Crafting the perfect employee benefits package can feel like an eternal dance between employee wants and budget needs. And to some degree it is. But it doesn’t have to be both a dance and a fool’s errand. As long as you offer carefully considered, impactful benefits that are inclusive, meet real employee needs, and offer flexibility, you can strike that balance. 

In this post, we’ll tell you why many benefits packages fail, what can happen when they do, and a list of benefits you should be adding to your compensation package. We’ll help you make a plan and craft a cost-effective and impactful benefits package that has lasting positive effects on the company.

Why it’s important for employers to have a competitive benefits package

Employers that treat their benefits package simply as a box to be checked are often plagued by high employee turnover, poor company morale, low employee engagement and productivity, and poor recruiting efforts. This is because employees value benefits. 

Benefits provide support for their everyday lives that employees desperately need and want. In fact, Pew Research found that only 49% of workers were satisfied with the benefits their employer offered. And of the people who left their jobs, 43% said insufficient benefits played a significant role in their decision to leave. The cost to companies to replace these employees is high from a dollars spent perspective (about ⅓ of their annual salary), as well as the lost productivity, the cost to company morale, damage to the company’s reputation, and more.

If preventing turnover isn’t enough of a reason to reconsider your benefits package, think about the importance of employee engagement to the success of your company. Companies with highly engaged employees perform better. The employees are more productive, they’re more loyal, they’re more creative, and the company as a whole is a better place to work. The quality of the benefits package (i.e. how employees rate the quality of the benefits package) correlates to employee engagement.

In addition, top talent wants to work at a top company. It’s easier to recruit the talent you need if you have a competitive benefits package and your company seems like it’s an innovative, growing, creative, and otherwise enjoyable place to work. Rethinking your benefits package can get you there.

Why many benefits packages fail

If you’ve tried revamping your benefits package before and it’s been unsuccessful, there might be a fixable reason. The top three reasons that benefits packages fail are:

1. They aren’t inclusive of the entire employee demographic. This is where the traditional, one-size-fits-all benefits packages get into trouble. If you’re just offering one, all-encompassing group health insurance plan, a vision and dental plan and a retirement savings option, you’re likely not meeting the needs of a large percentage of your workforce. For instance, younger workers don’t necessarily want or need a large, expensive, all-encompassing health insurance plan. They might prefer a lighter weight, less expensive High Deductible Health Plan (HDHP) with a Health Savings Account (HSA). That way they have the flexibility to save pre tax money to pay for the health expenses they need and want. 

2. Your benefits aren’t flexible enough. Since employees' needs can change quickly– they can start families, a global pandemic can happen, they can become the caregiver to an adult relative– your benefits package should be flexible enough to allow them to adjust how they use their benefits depending on their situation. For instance, by offering a Lifestyle Spending Account (LSA) that supports spending on a wide range of everyday expenses employees can choose how to use that money in the way that would be most impactful for their lives. LSAs are post-tax benefits that are highly flexible and can cover expenses such as remote working expenses, transportation expenses, family expansion services that may not be covered by your health insurance, pet expenses, wellness-related costs, and more.

3. Your benefits aren’t competitive. The competitiveness of your benefits is going to depend on what is becoming “industry standard” for your line of work. For instance, unlimited PTO is a pretty common benefit in the tech industry. And it’s very popular. Other types of accounts that are becoming standard are: LSAs, HSAs, Flexible Spending Accounts (FSAs), Health Reimbursement Accounts (HRAs), commuter benefits, and Medical Travel Accounts (MTAs). Find out from a benefits broker or benefits administrator what benefits are becoming common in your industry and make the necessary adjustments.  

Which benefits and perks should you be offering?

The most common benefits and perks that companies offer are:

• Group health insurance plans

• Group dental and vision insurance plans

• Retirement savings accounts like 401(k)s

• Life insurance

• PTO

But do these benefits really capture the full picture when it comes to your employees' needs? These are the best practices for determining where the holes are in your benefits package and how best to fill them.

1. Conduct an anonymous employee survey. Ask employees about the benefits you currently offer, benefits they wish they had, and current challenges they are experiencing in their lives outside of work. Enable the employees to give certain demographic information so that you can identify both how inclusive your package is and the ways in which you can make it better.

2. Audit your current benefits usage. You might be able to drop an expensive benefit that few employees are using and replace it with something else that might be more impactful. 

