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What Does a Meaningful Benefits Package Cost?

September 26th, 2023 | 4 min. read

By Payday HCM

Benefits packages come in all shapes and sizes and can vary widely by industry and company size. We are going to cut through all of the noise in this article and give you a good idea of what a meaningful benefits package includes and what it might cost you. Whether you are here because you’re losing employees to a competitor, you want to improve your hiring quality, or you just want to know what it costs to stay competitive, we have answers.

PaydayHCM has been helping business owners improve and simplify their businesses over the last three decades. One of our specialties is helping business owners understand the costs and variety of company health insurance available, and which is right for them.

We’ll lay out the factors that affect pricing and how you can find out what your employees want out of their company benefits. By the end of this article, you will have a working knowledge of what it takes to implement a meaningful benefits package and roughly what it will cost you.

Assess Employees' Needs for Benefits Package

This is an excellent first step for almost any situation and it costs nothing. Don’t waste time assuming you know what your employees want. Instead, make the effort to find out what they are actually thinking and feeling by conducting one-on-one interviews with them regularly. Surveys are also a viable option if you don’t have time to conduct one-on-one interviews.

You can use these one-on-ones to find out what types of benefits your team needs and find out if there is enough buy-in from your team to implement something meaningful.

Questions to Ask Your Employees Regarding Benefits Package

Just a few basic questions like this can be invaluable:

  • What are the benefits that are most important to you?

  • Do you have family members who will also need coverage under your plan?

  • Have you paid into a company health plan before?

  • What did you like or not like about your previous plan?

You will need a way to keep track of this valuable input. We recommend Excel, Google Sheets, or something similar to organize the data for each employee and get an overall picture of what the majority of your team needs. These are free to use, so you will have to measure your cost in time for this portion.

Factors that Affect Employee Needs for Benefits Package

Your employees’ needs are also determined somewhat by the industry. If you are in a lower-paying industry and have lower-wage employees who are on Medicaid, then you may not contribute anything because they are already covered.

Higher wage earners might have more of a need for private health insurance but that can also vary by industry. Take a dentist's office for example, they have higher-wage workers who might want health and vision benefits but no dental because they get it through work. Take a good look at your industry and demographics before making any choices.

Decide How Much You Will Contribute to Your Employees’ Premiums

This is the make-or-break part of your decision-making process. If you have 50+ employees then you are required to contribute a certain percentage. “A job-based health plan is considered ‘affordable’ if your share of the monthly premium in the lowest cost health plan is less than 9.12% of your household income,” according to the ACA. If you are below that threshold, you are not subject to the ACA but most insurance companies have participation requirements. These are usually around 75% of the group. That means they would require around 75% participation from your total staff.

If the average monthly premium for an employee is roughly $650, then you could be covering $325 or more per month for each employee. If that seems like something beyond what you can provide and you are below the threshold for ACA requirements, you may have to adjust the percentage you are paying. If you are above the threshold for ACA requirements you will need to consult with a broker. They can help you determine what is affordable according to the ACA.

The percentage you decide to pay can impact the participation requirement set by the carriers though, so it’s a balancing act. You want to contribute enough that your employees will buy into the plan but not so much that it breaks your budget. Again, this goes back to communication and finding out directly from your employees what they can or are willing to contribute.

When Should I Consider Providing a Benefits Package?

Now that you have an idea of what is involved in planning and providing benefits, let’s cover some of the signs you should look for when you are considering providing a health package.

The most obvious is your employees telling you they want health benefits. There is still research involved because you need to find out from all of your employees (not just the vocal ones) if they are also interested in health benefits. Remember, you will need a 70% participation rate for most insurance providers. If you cannot reach that level, then the employees eager for coverage can shop the marketplace for an individual plan.

Another significant indicator is hiring and retention. If you are having challenges with either of these, it can be related to your benefits or lack thereof. A recent Metlife survey found that among Millenials, Gen Z, Black, Hispanic, workers with children, and workers with disabilities the most important factor was something other than their pay. Even if you are paying a higher wage than your competitors, benefits are still a factor. We live in a time where health benefits are an expectation, whether they are mandated by law or not.

What to Remember About Employee Health Benefits

Don’t be discouraged by the prospect of providing health benefits. There are so many combinations and price ranges of coverage that you can find something that will work for your team and it doesn’t have to cost an arm and a leg.

There are a lot of variables that will determine the ultimate cost of health coverage for your employees, including industry, size of business, budget, participation, and more. Just know that you are probably looking at a cost of anywhere between $100 and $300+ per employee each month.

Keep yourself well informed on your employees' needs and wants by opening regular lines of communication and asking the questions we suggested earlier.

Here at PaydayHCM, we are pros at navigating the complex field of health coverage. Backed by more than three decades of experience and a team of enthusiastic benefits gurus, we know exactly what it takes to implement a meaningful benefits package and do it within a budget.

Check out our article with 6 steps to developing and implementing a company health plan to learn more about getting your health plan going. Or get in touch and we can answer any other questions you may have.

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