Only 41% of organizations believe their well-being programs are effective, indicating a mismatch between the offered benefits and what employees actually want.
This means companies are still under pressure to offer competitive benefits to keep their teams motivated and attract/retain top talent.
But how do you know if your benefits package measures up?
Benefits benchmarking lets you leverage data to compare your perks against industry standards to identify gaps, optimize spending, and ensure your package aligns with employee expectations.
In this article, we’ll cover how to conduct benefits benchmarking, including which perks to focus on and essential metrics to track.
What is Benefits Benchmarking?
Let's start with the basics: benchmarking is really just comparing your products, services, or processes against the “gold standard.” The goal is to find gaps that you should address to make your product feel like a duplicate of the standard or exceed it.
Benefits benchmarking works the same way by comparing your perks to what’s standard in your industry. However, while you can benchmark products based on features such as packaging and physical appearance, benefits benchmarking should be systematic and data-driven to support decision-making.
Why Employee Benefits Benchmarking is Essential Today
Benefits benchmarking gets thrown around in HR circles, but here’s why it matters for your team. It supports your company’s strategic goals directly by informing you which benefits to add or refine to keep your workforce motivated.
Other benefits of benchmarking include:
- Stay Competitive: Benefits benchmarking helps you identify and address gaps in your packages to keep up with the competition. Alternatively, you might find that your benefits package is superior to your competitors. In this case, you can keep refining it to maintain the edge.
- Boost Employee Engagement: Benchmarking helps you determine whether your benefits align with industry norms and, by extension, employee expectations. Offering above-industry employee benefits helps keep your team motivated and happy, which endears them to your company.
- Effective Cost Management: Employee benefits costs increase almost annually or every other year. Benefits benchmarking helps you identify which perks offer the most value for employees so you can prioritize them. This enables you to optimize your benefits budget without compromising on employee well-being.
- Evolve to Meet Changing Employee Expectations: Today’s employees expect their employers to support their work-life balance. Today’s teams value flexibility and balance — benefits like flexible schedules make a real difference. Benefits benchmarking helps you identify benefits trends quickly, so you can start planning them before they become must-haves.
- Boost Your Brand Image: Benefits benchmarking helps you position your company as the dream workplace for top talent. Additionally, a strong employer brand creates a positive perception of your company to the public, which helps attract customers.
Key Benefit Categories to Benchmark
Based on the definition of benefits benchmarking and its benefits, you might be curious about which benefit categories to evaluate.
You should focus on employee benefits that have the most impact on your team’s engagement and performance:
- Health Insurance: Medical cost coverage remains the cornerstone of any well-planned employee benefits package. In fact, a recent survey found that 88% of employees rated health-related benefits as the most crucial perk their employer can offer. Comparing your health benefits against industry standards helps you ensure you remain competitive and attract top talent.
- Retirement Savings Plans: Evaluate your retirement benefits, such as 401(k), superannuation, or pension plans, prioritizing metrics like employer match percentage, vesting schedules, and plan participation rates. Next, check whether your retirement benefits meet the federal and statutory mandated minimums. Additionally, check how your benefits stack up against those offered by other companies in your industry.
- Paid Time Off: Benchmarking your PTO policy can be confusing because you wonder what else to consider beyond the number of allowed days. However, PTO structure and flexibility significantly influence utilization rate. For example, employees want a variety of PTO options, including annual leave days, paid holidays, sick leave, and parental or compassionate leave.
- Perks and Wellness Programs: Here’s where the 41% we mentioned earlier ties into your wellness benefits strategy. Unlike traditional benefits, corporate wellness programs have become a must-have to address the modern challenges of the workforce, particularly stress, burnout, and social isolation. As such, not having a wellness program likely means your benefits package will perform dismally compared to industry standards.
Additionally, your benefits benchmarking should cover the offered wellness incentive programs and how they impact employee engagement and benefits utilization.
Now that we’ve discussed which benefits categories to benchmark, you also need to determine the metrics to analyze to get a clear picture of your perks and how they impact employee engagement.
Critical Metrics for Employee Benefits Analysis
The following metrics should help you evaluate your employee benefits’ competitiveness:
- Overall Benefits Costs: Benchmark the total cost of providing employee benefits to your team against the industry standards. The cost should account for health insurance, retirement plans, paid leave, and wellness programs. The goal should be to ensure you spend competitively and deliver premium employee benefits without hurting your cash flow.
- Employee Contribution Rates: Calculate how much employees pay toward their benefits as a percentage or fraction of your contributions as the employer, and compare the values to other companies in your sector. Finding the right balance makes employees feel that the cost-sharing is fair, while also keeping the organization’s financial burden in check.
