The ability to attract and retain top quality talent has increasingly become a major priority among employers operating in an increasingly competitive labor market, and few tools have proven more effective at properly incentivizing current and prospective employees than robust benefits packages which can set a company apart from the competition.
When redesigning and attempting to improve benefits offerings, however, many companies tend to focus their attention almost exclusively on medical benefits, which is understandable given that medical benefits are the largest benefits-related cost component from an employer standpoint.
What many employers fail to recognize, however, is that employees rank financial benefits like 401k contributions and incentives nearly as high as medical benefits in terms of how attractive those kind of benefits package components are from an employee perspective.
In order to create a truly employee-centric offering that is optimized to attract the ideal candidates from the labor pool, a company must evaluate all the potential components of a benefits package, including:
Of course, no benefits package regardless of its components can be fairly evaluated in a vacuum. In order to understand how best to craft the optimal benefits package for a given company, that benefits package must be compared with the benefits packages being offered by other similarly situated companies who are competing to attract the same talent.
This is where employee benefits benchmarking reports comes into play and have become an essential process for competitive companies to undertake.
Benchmarking in its simplest form is the exercise of comparing one company to another. In our case, we’re interested in comparing the benefits packages offered to employees by different employers, but the principle is the same whether comparing companies’ products and services or informal perks.
The key input that makes benchmarking possible is comp. data. Of course, any given company should have up-to-date information about its own benefits packages readily available, but gathering comparable information about the business and practices of competitors is typically a much more difficult task.
Further, not only can it be difficult to gather data in general, but it can be especially tricky to gather relevant data, that is, data from companies that are in the same industry and of a similar size. Even factors like geography can have significant impacts on benchmarking data, so it is extremely important that the data being used is well-tailored to the company/industry/location in question in order for the benchmarking comparison to provide meaningful, actionable results.
It’s also very important that the data is unbiased, which can be sometimes be difficult to determine given the often-misaligned financial incentives of data collectors and providers, which reinforces that properly assessing the source and quality of the data is a critical step in the benchmarking process.
There is no shortage of benefit benchmarking data available, which can be both a good and a bad thing. Having a lot of data available is great in the sense that there is a wealth of information from which valuable insights can be gleaned, but one of the reasons that there is so much data in the first place is because it is being supplied by a huge number of sources with inconsistent reporting, methodology, motivations & target audiences, differing definitions, data sources, samples & time frames, etc.
With that caveat in mind, for Small Business Benefit Benchmarking data, Zenefits produces a great survey focused on health benefits that is excellent for understanding small business trends in medical and plan design. It should be noted, however, that Zenefits is an insurance broker, which is primarily how they monetize their platform, and the sample set in the data is Zenefits own users who may or may not share similar characteristics with your company.
For information about Insurance Broker Benchmarking, Mercer Data is a great resource targeting companies that employ 500+ employees and encompassing in depth plan design, planning, discussion and consulting.For Payer Benchmarking, it is typically larger carriers who produce segment specific reports. Alfac and Cigna have historically put out great voluntary and health information respectively, for example. Because that information is siloed and apart from any comparable data covering other benefits package components, however, it is difficult to use this data to draw conclusions and take actions in a cohesive way across a full benefit plan design and offering.
There is also a fair amount of Benchmarking Data from Enrollment Firms, which is typically pulled directly from the firms’ clientele and their plan choices. The quality and applicability of this data can vary widely from firm to firm, any one of which may specialize in certain types of companies or industries and/or may exclusively operate in one or more geographic areas with particular characteristics.
As alluded in the paragraphs above and through much of our exploration of the available benchmarking data resources generally, sourcing relevant and unbiased information were two of the main challenges to effective benchmarking that we continually encountered over and over again.
In terms of bias, it is important to be aware at the outset of the process that nearly all benchmarking information today is provided by someone with a financial interest in your company choosing one plan over another.
To be clear, this isn’t to say that the data has been manipulated or framed to be deliberately misleading, but strong financial incentives can have practical effects even if they aren’t being actively considered or even acknowledged. This situation is not unlike a scorekeeper for a basketball game also playing for the opposing team. The arrangement itself is not evidence of any wrongdoing or malicious intent, but it certainly should raise questions and it serves to highlight the fact that there is no independent resource to fill this needed role.
Beyond bias, there are also issues involving the relevancy of benchmarking data, which typically involve data that is incomplete, over-broad, and/or non-actionable:
It’s also very important that companies recognize that while the technical, data-based issues of relevancy and bias are certainly considerable hurdles to overcome when evaluating benefit offerings, the far greater issue that most companies face is less a technical problem than a problem of perception and communication.
After all, even the best imaginable benchmarking dataset is of little value in terms of attracting and retaining quality employees if an employer is unable to effectively communicate the value of their benefit offerings in a way that is compelling to the specific prospective or current employees in question.
Consider this example provided by a fellow MployerAdvisor staff member:
I have a great friend whose company covers 100% of medical for all employees. She is evaluating taking a job with a 12% raise but has to pay for medical. At the end of the day, is that a pay raise? She doesn’t value the benefits being offered to her, but it’s not her fault. Her company is not able to communicate to her the value of the benefits and much less how that compares to the market.
In the example above, the employer does all the hard work and is offering a significant benefit but has failed to communicate the value they are providing and therefore the positive impact of that work in terms of employee retention is lost altogether.
It should also be noted that employees’ expectations and their impression of any given benefits package component can be significantly influenced not only by the information being provided (or not) by the employer but also information from outside sources can have a major impact as well. In a sense, employees sometimes undertake their own approximated benchmarking effort through social circles and their industry network, though the limited sample regularly leads to a skewed perception of where their benefits package may actually fall on the market spectrum.
Regardless of the reasons why employees may not fully appreciate the value of some benefits offerings, the most important takeaway is that in order for benefits packages to have their intended effect in terms of talent attraction and retention, those benefits must not only provide real value to current and prospective employees but that value must also be effectively conveyed so that it can be internalized and comprehended by the recipients on a practical level.
Given our encounters with the shortcomings of publicly available benefits benchmarking data, and given our data processing capabilities and our uniquely independent positioning in the industry, Mployer Advisor recognized that we have the opportunity to address the bias, relevancy, and communication issues hampering the industry by launching our own, independent benchmarking platform and accompanying resources.
Mployer Advisor was founded to address inefficiencies in the insurance and brokerage marketplace and to support both employers and advisors with better information leading to better outcomes for everyone involved. Because our company generates revenue exclusively through advertising on our platform, which is an opportunity we offer exclusively to highly-rated insurance advisors, there are no concerns about any conflicts of interest in our data.
And relevancy is no issue since our benchmarking information is tailored for you down to the company size, geography and industry, and your custom snapshot is updated annually with information pulled from the largest benefit design database in the US processed through industry-first statistical modeling to provide the most granular, micro-targeted assessment the industry has ever had access to.
As with everything we do at Mployer Advisor, our goal in offering benchmarking and analytics information is simply to improve the employee benefit and insurance industries. We believe that better information and greater transparency lead to increased efficiency which leads to improved performance and more business.Click here to download your customized benchmark report.