How to create an employee benefits program in 8 steps

Employee benefits are more important today than they’ve ever been. Modern companies can’t just check boxes for their common employee benefits packages; today's programs have to be thoughtful, competitive, and aligned with what employees need.

In this guide, we’ll walk through a wide range of employee benefits, why these benefits matter, and how to build a benefits program that attracts and retains quality talent.

An employee benefit is a perk and compensation companies provide their employees in addition to a base salary or wages.

Employee benefits​​ include mandatory and voluntary benefits, covering health and wellness, insurance, retirement savings, and beyond. HR leaders often use employee benefits to attract top talent.

Companies are required to provide essential benefits mandated by law, often referred to as statutory benefits. Additionally, there are voluntary benefits that employers can offer to enhance employee experience (EX) and retain a competitive advantage in the hiring market.

Federally mandated benefits in the United States include:

Offering competitive and personalized employee benefits has far-reaching impact throughout an organization:

Employee benefits can be a great incentive to stay with a company. MetLife data shows that employees are 70% more likely to stay if they are satisfied with their benefits.

Quality benefit packages make new hires and current employees feel valued and supported by their employers, which is a win for employee satisfaction. According to Gallup research, exiting workers often cite employee benefits and compensation as key factors affecting their decision to leave a company. 

Job candidates seek companies with competitive pay and ample benefits. Highlighting top benefits in your job listings and recruitment resources is a great way to attract talented professionals.

A strong benefits package enhances your organization’s appeal and supports a healthier workplace culture, which can appeal to experienced professionals.

Flexible work hours and paid leave enhance productivity and engagement by promoting a healthy work-life balance and allowing employees to recharge. Perks like free snacks and gym memberships also boost team morale.

Our research uncovered that 53% of workers believe employee well-being should be the top focus for HR, which puts a bright spotlight on benefits and wellness programs.

Over 1 million workers miss work daily due to stress. To combat this, implement mental health benefits, paid vacations, and support for employees’ overall well-being. These benefits help prioritize well-being and reduce turnover by enhancing work-life balance and job satisfaction.

Employee benefits can be divided into six overarching categories:

Health insurance, including dental and vision options, is an essential part of employee benefits packages and is extremely valuable to employees. Under the Affordable Care Act (ACA), employers with 50 or more full-time employees must offer health insurance or pay a penalty.

This benefit allows employees to choose coverage for themselves and their families. Many employers cover only part of healthcare premiums, yet 51% of employees want fully paid premiums, according to SurveyMonkey.

There are several different types of health insurance plans. The most common insurance plans are:

Tracking and supporting mental health through wellness benefits is becoming increasingly recognized in the workplace. Mental health programs help cover the cost of professional counseling services, treatment for mental illness, substance use disorders, and other mental health concerns.

Employee assistance programs (EAPs) provide free and confidential care to help employees address personal or work-related challenges. These programs may include counseling sessions, financial planning resources, and crisis intervention.

EAPs are beneficial to both employees and employers as they help employees get the support they need to perform at their best.

Telemedicine, or telehealth, enables remote medical care. It gained popularity during the COVID-19 pandemic for its convenience, particularly among busy workers. Many benefits packages now include telemedicine access.

Wellness stipends are a popular employer benefit that provides a fixed amount monthly, quarterly, or annually for health-related expenses. Employees can use this stipend for costs like gym memberships, fitness equipment, wellness apps, or nutrition support. 

Some employers offer fertility benefits that help cover the cost of fertility treatments, such as in vitro fertilization (IVF) or freezing eggs or sperm.

Transgender care benefits offer inclusive healthcare coverage for medically necessary care for transgender employees. This can include hormone therapy, surgeries, and mental health counseling. 

Life insurance provides an employee’s beneficiaries with financial assistance in the case of said employee’s death. A life insurance policy will help cover funeral costs, burial or cremation costs, debts, etc.

Disability insurance provides income replacement if an employee cannot work due to an injury, illness, or condition. There are two primary types of disability insurance: short-term and long-term. 

