It is common for employers to offer at least some benefits to their workers. In fact, unless you only have a handful of employees, you may offer several benefits to your employees. This is a part of the employees’ total compensation package. It can be a critical component related to talent recruitment, retention, motivation and more. The most common name for what you offer your staff members is the average cost of benefits per employee.
However, you may be wondering more on what is the average cost of benefits per employee. You may also be thinking what you can do to decrease your overhead in this area without experiencing negative results. Let’s find out below.
What Is the Average Cost of Benefits per Employee?
Before you analyze real data about the average cost of benefits per employee, it is important to gain a thorough understanding regarding what this calculation is. To determine your average cost of benefits per employee, you must tally a total of all of the benefits costs your company pays per year company-wide. This includes:
- Insurance premiums;
- Employer-matching retirement account contributions;
- On-site exercise facility and more.
After you calculate this total, divide it by the total number of employees you had on average throughout the year. This is your average cost of benefits per employee.
Who Needs to Use the Average Cost of Benefits per Employee?
All businesses need to be aware of their average cost of benefits per employee. After all, if your employees feel as though their benefits package is less than what it may be elsewhere, they may be more inclined to start looking for another job. Your churn rate would skyrocket, and your productivity may tumble.
On the other hand, if you are paying far more for the average cost of benefits per employee than others in your industry, you may be able to cut back without experiencing too many negative effects. In some cases, you can simply adjust how you allocate your expenditures in this area so that you use the funds more strategically.
How Much Is Usually Spent on Employee Benefits?
- With this in mind, you want to know how your business stacks up in the area of average cost of benefits per employee. On average, the typical business offered an additional 30 percent in compensation to each full-time employee.
- There are variations to this based on which sector of the economy you are in as well as which region of the country you work in.
- However, you can use this ballpark figure to determine if you need to cut back on benefits spending. You can also make adjustments to your benefits package in other ways.
5 Ways to Reduce the Average Cost of Benefits Per Employee
1. Eliminate Unpopular Benefits
If your business offers a substantial number of benefits, there is a good chance that some of your benefits are more popular than others. In fact, some may only rarely be used.
For example, if you have a Pilates instructor come into your on-site gym every Wednesday afternoon, there is a good chance that this may not be money well-spent. Focus on participation and interest in benefits. Then, survey your employees to determine benefits that they do not plan to continue using in the future.
2. Shop Around for Better Rates
If you want to reduce the average cost of benefits per employee in your business, it is wise to shop around for better rates for the benefits you plan to keep in place. Health insurance is one of the most significant benefits that you may offer, and rates vary substantially. Ensure that you invest in a policy that is truly beneficial to your employees. Remember that your employees may be just as dissatisfied with a poor plan as they would be if you offered them no coverage at all.
After you identify the best options available, then focus your attention on shopping for the best rates. Another way to save money is by choosing a better retirement plan administrator with lower fees.
3. Choose Benefits Your Team Actually Wants
Each workplace and team are unique, so there is not a catch-all answer to the question of which benefits are most popular. Brainstorm benefits ideas that your team may want. For example, if many of your employees are young parents, an in-office daycare center can be truly advantageous. This benefit may be a veritable waste of money if your workers are mostly older adults.
Remember that some benefits, such as a casual work environment or flex time, may not cost your company at all and could dramatically increase worker satisfaction.
4. Take Advantage of Technology
There is a cost which comes with managing your benefits as well. Technology is available to improve your costs related to benefits management. For example, some software programs may facilitate enrollment in different benefits, adjustments to benefits and more.
If you are not currently using technology in this beneficial and cost-effective way, you may be spending more money than necessary managing your company’s benefits packages.
5. Use Tax Advantages
The benefits that you offer to your employees may be tax deductible in different ways. In order to develop the most cost-effective benefits package available, it is important that you understand how the deductions and credits work in your favor.
You can speak with your accountant today about tax benefits related to your compensation plan for employees. Your accountant may be able to improve your figure for the average cost of benefits per employee. They can do this by helping you to maximize savings on your corporate taxes each year.
To Sum Them Up
The average cost of benefits per employee that your company is paying may seem high. But with a closer look, it may be on average with what other companies in your industry and area are paying. Even so, you can see that there may be several steps that you can take to reduce your expenses in this area. This way, you also generate a great return.
Analyze these tips carefully to determine how you can best use them strategically to lower your overhead and boost profitability. Then, leave us a comment and share your thoughts!