12 ways to get the most out of your benefits budget

(without breaking the bank!)

A benefits strategy that earns loyalty from your team may cost less than you think. In fact, many of the things that make the difference between a “good enough” benefits package and one that makes your organization stand out have more to do with the strategy and messaging behind the benefits you already offer and come at no extra cost! In other areas, spending a little more per employee can make a significant difference, and help you save money in other areas.

Read on for 12 practical tips on how to structure and present your employee benefits to get the most out of your organization’s greatest asset – your team!

Here are 12 practical tips to do more with less in your benefits budget:

1. Provide better medical plans. Health insurance plans are a big investment, but they are one of the first things candidates look at when deciding whether to join your company, and a big reason current team members stick with you through the rough times. The cost difference between an “adequate” medical plan and a “great” medical plan is probably less than you think (see Example 1 from my previous post), and will more than pay for itself in increased productivity and retention (see examples 2 and 3 for more). 💡Tip: If there isn’t room in your budget to offer a premium medical plan, consider a “base buy-up” strategy where your company pays for a “base” plan, but offers employees the option to upgrade to a richer plan by paying the difference in premiums themselves.
   

2. Cover dependent premiums. Covering a larger portion of dependent premiums tells your current and prospective team that (1) you understand that work isn’t the only important thing in their lives, and (2) your company invests in their quality of life for the long term. Reducing the cost of supporting a family helps you attract experienced talent, who are generally older and more likely to have dependents. Clear messaging about your strategy for investing in dependent coverage doesn’t just make your company attractive to a more diverse set of people, it can also provide “free” advertising to candidates who plan to start a family in the future. Compared to workers who are just looking to “vest and move on,” family-minded professionals seek long-term stability, which translates into loyalty for you. It may be many years before these future-focused team members actually take advantage of your dependent premium subsidies and generous parental leave (see below), and the cost-savings of retention will far outweigh the costs of supporting them as they build a family.
   

3. Offer an FSA and dependent care FSA. Flexible spending accounts (FSA) allow employees to set aside money pre-tax for qualified medical expenses (health FSA) or for caregiving costs like childcare or eldercare (dependent care FSA). By using pre-tax dollars to pay for qualified expenses, an employee can effectively increase their annual medical or caregiving budget by 50% and lower their annual tax burden. The administrative fees on FSA plans usually cost the company only a few dollars per enrolling employee per month (PEPM). Since FSAs don’t require that the company match team contributions, this is a very low-cost way for you to help your team get more out of their salaries and send the message that you care about their (and their families’) physical and financial wellbeing. If you have the room in your budget, funding an employee’s FSA and/or offering a match is more cost-effective for both the employee and employer than an equivalent raise in salary. Employees benefit because employer-contributed funds raise the absolute annual limit imposed by the IRS from $3050 to $6100 (in 2023). Further sweetening the deal, the employer-contributed portion isn’t taxed as income like a stipend would be. In return, the employer gets unused FSA funds back at the end of the year and/or when the employee leaves the company, and doesn’t need to pay payroll taxes on the funds as they would with a stipend or salary increase.
   

4. Offer flexible work hours and more paid time off. Employees are happier, more productive, and work harder in a high-trust culture where they have control over their schedule. Few salaried positions actually require that a worker consistently work traditional business hours. Especially in the era of remote work, what is most important is that team members attend meetings, get their work done, and respond to asynchronous communication within a reasonable interval. Flexible schedules also support diversity, since they are more accessible to parents, people with disabilities, caregivers, and just about anyone juggling personal commitments. Yet many managers still have trouble breaking out of a traditional attendance model. Unfortunately, the lack of agency that enforcing a rigid schedule implies ultimately hurts morale and undermines leadership. Furthermore, a fixed schedule sends a message that your team is compensated for their time not the results of their work, paradoxically disincentivizing workers from catching up during “off hours,” and eroding overall productivity. Offering additional paid time off is a low-cost way to show your team that you care about their wellbeing. In fact, you may need an additional policy to convince your team to take more time off, since study after study shows that most people don’t max out their PTO anyway (the number of unused vacation days was up to 55% in 2022, according to Zappia, but that’s a subject for another post!).
   

5. De-stigmatize mental healthcare with a mental health benefit. An estimated 15% of working age adults have a diagnosable mental health disorder, and depression and anxiety cost US businesses a combined $1 trillion in lost productivity per year, according to the WHO. Even for those without a clinical condition, home or work stress can significantly impact productivity at work. Removing the stigma around mental health encourages your team to open the conversation with their supervisor when they’re struggling, and work together to better accommodate their needs. Having an open culture around mental health also encourages team members to seek professional help if they need it (and ideally before it impa. Even if dedicated mental health benefits like Lyra, Ginger, or Modern Health are out of reach for your company, there are plenty of low- and no-cost things you can do to reduce stigma and support your team’s needs. Explicitly mentioning mental wellbeing in your time off policy, and describing your medical plan’s mental health coverage in your benefits descriptions are easy and free ways to let your employees know that their mental healthcare is important to your company strategy.
   

