Budgeting for success
Making the most of your benefits budget
One of the most common questions in the benefits world is how much does a good benefit strategy cost?
The more important question might be what is your budget and how can we maximise your return on investment (ROI). Most employers come to us without any idea of what their budget is and in this article we will look at this in more detail and give you some ideas on strategies to increase you ROI and even increase your spend on benefits.
Getting buy in from the companies stakeholders is essential and unless you can demonstrate an ROI it can be difficult. So before you consider your benefits spending priorities it might be a good idea to start with some employee feedback This can be in the form of staff surveys, user groups or polls to find out how happy employees are and what their key needs are. You might also survey your customers or external partners to get a view of how happy your employees seem from the outside. Other measures that are useful before implementing a benefit strategy are rates of sickness and employee turnover. These are all great indicators for how you are doing as an employer.
For those with a bigger budget you might like to do some benefits and salary benchmarking. You don’t have to spend a fortune to get some good indicators. Look at job boards of competitors, use job sites to see what’s on offer. Check out some great resources that are available for free some providers like Metlife who do a regular survey on benefit trends globally and publish them for free. Finally, if you have the budget you might like to outsource this to a consultant like us where you might get some high level benchmarking included in your benefit review or pay for a more bespoke benchmarking per job role at around £750 per role.
What ever you decide this is a great starting point and the time and money spent here will pay off longer term as you are not going in blind and relying on gut feel.
We cover budgeting and benchmarking in detail in our benefits masterclass, if you have not seen this, sign up for our next set of sessions here and we will be in touch when its ready.
If you not going to spend time on this or you already have your measures then lets consider budgets and how to apply them. There are typically three ways budget are fixed:
- The HR team are given a fixed sum to spend on benefits and there is no account taken of employee headcount or salary roll. This is difficult and proves unsustainable in the longer terms as typical benefit schemes costs increase as the workforce grows, salary roll grows and through natural increases to cost caused by medical inflation and age inflation.
- Fixed cost per head. This is a better way to set a budget than the one described in 1 above as it will be better for budgeting in the shorter term and for companies who are growing as you will know the cost associated with an increasing workforce. You will however still have the issue of cost increase due to the inflationary pressures mentioned above.
- As a percentage of salary. This is often the best way to set your budget as this will account for pay increases when projecting future costs. It still does not cover medical inflation or age increase as you workforce gets older.
Whatever method you use to set you budget or even if you don’t have a budget set, make sure you speak to your broker about cost projections over the next 3, 5 and 10 years based on your current workforce so you are not surprised at renewal, ask them to factor the following:
- Medical inflation on benefits including Medical and Dental Insurance
- Salary and Age inflation on benefits like Life cover and Income Protection
- General inflation and cost increases in other benefits
Summary
Overall, understanding the reason and return on investment and setting your benefit spending budget is of great importance and if your current consultant/broker or any consultant/broker you approach does not speak to you about this you should reach our to our team.
The right benefit strategy can show an employee how much they are valued and give them the comfort of working for a caring employer. The wrong strategy might not hurt you immediately, but long term can end up costing you time and money.
Eppione offers a range of pension advisory, consulting, benefit broking and administration services to complement the platform. Speak to one of our team if you want more information.
Eppione also provides a fully integrated HRIS and Employee Benefit platform affordable to all employers. You will have access to a state-of-the-art platform with native mobile app giving your employees access to a one stop solution for all your HR and Employee benefit needs and you have touch of the button data analytics and accurate benefits administration included for free.
Written by Neil Fallon DipPFS
COO & Co Founder of Eppione
These are the personal views of Neil Fallon and should not be taken as a recommendation. Always seek independent advice with making benefit and insurance placements from a qualified individual. All figures quoted are for illustration purposes only and should not be relied upon for accuracy.
