The truth
about benefits

Employee benefits can be valuable to any type of organization, regardless of size or HR resources. Principal provides benefits for businesses with as few as three employees. The key is to find solutions that match the goals, culture and budget of an organization. Some employee benefit solutions are specifically tailored for small and medium-sized businesses (SMBs) that don’t have retirement plans, such as Simply Retirement by Principal^®. SMBs without a dedicated HR staff can use this type of service to tap into the retirement benefits expertise they might not have in-house.

New legislation has also paved the way for SMBs to use pooled employer plans (PEPs), such as Principal EASE ^® . These plans enable companies to share resources and shift some responsibilities in this employee benefit to third parties that handle more of the plan administration and risk.

Other benefits, like flexible scheduling or team lunches, can be just as easy for some small companies to implement as it would be for larger ones. And there’s value in doing so, considering that nearly two-thirds of employees say their employer has a responsibility to help staff feel healthy and financially secure, according to the Employee Benefit Research Institute (EBRI).

Not only do businesses often overestimate the cost of benefits, they also don’t realize the flexibility of plans to meet their budgets. Employers can also share a portion or all of the costs of some benefits, if necessary, with the access alone still being worthwhile for staff.

What’s more, companies need to think about benefits as a long-term investment, not just an upfront expenditure. For example, nearly two-thirds of business owners say employee benefits improve retention, according to Principal research. This can ultimately boost revenue when considering that the cost of replacing an employee ranges from half to twice the amount of their annual salary, based on some estimates.

Administering benefits can also be easier than companies often assume. