Many organizations are under pressure to reduce costs in the current environment, but they shouldn’t have to cut corners. By relying on data analytics, organizations can better understand which benefits are currently being used and re-evaluate those that are not, saving money without sacrificing the support their employees need most, writes By Chris Bruce, co-founder, and managing director, Darwin.
The importance of employee benefits cannot be understated, especially in the age of COVID-19. Prudential’s researchOpens a new window shows that, in the wake of the pandemic, employees see even more value in benefits. More than three quarters (77%) of those surveyed feel their benefits programs are a “key part†of their compensation, up from 67% in 2019. Most (73% now vs. 59% in 2019) said that benefits are a “big reason†to stay at a job.
Organizations should not attempt to cut corners when putting together their benefits packages, but they cannot go in blindly either. Without careful consideration of the benefits being introduced and their uptake, businesses could waste thousands of dollars. Our researchOpens a new window , which surveyed 542 HR leaders responsible for 5,000 to 50,000+ employees globally, found that 42% are spending over 20% of employees’ baseline salaries on benefits. With the median household income reaching $68,703 in 2019 — up 6.8% from the previous year — employers could be spending more than $13,000 annually on benefits alone. This is why it is so important to use analytics to determine which benefits are being utilized and which are not.
Learn More: Well-Being, Engagement, and Communication: Refocusing Employee Benefits Priorities for 2021
3 Strategies To Improve Employee Benefits
At a time when organizations are expected to do more with less — YPO’s surveyOpens a new window of business leaders found that more than four-fifths (82%) have braced for revenue declines this year — waste is not an option. The best strategy going forward is one that’s backed by the knowledge analytics provide.
1. Determine the Benefits Employees Want and Use Most
Organizations should begin by comparing the number of employees using benefits in relation to the overall number of employees. This might sound like an obvious step, but it’s an easy one to miss. For example, one organization only needed 19,000 health insurance policies but had erroneously paidOpens a new window for 26,000 instead.
A reportOpens a new window by the Kaiser Family Foundation shows that annual insurance premiums average $7,188 for single coverage, of which the employee pays an average of 18%. Family coverage averages $20,576 with a typical 30% employee contribution. This leaves employers with an average healthcare contribution of 82% ($5,894) for individuals and 70% ($14,403) for families. If thousands of health insurance policies are purchased by mistake, organizations could spend millions of dollars in unnecessary fees.
By starting an analytics initiative here – with easy to access, centralized data on the number of employees actually using the benefits that are offered — benefits and HR teams can better determine where their funds are going and how they should be deployed going forward.
Learn More: 4 Tips for Managing Open Enrollment in the COVID-19 Era
2. Analyze Key Demographic Characteristics To Help Identify and Reduce Some of the Highest Expenses
According to the Centers for Disease Control and Prevention, organizations can better assessOpens a new window their healthcare costs by looking at two key demographics. This includes individual characteristics, such as age, sex, and employment status, as well as organizational characteristics, which involve the units or divisions within the business.
By analyzing this information, employers can identify the groups of individuals or worksites that incur the greatest healthcare expenses. Employers can then use the resulting data to predict potential healthcare costs and to develop programs aimed at reducing them. This could include a wellness program that encourages healthy eating and exercise to reduce healthcare expenses that can be incurred by a more sedentary lifestyle, such as diabetes or obesity.
The results could be quite significant. Harvard researchers foundOpens a new window that wellness programs increase the rate of employees who exercise by 8.3% and the rate of employees who actively manage their weight by 13.6%.
Learn More: 4 Simple Steps for Creating an Effective Employee Benefits ProgramOpens a new window
3. Manage Employee Benefits Effectively With the Power of Analytics
Health insurance prices continue to rise as employees grow older. Annual premiums are also expected to increase for all ages. The Centers for Medicare and Medicaid Services projectsOpens a new window annual growth of 5.4% for the next several years, pushing annual healthcare costs as high as $6.2 trillion by 2028.
Employers need to look for any way they can reduce their share of these growing expenses. Organizations should analyze key demographic characteristics to help identify fees that could be reduced. By relying on analytics to determine the benefits employees use most, organizations can not only cut back on benefits with low or no uptake but make sure they continue to offer the benefits employees actually want and that make a difference. In the current climate, it has never been more important to make sure benefit spend is being managed effectively while ensuring employees continue to feel supported.
How do you think using data analytics can improve employee benefits? Tell us on LinkedInOpens a new window , TwitterOpens a new window , or FacebookOpens a new window .