Short-term disability insurance provides benefits for a temporary disability lasting up to several months. Long-term disability insurance provides coverage for an extended period of several years or until retirement age. 

Pension and retirement plan benefits assist employees in saving for their golden years of retirement. 

A pension is a defined benefit plan providing monthly income to retirees, regulated by the Employee Retirement Income Security Act. The amount is based on tenure and salary history. Traditional pension plans are rare in the private sector but are common among government jobs.

A 401(k) is a common type of retirement benefits plan offered by employers to help individuals save for retirement. Employees can contribute a percentage of their salary to the account each pay period. Some employers match contributions up to a certain percentage to accelerate an employee’s retirement savings.

Employee benefits that translate directly into money include competitive salaries, bonuses and profit-sharing, and paid time off. These are key components of an employer’s total compensation pacxkage.

As an employer, providing competitive salaries is crucial for attracting and retaining talent. A competitive salary must meet or exceed industry standards, encouraging employees to excel and innovate.

Bonuses are extra compensation for employees based on achieving company goals or performance milestones. This benefit helps employers retain exceptional employees and validates their contributions. Common types of bonus include performance, sign-on, or holiday bonuses.

Profit-sharing is based on distributing a portion of the company’s profits to employees as cash bonuses, stock options, or retirement contributions. This bonus structure fosters a sense of ownership and shared success among teams. 

PTO policies ensure that employees enjoy a healthy work-life balance and reduce the risk of burnout. Generous PTO policies are highly attractive to prospective employees. Common types of PTO include vacation time, sick days, mental health days, bereavement leave, and parental leave.

With an unlimited PTO policy, employees can take off as much time as they need (without impacting performance.) SHRM reports that in 2024, 7% of companies offer unlimited PTO or open leave policies.

Small businesses have different budgets and resources, so their benefits programs typically look different. A typical employee benefits program for a small business may include health insurance and PTO.

Group insurance plans, or group health plans (GHPs), are insurance policies offered to employees, union members, or association members.

GHPs are popular because they speak risk among a large group, allowing for lower premiums. Employs can also educt the money they pay towards GHP premiums from their taxes.

Some small businesses also offer student loan repayment programs to help employees manage their educational debts, or include supplemental plans for vision, dental, and pharmaceuticals.

Since small businesses often cannot offer the most competitive salaries, they sometimes provide employees with flexible PTO. Flexible PTO plans offer paid time off without many strict limitations on when or why employees can use it.

Under the Family and Medical Leave Act (FMLA), employers must provide up to 12 work weeks of unpaid leave a year for specified family and medical reasons. Typically, a small business with family leave benefits will provide at least two to six weeks of parental leave for the birth or adoption of a child, though some parents may decide to take additional unpaid leave.

Fringe benefits are voluntary benefits that employees might receive in addition to their salaries and statutory benefits. They’re usually considered perks that help employers attract and retain employees.  

Employee discounts include discounts on products or services offered by the employer or partner companies. Employees can factor these discounts into their cost of living or other expenses. 

Remote and hybrid work schedules attract many employees. Allowing employees to work from home a few days weekly can reduce burnout and boost engagement. Nearly 30% of workers prefer remote work, yet only 16% of workers have the option to work remotely. 

Gym memberships can help encourage employees to reduce stress and improve their physical fitness. For many employees, gym memberships can get expensive and may deter them from reaching their health and fitness goals. 

By providing a paid or discounted gym membership, employers can show they care about employees’ health and well-being.

Meals are a popular perk. Vouchers or catered lunches provide free or discounted meals during work hours, reducing the need to pack a lunch or budget for meals. This benefit can also promote wellness if nutritious options are available. 

Supporting employees with children by providing financial aid or on-site child care can be a game-changer for parents. Providing an on-site daycare or subsidized costs for external child care providers can help ease employees’ stress and improve their childcare costs. 

While there are many ways to build an employee benefits program, here are eight recommended steps to help you kick things off:

Collecting employee feedback is a good first step for creating the best employee benefits program for your company. Feedback reveals what your team wants, needs, and expects, so you can create a program that's more likely to delight them.