6. Offer a 401(k) plan (even if you can’t offer a match, yet). Offering a 401(k) plan costs only a few dollars per employee per month, and tells your employees that you care about their future. Even without a match, employees can save more for their retirement through a 401(k) than an individual retirement account (IRA), making the tax savings on a traditional or ROTH 401(k) an attractive benefit in and of itself. If there is room for a match, many of the same mutual benefits of FSAs apply to 401(k)s (except that companies don’t get unused funds back when someone moves on), including mutual tax savings and a higher annual funding limit. If you don’t offer a match, you can still use your 401(k) to tell your employees that you care by selecting a provider that offers a wide selection of funds for them to choose from.
   

7. Make sure your dental plan covers orthodontia. Dental insurance is inexpensive, usually costing less than $50 per employee per month. While many companies offer dental and vision insurance in their benefits package, a surprising number of dental plans don’t cover orthodontia. Adding youth orthodontia to your dental plan may only cost a couple of bucks a month in premiums, but can save your employees thousands of dollars. Explicitly stating your reasons for including orthodontic coverage in your benefits plans is yet another way that you can attract a more diverse group to your team by showing that you’re thinking about their families.

8. Offer stipends on activities that increase productivity. Stipends don’t have to be large to send a meaningful message. An employee may sniff at a $600 increase in their salary, but when $50 per month is dedicated to a specific out-of-pocket expense as a separate line item on their paycheck, it feels like “free” money. With stipends there is no need to deal with the operational overhead of checking receipts and processing reimbursements since the money is taxed as income and therefore carry fewer regulations. Instead, stipends serve as a way to communicate your company values and incentivize desired behaviors. You can offer stipends for anything from commuting costs, to wellness, to childcare, to team events, depending on the message you wish to send. You can also use stipends to reduce the company’s financial liability for shared personal/business expenses like home internet and cell phones.

9. Offer generous parental leave (for all new parents). As with covering dependent healthcare premiums, dependent care FSAs, and orthodontic coverage, a generous parental leave policy helps you attract and retain a more diverse group of talent, even if they’re not parents. Your parental leave policy offers an opportunity to show that yours is a supportive environment to working parents. Using inclusive language in your parental leave policy is also a fantastic opportunity to subtly signal your supportive work environment to non-parents concerned with gender equality, marriage equality, and alternative family structures. Make sure that your policy covers parents of all genders, including non-birth parents and same sex parents. Opening your parental leave policy to adoptive and foster parents implies that you want to support your team’s family aspirations, even if you can’t offer prohibitively expensive fertility benefits. And don’t forget to explicitly include your policy for time off for miscarriages in your parental leave policy. Even if your team members decide not to disclose a miscarriage, it will mean a lot to know that the support is there.

10. Consider offering a health reimbursement account (HRA). HRA programs provide HIPAA- and IRS- compliant ways for companies to reimburse a variety of medical expenses. While an it may require a little extra administrative overhead, an HRA plan lets you offer the same low out-of-pocket employee costs of a top-shelf health plan on a lower budget. Depending on your goals, there are a variety of HRA programs to help small businesses keep their health benefit costs low while keeping the standard of care high. Contact me for ideas about what could work in your situation.
    

11. Provide life and disability insurance. Life, long-term and short-term disability insurance policies start at less than a dollar per employee per month, but send a powerful message to your team that you understand that they’re dependent on the income you provide. Offering life and disability insurance tells your team that you’ll stand by them and their family through the tough times, even if they’re not able to work.

12. Message your benefits so employees feel valued. A pimped out benefits package can’t support your strategic goals if your team doesn’t understand why you think it’s important to invest in their physical and financial wellbeing. When you share your benefits, don’t forget to communicate why they are worth the investment. I’ll have more to say about messaging your benefits plans in a later post, but drop me a line if you’re looking for ways to say more and spend less.

Want to learn more about getting the most out of your benefits budget? Check out these related articles:

• Does your benefits package benefit your strategic goals?

• How 401(k)s help small teams stretch their compensation budget

• (Coming soon!) How to message your employee benefits for maximum impact

• (Coming soon!) 5 important benefits that cost you nothing

• (Coming soon!) Is your benefits package as inclusive as you think it is?