Employee benefits benchmarking is an important exercise for any business, big or small. Why? To put it simply, because it ensures your benefits are relevant and effective.
The employee benefits you set up several years ago may no longer be the most effective use of your benefit spend now. As demands change, it’s important for you as an employer to keep up with competition.
This is where employee benefits benchmarking comes into play. We believe it is a powerful tool that all businesses should use. But what exactly is it? How do you do it? We’ll answer all these questions and more in this guide.
Employee benefits benchmarking compares your benefits package to that of your competitors. It provides an in-depth analysis of yours and your competition’s employee benefits.
Any business can conduct employee benefits benchmarking. Whether you need to set up your benefits from scratch or review existing ones, benchmarking is a powerful tool as it allows you to see if you’re:
As we’re talking about benefit benchmarking, we should address salary benchmarking too. Although not technically an employee benefit, it does form part of a company’s total reward. With this in mind, it’s always a good idea to benchmark your employees’ salaries with that of your competition when carrying out a benchmarking exercise.
By doing this, you can compare the salaries you offer against your competitors. Pay benchmarking will identify if you’re paying above or below the market average. Employers can then adjust salaries accordingly to remain competitive. Paying too little will look unappealing to prospective hires. But paying too much may cost your business more than necessary.
Offering competitive salaries is not enough nowadays to help companies recruit staff. While pay is important, people often apply for roles based on the benefits they’ll receive. In fact, a report by LinkedIn found “excellent compensation and benefits” were the top priority for global candidates in 2022.
The employee benefits you offer are important. You’ll want these to go above and beyond to attract the top talent, which is where benchmarking comes in. It can identify if you’re not providing a benefit that one of your major competitors is, for example. You’ll better understand competitors and develop a successful benefits package from it.
This is the bit that as an employer you’ll really want to know about. What are the benefits of carrying out benefits benchmarking?
You’ll be pleased to know there are a range of benefits, not just for you as an employer, but also your staff. Let’s explore what these are now.
The most obvious benefit of benchmarking your employee benefits is that you can compare what you offer to your competitors. This will help to identify if there are any gaps in your package, or give you confidence that what you offer is competitive. Not only this, but it could highlight if you’re offering too much.
Whatever the outcome, the process will pin point how your benefits stack up against similar companies in your industry. Having this insight will help you to make relevant adjustments, which in turn could help to improve your offering. Or, you may discover that you offer a benefit that competitors don’t and realise that it gives you a USP when it comes to recruitment and retention.
Benchmarking forces you to review your existing benefits and look at their effectiveness. It’s not just about offering what your competitors do. It’s about providing a rewards package that employees really value.
You might be paying for a Corporate Health Cash Plan, but no one is using it. Or, you might have a workplace pension but are missing out on big savings as a result of not using a salary sacrifice scheme.
The point is, by reviewing your existing package, you can start to identify these things. It gives you the opportunity to look at engagement levels and see if your staff are actually using what you provide.
If they aren’t, you can then dig a bit deeper.
Benchmarking could also help you to save money. By understanding the level of benefit competitors provide you can adjust your own. There are a lot of things you can do to save money but still offer a competitive package.
For example, you may be paying much higher pension contributions compared to the industry average. It might be that you can lower this to bring it more inline. Or, you may offer Group Income Protection with a deferred period of 4 weeks, when the average is 13.
Increasing a deferred period can reduce the amount you pay in premiums. So, even if you were to increase it to 8 weeks, you could still offer a more competitive benefit than your competitors, but reduce your own costs.
Providing your staff with a good benefits package has the ability to:
This can lead to you having a more engaged, motivated and productive team. Having a happy workforce can significantly improve business performance.
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A study by Oxford University found that happy staff are 13% more productive than those that aren’t. Happy staff work more efficiently and can potentially convert more sales!
In such a competitive job market, your business needs to stand out. You need to offer potential and existing staff something that your competitors don’t. You also need to make sure what you do offer is what employees want.
For example our recent survey found that nearly 1 in 5 employees said that that benefits such as insurance policies that protect them and their loved ones were most attractive. In order for benefits to be effective, you need to put yourself in the shoes of an employee.
If you were looking for a new role, out of the two example companies below, who would you choose to work for?
Different Company Benefits
Both companies offer the same salary, but one offers much better benefits. As an employee the likelihood is that you’d choose to work for Company B over Company A as it offers a much more comprehensive rewards package.
By benchmarking your employee benefits, you can make sure that you remain a competitive player in your industry when it comes to retaining and attracting top talent.
Even if you don’t have a big budget, you can still use benefits as an effective engagement tool. Flexible working and Group Life Insurance are great examples of valuable perks that don’t cost the earth.
In fact, flexible working is the top benefit employees want to receive according to our latest survey and it’s free to implement.
Head Of Health & Wellbeing Benefits
Employee benefits benchmarking can help you to stay up to date with industry trends. Using this knowledge, you can adapt your benefits strategy to reflect these. As an employer, knowing what’s going on in your industry can help with employee retention and hiring. If you adapt to new developments, you’ve got a chance to stay ahead of the competition.