While employees can share feedback on current and future benefits through in-person focus groups, 1:1 meetings, and suggestion boxes, the most efficient and confidential way is through anonymous surveys.

By asking for employees’ thoughts and opinions through surveys, you can offer the benefits your employees want.

Researching the benefit offerings of your peers can help you close experience gaps and makes your benefits package more competitive.

Compare your current benefits program to industry standards. How does your current program measure up against companies in your industry, markets, and size? Are there common benefits candidates within your industry or market expect to see in a standard benefits package?

After benchmarking with industry standards and collecting employee feedback, it’s time to determine what benefits your organization will offer. You must first consider the mandatory benefits, including: 

Cover the mandatory benefits and use survey feedback and benchmarks to identify supplemental benefits. What benefits do employees value most? What benefits do competitors provide that you don't? Use these insights for data-driven decisions on new or updated benefits packages. 

Next, you’ll need to analyze and manage the costs of the employee benefits you plan to offer. While offering competitive benefits is essential, you must also ensure they align with your company’s financial capabilities. Let’s look at an average cost breakdown according to a KFF study: 

Employers typically cover 50-80% of premiums for health insurance and wellness programs as part of their employee benefits packages, with employees paying the remaining share.

The average cost of a wellness program is $150-$500 per employee annually. This can include initiatives like gym memberships, app subscriptions, etc.

The average life insurance premium varies significantly based on the type of policy, an employee’s age, gender, health status, and more. For example, the average premium for a 20-year, $250,000 term life policy for a 30-year-old female is $144 and $162 for a male. The median life insurance coverage for an employee is $20,000.

For disability insurance, the average cost is $2,200 per year. In private industries, generally, employers cover 94-100% of the premium. 

The average employer cost of retirement contributions to accounts like a 401(k) can vary based on the size of the company and several other factors. For small businesses with less than $1 million in assets, the average 401(k) plan costs range from $5,000 to $10,000. 

To manage these costs effectively, small businesses can create tiered benefits plans catered to the needs of different employees. Additionally, small businesses can get tax credits through the Small Business Health Options Program (SHOP). These credits may cover up to 50% of premium costs for eligible employers.

As an employer, you should ensure legal compliance to avoid financial penalties, legal disputes, and damage to your organization’s reputation. To maintain compliance, review common legislation around employee and workplace benefits:

Regularly review federal, state, and local regulations to ensure compliance and keep up with any changes. 

Employee benefits liability (EBL) insurance protects your organization from errors or omissions in administering your benefits program. Since even small administrative errors can lead to legal claims that can result in costly settlements, securing this liability insurance can give organizations peace of mind regarding legal risks.

Common EBL providers include Great West Casualty Company, Sentry Insurance, and Tivly. Review and compare each provider to determine the coverage that works best for your company.

Communicate your benefits and policies clearly to employees, both through meetings or webinars and materials like PDFs, slide decks, or printed brochures. These materials should explain the available benefits, outline eligibility requirements, and address how to enroll. 

Use multiple channels to spread the word, including emails, Slack messages, and company all-hands meetings. Highlight benefit enrollment windows and deadlines and send reminders to urge employees to enroll on time to avoid coverage lapses. 

Leverage a benefits portal to give employees a centralized platform to view, enroll, and manage their benefits. Your benefits protal should also provide access plan summaries, FAQs, claims processes, and the educational materials you’ve created. 

The key to administering employee benefits effectively is to make it easy for your employees to understand their benefits offerings and complete the next steps to get covered.

Improve your benefits program continuously by implementing feedback loops. Use employee surveys to track your employees' changing needs and preferences, then update your program accordingly.

Key metrics such as enrollment rates, utilization, and employee satisfaction can provide insights into how employees feel about your benefits program and close experience gaps.

Strong benefits programs make for happy employees. That’s why building an employee benefits program your team loves is crucial for the success of your organization. Improve recruitment, retention, and engagement efforts with a comprehensive employee benefits program. 

SurveyMonkey empowers organizations to collect data and insights using employee benefits feedback software to improve their benefits continuously. Send surveys to gather employee feedback and take action today.