- Utilization Rates: This metric tracks how often employees use available benefits, such as health coverage, EAP services, tuition assistance, or wellness programs. High utilization rates compared to industry benchmarks likely mean your employee benefits are personalized and relevant to your team’s needs, so you don’t need to increase your benefits budget.
- Employee Engagement and Retention: Benefits influence how your employees feel about their job and how long they stay at your company. Use pulse and annual surveys to measure employee engagement and compare it to the rates highlighted in industry reports.
- Impact of Benefits on Business Performance: Track metrics that tie your employee benefits to company success, and then compare them to industry benchmarks. For example, premium benefits influence how employees interact with clients, increasing customer satisfaction. You can then benchmark your customer experience scores against those reported by other companies in your industry or location.
Where to Source Reliable Benefits Benchmarking Data
You know the benefits categories to benchmark and the metrics to measure, but where will you get the data? Remember, it’s not only about comparing numbers. The data you use should be valid so that the conclusions and recommendations you draw are reliable.
If you don’t know where to start, we have compiled a list of the best benefits benchmarking data sources:
- Job Websites: Use reputable websites like Salary.com and Indeed.com to track changes in competitive employee compensation across roles, industries, and locations.
- Industry-Specific Reports: Providers like Mercer (Total Remuneration Survey) and Aon (McLagan Financial Services Survey) conduct regular surveys and publish reports on employee engagement and benefits trends. Medical companies can also rely on the annual Medical Group Management Association reports for insights into improving employee engagement in healthcare.
- Government Labor Databases: The U.S. Bureau of Labor Statistics (BLS) publishes publicly available data on wages, benefits prevalence, and employment standards, which you can use for benefits benchmarking and determine whether your packages meet the minimum threshold.
- Proprietary Survey Data: Some consulting firms provide subscription-based proprietary benefits data that you can analyze to see how your employee benefits compare to industry standards. The primary benefit of this data source is that providers collect data continuously rather than annually, allowing you to use the insights to refine your benefits incrementally.
- Professional Networks: You can join associations such as SHRM, CIPD, or AHRI to connect with other managers and HR professionals for qualitative perspectives on emerging employee benefits trends, such as corporate health and wellness programs, or on thoughtful wellness gifts to drive employee engagement.
How to Conduct Effective Benefits Benchmarking
We have laid the groundwork for understanding benefits benchmarking and how it helps your business offer competitive perks to attract and retain top talent.
Next, we’ll provide an in-depth guide on how to undertake the benefits benchmarking process, ensuring your findings are relevant to your sector and help you align your employee benefits with company goals.
Let’s take a look:
1. Set Clear Objectives
Define what you hope to achieve with the benefits benchmarking. For example, you might be looking for ways to optimize your benefits costs, attract top talent, or improve cost efficiency.
Outlining clear goals helps you limit benchmarking to the core benefit components.
2. Partner with a Benefits Broker
While this step is optional, we recommend working with a trusted benefits broker to help you access up-to-date market data.
Some benefits brokers conduct independent research and prepare reports, which would make the benefits benchmarking cost-efficient. Alternatively, they might provide you with anonymized data from other clients they partner with.
Lastly, SoHookd partners with benefits brokers to help you address the identified gaps so your perks align with employee needs.
3. Outline the Benefit Categories to Benchmark
Determine which benefits to benchmark based on their impact on employee engagement and performance. Additionally, segmenting the benefits sets the stage for an organized analysis and helps identify which core benefits need the most work to match industry standards.
The most essential employee benefits to benchmark include health insurance, retirement plans, flexible work options, and health and wellness programs.
4. Document your Current Benefits
Create a detailed inventory of your employee benefits, including eligibility criteria, employee contributions, and coverage levels. Also, conduct employee benefits surveys to assess utilization rates and your team’s perception of the perks.
This snapshot of your employee benefits will serve as a baseline for comparison, helping you identify opportunities and gaps.
5. Source External Data
Identify credible data sources, such as salary and benefits surveys, industry-specific reports, and government labor databases, to benchmark your current benefits against. Combine several data sources to get a more realistic view of how your employee benefits compare with your competitors'.
Additionally, ensure the data is in the proper context, including companies of the same size (number of employees and annual revenue) or in the same sector.
6. Find Gaps and Opportunities
Compare and contrast your employee benefits against the benchmarking data to identify where your perks fall short or exceed the industry standards. For example, you might notice increased emphasis on flexible work schedules and hybrid working to support employees’ work-life balance.
On the other hand, benchmarking might show that most companies (including yours) don’t offer advanced health benefits, such as dental insurance, which is an opportunity you can exploit to differentiate your brand.
