Comprehensive employee benefits help you attract and retain high-quality talent, but rising benefit costs only make it harder each year. Higher premiums and evolving employee expectations may leave you wondering how to continue offering competitive employee benefits you can afford. Fortunately, with the right partner and strategies, you can create an employee benefits program that aligns with your business goals and budget.
The Concerning Benefit Cost Landscape
The increasing cost of benefits is not a recent development; it has been rising for decades, significantly affecting small and mid-sized businesses. In a recent National Federation of Independent Business (NFIB) survey, 63% of small businesses agreed health insurance was important for employee recruitment and retention, but 94% said managing the cost was challenging. Unfortunately, employee benefits, much like taxes, tend to increase regularly and seldom (if ever) decrease. Consider these findings:
- The average cost of benefits per employee increased by 5.2% to $15,797 in 2023. For employers with less than 500 employees, the cost increased by more — 7.8%.
- The cost of medical care in group health insurance plans is estimated to rise by 8% in 2025,
- Health insurance premiums comprise a larger share of expenses for smaller organizations, partly because they have a harder time negotiating favorable insurance premiums than larger organizations.
Strategies for Managing the Rising Cost of Benefits
Identifying ways to offer cost-effective employee benefits isn’t merely a bottom-line concern. Job seekers and employees increasingly consider benefits when deciding where to work. According to an Economist Impact study, 70% of employees would switch jobs for better benefits.
Though you can’t control rising premiums or foresee changes in employee benefit preferences, you can manage your benefit expenses while still providing employees with affordable, quality options. Here are three actions you can take to get started:
1. Offer a mix of supplemental benefits
Providing employees with comprehensive benefits doesn’t necessarily translate to higher costs. On the contrary, expanding your benefits program can help you manage expenses while offering employees benefits they value and are more likely to use. For example, you can offer voluntary benefits that are typically employee-paid, sometimes at group rates. Examples include:
- Critical illness insurance
- Long-term disability coverage
- Long-term care insurance
- Employee and dependent life insurance
- Pet insurance
If your budget allows, you can also supplement your program with additional employer-paid benefits, such as childcare subsidies, expanded mental health benefits, and lifestyle spending accounts. By promoting a better work-life balance, these benefits enhance employee productivity and engagement at work.
2. Maximize cost savings with a PEO
Outsourcing employee benefits to a PEO gives you access to comprehensive and competitively-priced benefits, so you can attract and retain the talent you need for growth. Aspen HR’s employee benefit services can be customized to your needs, budget, and culture, and include:
- Tailored guidance on navigating benefits trends, specifically for startups, small businesses, and mid-sized companies
- An employee self-service portal for automated open enrollment and benefit selection
- Cloud-based tools to streamline benefits administration and support compliance with benefit regulations
3. Benchmark and implement best practices
Enhancing your benefits program involves understanding best practices and exploring plan design options. However, each year, new trends in open enrollment, claims management, and compliance add to the complexity of benefits management.
When you partner with Aspen HR, we do the legwork for you. We use our market knowledge and benefits expertise to help you identify new efficiencies and opportunities for cost savings. We’ll compare your plan to competitors and your industry and work with you to craft a more cost-effective benefits program. With our custom PEO employee benefits, you can offer more affordable options to your employees while providing them with a broader range of choices. We recently helped a 30-employee fintech company upgrade its benefits offering and save over $370,000 annually.
Build a More Cost-Effective Benefits Program
Access to high-quality, affordable benefits is not out of reach for smaller organizations. By outsourcing employee benefits to Aspen HR and our white-glove PEO services, you can enhance your employee benefits and attract talent more competitively. Learn more about our PEO employee benefits solution, and contact us to get started on your customized employee benefits plan.
