Cost of Employee Benefits: How to Deliver ROI

What picture do your current levels of staff retention, absenteeism and productivity paint about your organisation? A portrait of a healthy, content workforce — or one that shows low engagement and high staff turnover?

There are many factors that can influence how engaged employees are. Company culture, work-life balance and recognition of a job well done are key motivators but pay and employee benefits continue to be decisive push and pull factors for recruitment and retention. For startups and SMEs, the ability to offer a comprehensive set of benefits may offset an inability to pay high salaries. 

Investing in an employee benefits package that meets both the financial needs and wellbeing needs of staff can be a cost-effective approach. But to understand the true value of these employee benefits to both the staff and the business, a cost-benefit analysis should be prepared.

Here, the outlay for each element of the investment can be calculated — from monthly insurance premiums to the time and resources required to administer the scheme — and compared with the quantitative or qualitative return for the organisation.

Calculating the cost of employee benefits may appear relatively straightforward, but measuring the ROI of employee benefits is more challenging.

The aforementioned trio of KPIs — staff retention, absenteeism and productivity — can provide a snapshot of how motivated staff are. And while there are numerous measurable employee rewards and perks that can provide meaningful data, such as insurance, healthcare, car loans and pension contributions, others are harder to quantify. Job satisfaction is subjective, but the correlation between low levels of job satisfaction and the mental and physical wellbeing of employees is widely reported. 

As the return for some benefits isn’t a direct financial one, it can be harder to assess the net contribution to the business. Where possible, a monetary value should be assigned as this will enable managers within the organisation to understand the value of the benefits and how they support business outcomes. For example, it’s easy to estimate the money saved from reduced absenteeism or staff turnover.

Stating an objective or goal is a good starting point when putting together a cost-benefit analysis. This will enable the ROI of employee benefits to be assessed in context, even if the result isn’t directly linked to a monetary value. Specify a time period too: what will the ROI for each element be during the course of a year?

How to measure the cost of employee benefits

So what is the true cost of employee benefits to employers? The figure typically quoted is in the range of 1.25x to 1.5x base salary, although the calculation will depend on a range of factors, such as the mix of staff rewards and perks, and the size and makeup of the organisation — a company with a higher average employee age may need to factor in higher life insurance costs, for instance. 

To calculate the cost of benefits as a percentage of an employee’s salary, divide the total annual cost of the benefits by the employee’s annual salary and multiply that figure by 100. 

Again, some rewards are less quantifiable but do pay dividends, and should be highlighted as a potential business outcome when considering the cost of employee benefits. Attracting and retaining the best talent, developing a better company culture, and fewer employee sick days can all impact productivity.

ROI of employee benefits

Although hard to measure specifically, engagement is one of the most important aspects to consider when working out the ROI delivered by employee benefits. 

Gallup suggests in its State of the Global Workforce Report that engaged employees “make it a point to show up to work and do more work”, and highlights a reduction in absenteeism of 81% and a 14% difference in productivity with a highly engaged workforce.

This is backed up by an independent Forrester Consulting report commissioned by YuLife, which details the effect that engagement has on staff turnover. 

Forrester examined the potential ROI businesses could realise with YuLife’s employee benefits when compared to traditional insurers. By aggregating data gathered from HR and benefits professionals into a single composite organisation of 5,000 employees, Forrester estimates that the increase in health and wellbeing engagement delivers a 181% ROI for businesses. 

What’s more, engagement with the app, Forrester suggests, could increase benefit use 2.7x — a critical metric in delivering a return on investment. 

The value of rewards and discounts also offers a clear and quantifiable measure of ROI, meaning you can present a strong case for investment.

How to make the most of your employee benefits budget

For the most efficient use of budget and resources, an all-in-one employee benefits solution represents the most practical option — taking a mixture of long-term support in the form of life cover, income protection and critical illness insurance, and pairing it with present-day support with rewards and discounts, daily wellness challenges, EAP, and Virtual GP. 

It’s not solely about a menu of benefits, of course, but the extent to which the staff actually value and use them.

How YuLife delivers ROI

This is where YuLife’s unique approach delivers every day. It is 11x more engaging than any other wellbeing programme, with the smartphone app that takes a gamified approach to health, providing a daily touchpoint for employees.

The YuLife employee app encourages simple everyday healthy activities such as walking, cycling and mindfulness, incentivised with YuCoin. 

This is the digital currency you earn within the app that can be exchanged for tangible employee rewards — including vouchers and discounts with leading brands and retailers. 

Participating in friendly competition with co-workers within the app strengthens company culture, and leads to a better ROI than can be expected with traditional schemes.

The app is also the gateway to the YuLife Wellbeing Hub, where staff can access all their company benefits and wellbeing tools. With a virtual GP, mental health services, and their Employee Assistance Programme (EAP) accessible through their smartphones, team members will be more likely to engage with the support that’s on offer.

It’s easy for HR professionals to check engagement levels too: YuLife’s powerful HR insights and pulse surveys can be used to measure progress and demonstrate the value of employee benefits.

Being able to access actionable data by region, age or time of day helps to build an invaluable picture of employee engagement and ROI, as experienced Wellbeing Manager, Paul Caudwell, attests: “That’s the core part of what’s bringing us to solutions delivered by technology companies, because we can show that every penny that we spend is making a difference.”

Underpinning this innovative approach is a foundation of core insurance products that provide financial protection and security for employees, with options for group life, sick pay, group critical illness and lump sum disability.

YuLife’s all-in-one solution offers value for money, and a marked ROI – as demonstrated by service rollouts with digital engineering business Apexon, Vodafone franchises, and food giant Del Monte. 

Would you like to learn more? Speak with one of our incredible insurance specialists here.

About YuLife.

YuLife is working to reimagine the insurance industry by protecting lives, rewarding living and inspiring life. We’re on a mission to transform traditional insurance into a life-enhancing experience each employee will value and use daily. 

How does it work?

Our award-winning app uses behavioural science and game mechanics to reward your people for living well while offering protection in case of crisis. And with our top-rated employee assistance programme, your team gets access to mental, financial and social support, virtual GPs, nutritionists, life coaches and more to help them live their best lives.

Because we believe that your employees should benefit from their insurance from day one — and that wellbeing should be accessible every day, for everyone.

Request a demo for your team today.