Wondering how to budget for employee benefits at a time when costs and employee expectations are increasing?
The job market in the USA is competitive – attracting and retaining top talent depends on more than just offering staff competitive salaries.
Team members want a broad range of benefits – in fact, around 56% of employees say employer-sponsored health benefits are a major factor in determining whether they’ll stay in their current role.
So, how do companies offer benefits that effectively attract and retain staff, without spending a fortune?
How Much Do Employee Benefits Cost Employers on Average?
According to a Bureau of Labor Statistics (BLS) report, benefit costs have increased for virtually all companies since 2024.
For civilian workers, total compensation was $47.20 per hour, with $14.68 directed toward benefits (around 31.1%). For private industry workers, total compensation averaged $44.67 per hour, with $13.20 allocated to benefits (29.5%).
Numerous factors contribute to these costs, but health insurance fees are one of the major ones driving expenses up.
A study by the Kaiser Family Foundation found that annual premiums for employer-sponsored family health coverage reached $25,572 in 2024 (7% higher than the previous year).
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Common Benefit Types: Options to Offer in the USA
In the USA, employee benefits do more than just “boost overall compensation”—they show team members that they’re valued by the workplace.
The types of employee benefits companies can offer are evolving, particularly in an age of flexible work. Usually, companies budgeting for employee benefits focus on:
Mandatory Benefits
Certain benefits are required in the US by law:
- Social Security and Medicare
- Unemployment Insurance
- Workers’ Compensation Insurance
- Family and Medical Leave Act (FMLA)
Healthcare Benefits
Designed to safeguard employee wellbeing, healthcare benefits include:
- Health Insurance: According to BLS data, private industry employers spend around $3.00 per hour (about 6.9% of total compensation) on health insurance, while state and local governments spend closer to $6.73.
- Dental and Vision Insurance: Supplemental coverage helps employees maintain oral and eye health through preventive care and corrective treatments.
- Disability Insurance: This pays a portion of income if employees can’t work due to illness or injury.
Lifestyle Benefits
Though not mandatory, lifestyle benefits promote work-life balance and employee retention:
- Paid Time Off (PTO): Bundles vacation, sick, and personal days.
- Retirement Plans: Options like 401(k)s.
- Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs): Programs that provide tax advantages for healthcare costs.
- Wellness Programs: Gym memberships, mental health support, and smoking cessation resources.
- Childcare Support: On-site facilities, subsidies, or referral services.
- Educational Assistance: Tuition reimbursement or professional development funds.
How to Budget for Employee Benefits: Calculating ROI
When calculating how to budget for employee benefits, companies need to understand the “return on investment” they can get.
Benefits that resonate with employees drive higher retention rates (reducing recruitment and onboarding costs), and improve employee engagement and performance.
To calculate the ROI of your benefits program, start by finding the perks that deliver the most value to your team. Look at how those benefits align with business goals. Do they improve retention, enhance job satisfaction, or reduce absenteeism?
Budgeting for Employee Benefits: Step-by-Step Advice
Here’s how companies can take a data-driven, intelligent approach to budgeting.
Step 1: Assess Employee Needs
Collect insights from your workforce.
Surveys, anonymous polls, and informal focus groups can offer a valuable insight into what employees want.
Link priorities to your overall goals – for instance, if you want to reduce absenteeism and improve retention rates, focus on health benefits.
Step 2: Explore Versatile Options
Health insurance can make a big part of your benefits budget – but traditional health insurance isn’t your only option.
With a company like HSA for America, you can explore options that may save you thousands of dollars per month, such as:
- Health Reimbursement Arrangements (HRAs): Employer-funded accounts that reimburse employees for qualifying medical expenses.
- Health Savings Accounts (HSAs): Tax-advantaged savings paired with high-deductible health plans (HDHPs).
- Health Sharing Plans: Membership-based arrangements where participants share healthcare costs, sometimes with fewer restrictions than traditional insurance.
- Direct Primary Care (DPC) Models: Subscription-based care that can reduce overhead and improve patient-provider relationships.
Step 3: Explore Legal and Tax Implications
Compliance is crucial for avoiding penalties and increasing savings.
Research relevant regulations and tax advantages you can take advantage of, such as:
- Mandatory Benefits: Ensure your benefits plan includes all “mandatory” employee benefits, such as social security.
- Section 125 (Cafeteria) Plans: Enable employees to pay for certain benefits with pre-tax dollars, reducing payroll taxes.
- Deductions and Credits: Many benefit costs are tax-deductible for employers. Keep accurate records to capitalize on these savings.
Step 4: Adjust the Benefits Mix for Affordability
Explore innovative ways to reduce costs while keeping teams happy, such as implementing High-Deductible Health Plans (HDHPs) or health sharing plans.
These plans generally have lower monthly premiums, making them more budget-friendly.
Promote Initiatives like gym memberships and mental health support to encourage healthier lifestyles and reduce healthcare claims.
Step 5: Regularly Review and Adjust
Employee needs and job market conditions are constantly changing.
Stay agile and conduct annual reviews to evaluate plan usage, satisfaction levels, and market trends. If you discover a particular benefit is no longer cost-effective, consider shifting your resources to other, higher-impact options.
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Cost-Effective Employee Benefits with HSA for America
The cost of employee benefits is increasing, and identifying the right package is becoming tougher for most organizations.
That’s where HSA for America can help. A Personal Benefits Manager will work with you to understand your business goals, budget, and employee needs, helping you to budget more effectively.
Don’t let rising healthcare costs dictate your benefits strategy. Connect with a Personal Benefits Manager at HSA for America today and take the first step toward affordable, high-impact employee benefits that work for your business.
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