7. Address the Most Urgent Areas
Use the insights from benefits benchmarking to address priority gaps that would have a significant impact on your team. For example, suppose you notice that companies lack systems or resources to help employees manage stress and burnout. This should prompt you to consider introducing corporate mental wellness programs like guided meditation and expert-led counseling services to support members dealing with stress, isolation, and anxiety.
Benefits benchmarking isn’t something you just do to check off your list. It should support your strategic decisions, especially in maintaining team motivation to enhance company performance.
At SoHookd, we have nearly a decade of experience helping companies address wellness gaps by introducing benefits that align with employee preferences. Additionally, we offer flexible wellness product packages that you can customize and launch within two weeks. Our wellness programs can run standalone or complement existing programs. Lastly, our benefits packages are procurement-friendly, with no contracts or PEPM fees.
Schedule a one-on-one call today to discover how we can help you address the wellness gaps in your employee benefits packages.
Common Benefits Benchmarking Mistakes to Avoid
The step-by-step process we’ve outlined above should help you conduct a comprehensive benefits benchmarking. However, you could make mistakes that hurt the reliability of your findings.
Watch out for these pitfalls when comparing your employee benefits to industry standards:
- Focusing Solely on Cost: We all agree that cost is an essential factor during benefits benchmarking, but it shouldn’t be your only focus, as you may miss out on other improvement areas. Additionally, a low-cost benefits package doesn’t necessarily mean you are using your budget effectively. Instead, find ways to deliver premium employee benefits without increasing costs.
- Comparing "apples to oranges": Suppose you are a small business with fewer than 50 employees. You shouldn’t be benchmarking your employee benefits against a Fortune 500 company just because you are in the same industry. Benchmark against peers that share similar workforce demographics.
- Failing to Provide Context: Raw data without context can be misleading and not serve its intended purpose of supporting decision-making. For example, higher health insurance costs per employee than market rates shouldn’t be alarming if you have an ageing workforce. As such, interpret benchmarking results in the context of your company’s demographics and strategic goals.
- Not Benchmarking Regularly: Benchmarking your benefits package after 5 years is counterproductive, as benefits trends shift quickly. Your HR team should review your benefits annually, refine them to align with evolving employee expectations, and adjust them to address economic pressures.
- Using One Data Source: Benchmarking your benefits based on a single survey can skew your understanding of market trends. Combine multiple, credible data sources to get a more realistic picture of the employee benefits landscape.
Frequently Asked Questions (FAQs)
Let’s wrap up this guide by addressing the most common questions about benefits benchmarking:
How Often Should Benefits Benchmarking Be Reviewed?
There’s no specific timeline for how often benefits benchmarking should be reviewed.
The rule of thumb is to review the benefits benchmarks annually to refine your offerings and meet evolving employee needs.
What Tools Are Available for Tracking Competitive Benefit Trends?
Use the following tools to help you track competitive benefits trends:
- Salary.com: To help you benchmark salaries and evaluate benefits against market data.
- Mercer BenefitsMonitor: Provides data on market prevalence, legislative updates, and key survey findings to support decision-making.
- Benefit SpecSelect by AON: Enables you to design your employee benefits package and benchmark it against other companies’ offerings.
What is the Difference Between Benchmarking And Market Research?
The main difference between benchmarking and market research is that the former compares your internal standards against industry best practices to identify gaps and opportunities to give your company an edge.
On the other hand, market research is the broader process of gathering and analyzing data to understand the external environment, including customer behavior, needs, and market trends.
What KPIs Should Be Monitored After Implementing Benchmark Improvements?
After implementing benchmark improvements, you should monitor KPIs that show the impact of the refined employee benefits on engagement and company performance.
Essential KPIs to track include:
- Benefits enrollment rates
- Benefit utilization rate
- Employee net promoter scores
- Cost-efficiency metrics: cost per employee and claims ratio
- Talent attraction and retention
Conclusion
Benefits benchmarking should be an ongoing process to help you keep your team motivated and your company competitive in the job market. However, remember, the benchmarking data should only inform your strategic decisions, not dictate them. Additionally, benchmarking should be in the proper context to make the insights applicable to your company.
However, even as you refine your benefits strategy, you should consider partnering with a benefits broker to help you evolve your offerings to match your team’s needs and expectations.
At SoHookd, we have nearly 10 years of experience helping companies address wellness gaps in their employee benefits. Our wellness packages are budget-friendly with no minimum fees or complex contracts. Additionally, employees can access wellness benefits on any device, boosting enrollment and utilization rates.
Schedule a live demo to learn more about our wellness benefits packages.
