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How to Measure ROI for Employee Benefits and Which Ones Offer the Best ROI

by Karen Sturdivant, on July 22, 2022

The majority of employees view benefits as a crucial need when it comes to their mental, physical, and financial health. If your organization isn’t offering benefits that employees view as a need rather than a want, then there may be an issue with attracting and retaining talent. However, offering employee benefits can be expensive. Due to this, it's crucial that leaders track their benefits programs to ensure that the investment is worth the cost.

Measuring return on investment (ROI) of employee benefits is crucial for your business' success. Two types of ROI can help you calculate the different variables to see if benefits are helping your business succeed. Hard ROI is easier to measure as it uses financial data and statistics. Soft ROI is more about company culture and employees' happiness.

We've researched everything you need to know about employee benefits ROI. If you're interested in calculating your ROI for employee benefits, or seeing what benefits have the best ROI, the information below answers all your questions and more.

How Do You Calculate ROI for Employee Benefits?

Many people agree that hard ROI is easier to measure than soft ROI since it is using actual data. The data you use varies on what you are trying to measure. You can use an equation to measure your employee benefits ROI as long as you have the data for your gains and expenses.
ROI = ((gain – cost)/cost)*100.
The list of variables you can measure with this equation includes:

  • Employee Turnover

  • Job Applicants

  • Employee Satisfaction

  • Company Reputation

The important detail to keep in mind when measuring the ROI for your employee benefits is to select an appropriate data point(s) that you want to improve. Once you’ve selected one or more, you can identify what your current metrics are. After you’ve implemented your desired employee benefits program, you can calculate the impact it had on your targeted metrics.

Which Employee Benefits Offer the Greatest ROI?

Now that you’ve properly calculated the ROI of your employee benefits program, it’s critical to know which benefits have been reported to offer the best ROI. This is especially important if your business is on a limited budget. You’ll need to carefully select benefits that will give the greatest support to your employees and overall business.
Below is a list of benefits reported to offer the best ROI:

Retirement Investing

Having a financially stable future and life after retirement is a top priority for many people. Companies that offer financial investing and retirement options can stand apart from their competitors when it comes to finding and attracting top talent. Offering an employer match incentive provides an additional boost.

Many studies put retirement investing at $3 for every dollar spent, but in Enrich’s whitepaper, they believe it can be $15. That means the return on investment is between 300% to 1500%.

Mental Health Benefits

Mental health benefits can be just as important as physical health benefits. Not only can having mental health benefits change the lives of your employees, but it leads to your employees feeling supported by their organization. Offering this incentive will lead to healthier employees, higher retention and greater employee engagement.
Deloitte research reveals that ROI is $1.62 after one year and $2.18 after three years. That means the ROI is between 162% and 218%.

Health Insurance

Employer-sponsored health plans can help incentivize employees to join an organization, which can lead to reducing recruitment and turnover costs. Offering a health plan can also help in reducing medical claim volumes and increase employee engagement.
According to a recent study from Avalere Health, employers will earn an average ROI of 147% from health insurance programs. For every dollar spent, employers will receive $1.47 back in financial benefits.

Tuition Reimbursement

 Providing your employees with helpful skills to aid them in their career path will assist with attracting entry-level talent and increase your number of job applicants.
Employees will be more engaged if they feel they are given opportunities to move up to a better position in the future. Tuition reimbursement is a great incentive for your employees to stay with the organization as well as give them the skills/education to help your company succeed.
Per Lumina’s two-year study, reimbursement programs have a 129% ROI.

What Impact Outside of a Hard ROI Does an Employee Benefits Program Offer?

Outside of a hard ROI from employee benefits, a solid program will also provide soft ROI advantages. Just because soft ROI outcomes may not be directly noticeable on a company’s bottom line doesn’t mean certain initiatives are not worth the time and effort.
Soft ROI outcomes from an employee benefits program include:

  • Increased productivity

  • Positive company culture

  • Increase in brand awareness and reputation

  • Higher quality candidates

Attracting and retaining talent is highly competitive, so offering benefits gives you a leg up on the competition. According to Forbes, six in ten employees say that benefits are a top priority when it comes to applying to jobs. With that in mind, you also receive higher quality candidates as they expect more from their employer.
Benefits may genuinely improve the lives of your employees and, in turn, make them feel more valued. If employees value both their roles and benefits, they are likely to work at their best to keep those benefits. If your employees are happier, this leads to a more positive company culture.
A positive company culture equals positive results. A happy employee is also more likely to talk about their company in a positive light to others. This may lead to attracting more candidates to your organization or, depending on the company, even more business.

Offer Your Employees Top-Tier Benefits With LandrumHR

Are you interested in offering more or better benefits to your employees?
LandrumHR is a certified Professional Employer Organization with over 50 years of experience helping businesses succeed. When you partner with us, you’re using our buying power for employee benefits to help attract and retain top talent. Not all businesses are the same, which is why we help tailor an employee benefits package to suit you and your employees’ needs. We also take care of the details and all the paperwork to give your employees the benefits package that they need without adding undue stress and time to your already full plate.
Contact our team today to find out how we can help your business succeed by offering your employees Fortune 500-level benefits.

Karen Sturdivant

Karen joined LandrumHR at the beginning of 2021 as a Benefits Director overseeing the day to day Benefits Operations, COBRA, Benefits Reconciliation and 401(k). She brings over 20 years of experience focusing in the Professional Employer Organization industry with a passion on educating and empowering teams for an overall personal and client service success. When Karen is not at work, she may be experimenting with crafts, colors or music.

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