You may find that benchmarking identifies patterns within the market. Industries might offer different benefits, depending on aspects like location and employee demographics. This information can help to add new benefits in line with industry demands.
Before you benchmark your employee benefits, there are several elements to consider. These include:
Gathering the benefits data to benchmark can take time, depending on factors like:
You need to research your competitors and collect information about their employee benefits. This can take time, and not every business will have the resources to carry out the process. So, before you benchmark, check if you have the time and resources for the task. Employers often outsource their benefits benchmarking to free up time.
The location of your business and your competitors can impact your data. This is because different areas will offer different salaries and benefits. For example, if you’re in North England and you’re benchmarking companies in London, the data isn’t reliable.
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The purpose of benefits benchmarking is to see how your benefits compare to your competitors. What a business offers in London may differ from one in Leeds, due to inflation in the capital city.
Another thing for employers to consider is the size of their business. Discrepancies between what a small business and a large one can afford are common. Larger companies tend to have more budget to add a variety of benefits. It would be an unfair comparison if you compared your startup to a company with 250+ employees.
Your sector will affect the employee benefits benchmarking report too. Those in more niche industries may not have a huge dataset to compare their employee benefits against. This could make comparison to your competitors trickier. For companies in niche markets, your solution would be to broaden the benchmarking data.
Below is a general idea of the steps involved with employee benefits benchmarking. There’s a lot involved, which is why some employers outsource the task. That said, you can do it yourself!
First things first, what do you want to benchmark? There are various areas within the employee benefits landscape. Some of which might be of more importance to your company.
For example, you might be benchmarking to lower business costs. In this case, your goal might be to see how much money your competitors are spending on their benefits. Think about your specific needs when setting goals.
Getting your employees involved with the process can be beneficial to your company. When an employer is aware of their workforce’s needs, they’re better placed to meet these demands. You can send out an internal survey, asking about their benefits and satisfaction. You can then use this valuable benefits data to make changes to your benefits package.
To benchmark well, you need to know who your competitors are. Make a note of any competitors you know of. Research will help you to identify any you might have missed.
You can find more of your competitors by:
Write a list of the competitors you want to compare your company to. This could be all the competitors you’ve found, or a short list, depending on your business size.
You can’t benchmark without data. So, you’ll need to gather information on your competitors’ employee benefits. You can review job ads, read their website, and speak to industry experts about their perks.
The data will allow you to compare your employee benefits to other companies. Keep your benchmarking goals in mind during this step. For cost-related goals, you’ll want to find out how much competitors spend on benefits, for example. If it’s employee engagement you’re keeping an eye on, it’s worth seeing how employers communicate their benefits.
Now it’s time to put the employee benefits benchmarking data to good use. Do you need to add a new benefit? Can you reduce the amount you offer for Group Life? Whatever the outcome, benchmarking will enable you to make data-led decision about how to improve your employee benefits.
If you do make changes to your benefits, it’s vital that you communicate what these are to your employees. Benchmarking can only go some way to making your rewards package effective. You also need to have a clear and consistent communication plan so staff know what’s available. You could offer everything your competitors do and more, but if staff don’t know about it, what’s the point?
At Drewberry, we know that updating your benefits can be time-consuming, which is where we step in. Not only can we carry out benchmarking exercises, we can also help you communicate any changes to staff. So, if you’re looking for help please don’t hesitate to get in touch with us by calling 02074425880 or email email@example.com.
Our latest survey found that only 18% of employees received information about their benefits more than once a year. This could go someway to explaining why 25% said they were unsatisfied with their benefits.
Senior Consultant, Employee Benefits
As we’ve hopefully shown, employee benefits benchmarking comes with a host of benefits. Yet, despite this, our latest benchmarking survey, which surveyed 600 UK employers, found that 40% of employers don’t do it.
This means many companies could be missing out on important opportunities, such as controlling costs, attracting and retaining top talent, and most importantly, a happier and more engaged workforce.
We know that carrying out a benchmarking exercise isn’t a quick task though, and you might not have the time and resource to do it. This is where the team at Drewberry can help. Our expert advisers can do all the heavy lifting for you, they can:
We appreciate that this approach may not be for everyone, which is why we also offer access to our full benchmarking report. Our survey was conducted via YouGov and provides data from over 600 UK companies to give you a clearer picture of what employers are currently offering.
Whether you want our experts to conduct a full analysis of your benefits, or you’d like access to our benchmarking report, don’t hesitate to get in touch. To find out more, drop us a call on 02074425880 or email firstname.lastname@example.org.
Our team of experts are experienced employee benefits advisers. We can help you to develop a comprehensive employee benefits package and ensure your employees get the most value from their benefits.
If you’d like more advice on your employee benefits, you can speak to one of our financial advisers. At Drewberry, we help many businesses, big and small, with its benefits strategy.
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