5 Reasons Employee Benefit Packages Succeed

Employers pour a lot of resources into their employee benefit packages – often going above and beyond legal requirements to offer expansive options. Does all this added time and expense pay off? The answer is YES, but only if you’ve employers carefully structure their plans to meet employee needs while achieving organizational goals. Below are some key considerations.

What Does It Mean for an Employee Benefit Package to Succeed?

An employee benefits package is successful if it meets the employer’s intended goals, such as:

• Enhancing employee well-being and productivity, while reducing absenteeism. Each employee benefit is designed to enhance well-being in some way. Some benefits (such as health plans) support mental and physical health. Others (such as retirement plans, life insurance, and disability insurance) support financial well-being. When employees are less stressed about their physical, mental and financial health, they tend to be more productive and present in the workplace.
• Supporting recruitment and retention. Many employers utilize employee benefits as part of their talent strategy. In fact, Indeed Hiring Lab found that 59% of job postings in 2024 advertised at least one employee benefit, up from 40% in 2020. A better benefits package helps employers compete for the best workers.
• Controlling costs. The BLS says private industry employers spent an average of $13.15 per hour on benefits, which accounted for 29.6% of total compensation. Whereas benefits are often a significant cost, a good benefits package is also a good investment that should help control overall costs. For one thing, increasing benefits is often more cost effective than increasing salary or wages, due to the tax advantages. Furthermore, if the benefits package achieves the other two goals – supporting recruitment and retention and boosting employee well-being – employers may also save money on reduced turnover and improved employee engagement and productivity.

5 Key Factors That Make Employee Benefit Packages Successful

There are five reasons some employee benefit packages succeed whereas others do not.

1. The benefits align with the needs of the workers.

Imagine an employer provides health insurance but the deductibles and copays are so high that employees can’t afford to use their coverage and end up delaying care. Another employer provides gym memberships to all its employees, but most of the employees now work from home and can’t get to the gym due to childcare responsibilities. Yet another employer offers a generous 401(k) matching program, but the workers are focused on paying off student loans and aren’t ready to think about retirement planning.

To be successful, employee benefits need to address the concerns of their workers. If there’s a mismatch between the benefits offered and the needs of the employees, participation rates are likely to be low. This means employers won’t realize the desired impact on employee engagement, well-being, and retention.

How should employers position their benefits for success? Use focus groups, surveys, and open communication to understand the needs of your workers, and then structure your employee benefit packages to meet common needs.

2. The benefits provide flexibility.

A worker who is young, single, and healthy may want a high-deductible health plan with a low premium, whereas a worker with a family and health issues may prefer a health plan with a higher premium but lower out-of-pocket costs. Some employees may need life insurance and disability insurance, whereas other employees may feel that the cost isn’t worthwhile. When employees are able to customize their benefits packages, they can select the options that fit their individual needs.

How should employers position their benefits for success? Offering two or three health plan options may make more sense than only providing a single option. Likewise, employers should let workers decide whether they want to use 401(k) matching for retirement savings or student loan payments, something that is possible thanks to new IRS rules. Offering voluntary benefits is another simple and cost-effective way to create a highly customized employee benefits package.

3. Employees receive the education they need to make the most of their benefits.

According to PSCA, 25% of workers say they feel “a little” or “not at all” educated about their employee benefits. Among Gen Z workers, this jumps to 42%.

Benefits are often confusing, and busy employees often don’t make time to educate themselves. Unfortunately, this may lead to bad outcomes, since workers who don’t understand their benefits may make poor enrollment decisions or fail to use the benefits available to them. For example, an employee who doesn’t understand how deductibles work may end up selecting a health plan that doesn’t fit his needs, which could lead to dissatisfaction.

How should employers position their benefits for success? Traditional benefits documents tend to be dense, meaning employees may not look at them. To help workers understand their benefits, employers should provide education through meetings, interactive tutorials, short text messages, one-on-one meetings, and easy-to-understand graphics.

4. Benefit communication takes place year round.

Imagine an employer adds additional telehealth benefits that include remote counseling and 24/7 appointments with nurses. However, the employer never mentions these benefits outside of open enrollment, so employees forget these options are now available. The employer sees that utilization is low and considers scrapping the benefit. Another employer provides the same benefits but also issues reminders throughout the year. Utilization is high, resulting in employees who are very satisfied with their benefits.

Employee benefits tend to receive a lot of attention during open enrollment, but communication and education tend to decline throughout the rest of the year. This may lead to low utilization rates as workers forget about the benefits available to them.

How should employers position their benefits for success? Employers should encourage benefits utilization by reminding workers of the benefits available to them. This may include timely reminders about things like FSA deadlines and annual flu shots as well as regular reminders about telehealth benefits, health screenings, prescription delivery options, and other perks that employees may otherwise forget about over the course of the year.

5. The benefits package adapts to changing pressures.

The International Foundation of Employee Benefit Plans says 42% of employers offered fertility and adoption benefits in 2024, up from 30% in 2020. As these benefits become more common, more job seekers will look for these options – and more employers should consider offering coverage to compete for top talent.

Worker needs and expectations tend to change, as do the regulations governing employee benefits. No matter how great your employee benefits package is now, it will need to change over time to keep up with new trends and laws.

How should employers position their benefits for success? Employers will ensure their employee benefits succeed year after year by continually reassessing their programs and making updates and by working with an employee benefits broker that helps them stay on top of social and regulatory trends.

Is Your Employee Benefits Package Helping You Achieve Your Goals?

Altura Benefits can help you create an employee benefits package that meets your company’s goals. Contact us today to see how we can optimize your employee benefits package!