3. Survey employee candidates that declined your job offer. High value talent typically gets multiple job offers and thus has a window into how other companies structure their benefits packages. Ask them how yours stands up against the competition.

Flexible benefits your employees need and want

Flexibility in your benefits package is a must in the modern working environment. Whether you’re trying to help employees improve their health– be that physical, mental, or financial– or trying to support their family life, their passions, or anything else, your benefits should both support a wide range of challenges under one umbrella, and allow employees to change how they engage with the benefits as their needs change. 

The following benefits allow you flexibility both in terms of the types of expenses and needs they cover, and how employees can use them.

• Health Savings Accounts (HSAs). These are accounts into which employees can save pre tax money to pay for qualified medical expenses, or even retirement. HSA account balances roll over from year to year and the employee never loses access to their account, so this benefit can be a great way to support employees’ physical and financial health. For more details on HSAs, check out our HSA guide.

• Flexible Spending Accounts (FSAs). These accounts allow employees to deposit pre tax money to spend on qualified medical expenses, dependent care that allows the employee to work, or dental and vision expenses (depending on the type of FSA that’s offered). They can be a good way to support employees’ physical and financial health as the types of expenses for which they can reimburse for is wide and support everyday costs that many employees struggle with. Dependent Care FSAs can help support parents and caregivers of adult relatives and help keep them in the workforce, while Healthcare FSAs can be used to purchase everyday items like bandaids and sunscreen. These contributions do expire at the end of the plan year but employers can allow employees to roll over a portion of their unused contributions to the following plan year or give employees a grace period of up to 2 ½ months in which to use their balance (but not both). For more information on FSAs, check out our FSA guide.

• Health Reimbursement Arrangements (HRAs). These accounts allow for employers to deposit money for employees to reimburse for health-related expenses. These accounts are a good way for employers to support employees’ physical health because they can be used to fill gaps in coverage, or as a way to help employees fpay or health insurance premiums. Employers have more control over which expenses they will allow for reimbursement through an HRA than through an FSA or HSA (these accounts are tightly regulated by the IRS). For more information on HRAs, check out our HRA guide.

• Lifestyle Spending Accounts (LSAs). One of the most impactful characteristics of the LSA is that it can be designed to fit almost any need and budget. The LSA is an employer-funded account that can be used to reimburse for whichever expenses the employer chooses. It’s an after tax benefit, which means employees pay income taxes on the amounts for which they reimburse, but it can be used to meet a wide range of needs including: groceries, healthy food delivery, fitness classes or gym memberships, gender affirmation treatments, family expansion costs, mindfulness benefits like meditation apps or retreats, and more. Employers can offer one general LSA, multiple targeted LSAs, or whatever mix makes sense. For more information on LSAs, check out our LSA guide. 

• Commuter benefits. These help employees pay for the ways they commute to work, whether by transit, vanpool, shared rides, or driving and parking their car near their work location. They can function differently but most often provide an opportunity for employees to save on their commute and/or a way for employers to provide employees with a stipend for commuting. A typical commuter benefit account enables employees to save for their commute costs tax-free, though some offer add-ons of taxable benefits such as bike, ride, and scooter shares. For more insight into commuter benefits, check out our guide.

• Medical Travel Accounts (MTAs). Medical travel accounts are intended to help employees that need to travel for medical care, reach the care they need. Expenses covered by MTAs include: taxis, bus fare, airplane tickets, train tickets, mileage on a personal car, rental car costs, and even hotel stays that are necessary to receive treatment. This is an employer-funded account and after-tax benefit for which employees will have to pay income taxes. Employers have almost complete control over how this benefit is structured including: how much each employee can reimburse, the cadence at which the account renews, which expenses can be reimbursed for, the required travel radius from the employee’s house, and whether or not travel expenses for a necessary travel companion are covered. For more information on MTAs, check out our MTA guide.

Offer a better benefits package with Lively

Lively offers employers a suite of benefits solutions that can be bundled or added separately in order to craft the most impactful benefits package for your company. Our HSAs, FSAs, HRAs, LSAs, Commuter benefits, and MTAs are thoughtfully designed to be easy for the employee to use, efficient for the employer to administer and cost effective for both. 

Lively also partners with employers to ensure that employees are onboarded effectively and takes care of account holder education so that your team not only know what benefits are available, but how best to use them. Your goals are our goals.

If you’re ready to level up your benefits package with account offerings that are flexible, economical and impactful, reach out to Lively today.