When you first developed your benefits package, it might have been impressive. Still, without proper benchmarking, you have no way of knowing how well your offerings stack up against the competition in the current market. If your competitors are actively recruiting, it means you could lose talented employees who want to pursue better opportunities.
Benchmarking your benefits against industry standards provides concrete data to make more informed decisions about your offering. For example, it can identify gaps and opportunities, and justify any budget requests you need to make to leadership. Best of all, it can help you avoid overspending in certain areas or falling short in others. Here’s how to approach benchmarking effectively.
1. Understand What Benefits Benchmarking Actually Measures
Benefits benchmarking compares your company’s offerings to those of similar organizations in your industry, region, and size category. It looks at a broad range of offerings, including medical insurance, dental coverage, vision, retirement, paid time off, and wellness programs. Supplemental benefits such as life insurance and disability coverage will also be considered.
However, benchmarking takes many factors into account. It’s not just a straight dollar-to-dollar comparison. Proper benchmarking will tell you whether your strategy matches your retention and acquisition objectives. For each company, the approach may differ; some want to offer generous health coverage, while others believe flexible work arrangements are the best way forward.
2. Identify the Right Comparison Groups for Your Business
Once you understand what benchmarking can offer, take some time to define your peer group. After all, you’re not going to gain any valuable insights from comparing your 50-person startup to a Fortune 500 company. How can you make sure you’re looking in the right place? Focus on organizations that are competing for the same talent pool as your business.
Some factors to keep in mind when selecting comparable are the company’s size (workforce), geographic location, industry sector, and revenue range. Regional cost of living matters, and so does your local labor market.
If you don’t know where to begin, many employee benefits consulting firms will work with you to identify the best peer groups to use for benchmarking. These professionals maintain databases that make these comparisons more meaningful and less time-consuming.
3. Gather Accurate Data From Reliable Sources
You won’t get good results from benchmarking if you don’t start with high-quality data. There are several reputable sources you can turn to for this important step. The Bureau of Labor Statistics publishes complete data on benefits prevalence and costs, while industry associations often conduct salary and benefits surveys among their members.
Professional employer organizations and benefits brokers maintain proprietary databases that show current market rates, and some businesses take part in compensation surveys through their HR networks or industry groups.
Avoid relying on a single source for this effort; it is best to cross-reference multiple data points to obtain a more thorough picture. It is also helpful to factor in recent trends, as publicly available data often lags current market conditions by several months.
4. Analyze Your Current Benefits Package Component-by- Component
Benchmarking is a big task, so it is prudent to break down your benefits into specific categories and evaluate each one separately. For health insurance, for example, you can look at premium contributions, deductibles, out-of-pocket maximums, and network coverage. Consider how much employees are paying versus what you’re covering.
When it comes to retirement plans, consider your matching formula and vesting schedule. Many businesses compare their PTO policies by total days, but you should also account for how time accrues and whether sick leave is treated separately from vacation time.
This approach will show you the areas where you’re competitive and those where you are falling short. For example, you might find that your health insurance offering puts you ahead of the competition, but your retirement match lags. Or perhaps your generous PTO policy makes up for a less extensive health plan. These insights can show you where you should invest additional budget.
5. Recognize the Gaps Between Your Offerings and the Market Standards
After compiling your comparison data, it’s time to look for specific gaps. What do your results show? Perhaps you’ve found that your dental coverage has higher out-of-pocket costs than 80% of your peer companies, or maybe you aren’t offering any wellness-related benefits while your competition is providing gym memberships.
Try to quantify these gaps and use this information to support requests for budget increases or benefits restructuring.
Being at the top does not necessarily mean you’re winning the recruitment and retention game. Be sure to look at whether your benefits exceed market standards in ways that don’t really matter to your workforce. Perhaps you’re offering a substantial life insurance benefit, but your employees would prefer to receive higher retirement contributions. The best way to determine where to focus your energy is to conduct employee surveys or ask your workforce for feedback.
6. Create an Action Plan That Balances Your Budget With Your Employees’ Needs
Once you’ve completed your analysis, it’s time to map out the changes you need to make. Don’t try to fix everything at once; prioritize the changes that will deliver the best return on investment for employee retention and satisfaction.
Although successful long-term initiatives will always be your primary goal, you should also look out for some quick wins you may be able to tackle along the way. A complete health insurance overhaul could take months, but you may be able to adjust your PTO policy right away and see an immediate boost in employee morale.
Work With Professional Partners to Maintain Competitive Benefits
Benefits benchmarking can make a significant difference in your employee retention and recruitment efforts, but it’s not a one-time effort. Changing workforce demographics and market conditions call for regular benchmarking to confirm your strategy stays current and competitive.
Collaborating with seasoned consultants can streamline the entire process. Business Benefits Group has spent nearly three decades helping businesses manage their benefits and develop strategies to retain top talent.
Do you want to learn more about benchmarking your offerings against industry standards and developing a strategic plan that supports your goals? Contact BBG today to learn more about our employee benefits consulting services.