 of 5
K04004 ©2016 APQC. ALL RIGHTS RESERVED
 COMMUNICATE VALUE OF BENEFITS PACKAGE
Help employees fully appreciate the value of the benefits package especially as it compares to
the packages offered by other employers. If your organization offers an above-market benefits
package, consider sharing this information with employees. For retention purposes, it is
important that employees know that an offer of a higher salary elsewhere does not necessarily
mean they will receive a better total rewards package elsewhere.

To communicate the value of your organization’s benefits package, provide employees with
yearly total rewards statements. These are personalized documents that outline the value of all
aspects of employment—from compensation to benefits to perks. If the value of any benefit is
above market, or if any benefit offerings are unique to your organization, consider sharing this
information on the total rewards statement.

CONCLUSION
Rising health care costs and slow economic growth have most employers working to contain
benefits spending. The five strategies presented in this article offer alternatives to across-the-
board cuts to benefits budgets and/or benefits package components. By more effectively
allocating benefits dollars, employers can have the same or greater impact on attraction,
engagement, and retention, but for the same or less expense.

ABOUT APQC
APQC helps organizations work smarter, faster, and with greater confidence. It is the world’s
foremost authority in benchmarking, best practices, process and performance improvement,
and knowledge management. APQC’s unique structure as a member-based nonprofit makes it a
differentiator in the marketplace. APQC partners with more than 500 member organizations
worldwide in all industries. With more than 40 years of experience, APQC remains the world’s
leader in transforming organizations. Visit us at www.apqc.org, and learn how you can make
best practices your practices.

Page 5 of 5
K04004 ©2016 APQC. ALL RIGHTS RESERVED