blog 4 ways to measure the roi of the benefits you offer

4 Ways to Measure the ROI of the Benefits You Offer

Employee benefits are big expenses for most companies, making up nearly a third of compensation costs for businesses nationwide. As much as a financial strain as these benefits can be, the payoff is surely worth it. Right?

Benefits are like any other investment: You pay for benefits to increase the efficacy of your business and its workers. While it’s easy to measure the cost of a small business 401(k) or health insurance, calculating the value these benefits add to your business is a different challenge entirely. 

There’s a number of different ways to measure the return on investment your benefits have. All will produce different answers. To get the best sense of the value of your company’s benefits plans, try looking from these angles: 

1. Measure the cost of employee turnover.

No matter how you crunch the numbers, employee turnover is expensive. The amount of work lost while looking for a replacement can be substantial; onboarding costs continue to rise each year. The right benefits package, however, can discourage employees from leaving and promote long-term loyalty.

Recent studies have shown that hiring a single employee incurs an additional cost of 33% of that worker’s salary. But that number can vary wildly from business to business. If you lose an employee in a highly specialized role, for example, the recruiting process will be far more intensive than with other positions. 

Look at your company’s records for patterns. Make note of each new hire and departure. See how they coincide with the introduction of new benefits or the elimination of older ones. Once you calculate the costs of both your benefits and employee turnover, identifying correlations between the two can give you a better understanding of your benefits’ ROI. 

2. Ask your workers.

The majority of employees rate benefits as a very important component of job satisfaction, but every employee is different. To get a sense of the true impact of the perks your company offers, just ask.

Formulate questions that get at the heart of how benefits affect your employees’ work. Questions about how time off, retirement savings, or in-office amenities affect productivity can provide valuable answers. 

While face-to-face time with workers is a great way to get a sense of things, making benefits-related inquiries in a survey might produce deeper insights. Adding the element of anonymity can get clear answers. That allows you to figure out exactly which benefits produce the most impact among your staff and which fall flat.

3. Look at the number of days worked. 

If your business has made changes to its healthcare plan, use that as an opportunity to measure how it affects your company. The CDC reports that healthier employees are less likely to take sick days and vacation time due to illness, meaning more work is done over time. 

Companies with weaker healthcare plans might unintentionally encourage employees to avoid going to the doctor or getting prescriptions to save money. Look back at any alterations you’ve made to your business’s healthcare plan; did they affect employee attendance or vacation day usage? By adding the money saved through any decrease in time off, you can get a rough estimate of the returns your medical benefits are providing. 

4. Calculate increases in employee skill.

Up to 60% of workers strongly consider benefits packages before choosing a job. Any company that wants to recruit top talent needs top-of-the-line perks to capture their attention — but knowing what level of benefits produces the highest ROI can be difficult.

As with the other systems of measurement, look at how the skill of your workers has increased with any increases in benefits offered. Alternatively, you can reach out to highly skilled workers you’ve successfully recruited in the past to ask what potential benefits would’ve convinced them to come on board. The more skilled your employees are, the more revenue they can generate for your business — measuring the impact of perks on worker skill can reveal a key aspect of benefit ROI.

Benefits increase employee satisfaction, happiness, and overall well-being, but they can have larger impacts as well. Curated well, benefits can fit the needs of your employees while promoting business growth. By using these measurements, you put a figure on the ROI of your benefits package — and learn how to best alter it in the future.