Cost-Saving Strategies For Employee Benefits
Second only to payroll, a company’s benefits package is the most expensive item on the budget. Any cost-saving measures that can be applied to benefits can, therefore, have a significant impact on your bottom-line.
However, approaching the benefits package with only cost-savings in mind can be a disadvantage for your organisation. Benefits are one of the primary means that businesses use to attract top talent. A cost-saving strategy that may be saving you money on the face of it may mean you lose out on the skilled, experienced and qualified employees. At the same time, sacrificing that all-important bottom-line for the ability to attract and retain the best is not always plausible.
It’s all about achieving that perfect balance between offering an attractive benefits package while keeping the budget trimmed.
To find out how to achieve this balance, we asked the benefits experts – our employees – what a company can do to save money on their benefits package and found the following:
1. Re-consider Medical Insurance Plan Designs And The Cover They Offer
There is a wide variety of medical coverage option available that you can offer your employees that will attract and retain the best employees. Simply opting for the most expensive plan is however not necessary and can be costly.
Restructuring the different plan options available can ensure that your employees are not over-insured while offering them competitive benefits. Opting for health insurance through a local PEO (Professional Employer Organisation provides employers with access to a larger pool of plan designs from the top carriers to choose from. This is especially beneficial for small businesses or groups who would normally be subject to a community rating.
2. Reconsider Employer Contributions
Employers offering medical insurance to their employees are required by law to pay a minimum contribution to their premiums. This is usually 50% of employee-only cover relevant to the lowest cost plan on offer.
Many employers choose to contribute more than this minimum to attract and retain talent. However, percentage-based contributions can become costly. The G&A Benefits Team suggest structuring benefits according to a set dollar amount rather than applying the equal contribution percentage strategy to every plan that is offered to employees. This way, the company will save money on contributions for employees who choose to enrol on the more expensive plans available to them. As long as the dollar amount meets the required minimum for employer contributions percentage, this is a fair and effective benefits cost-saving measure. Every employee receives instead of the same contribution to their medical plan no matter the plan they choose.
Business analysts at Credit Capital say, “no matter what plans your employees choose, the cost-to-company remains the same when you choose a set dollar contribution strategy instead of a percentage. This not only lowers medical contributions costs for the company but also makes the cost associated with the benefit far more predictable.”
3. Educate Employees About The Benefits Offering
It isn’t only employers who find benefits complicated and confusing. According to our Collective Health Poll, over 60% of respondents said that they find the benefits options confusing and that they don’t understand them.
Also, employees often feel pressured or rushed into deciding within the enrollment period which leads to them simply selecting an option that they are familiar and comfortable with. Offering multiple meetings to discuss different plan options that are available in detail throughout the year will keep employees informed and thinking about alternative plan options.
Taking the time to educate your employees on the different benefit options that are available to them will prevent them from choosing the wrong option and then complaining about it at a later date. It will also save your company money in the long run.
4. Tax Reductions
Salary sacrifice strategies, where employees are willing to forego a portion of their salary instead of non-cash benefits can provide huge cost-savings for an employer. These types of benefits often include gym memberships, travel cards, car schemes, childcare and so on.
This also has tax benefits for employers and employees. The lower their salary, the less you need to contribute towards taxes and national insurance on their behalf. You should, however, be aware that the government has introduced a tax on some benefits such as company cars and mobile phone packages. Make sure you choose salary sacrifice schemes that are tax-free to save costs for your company.
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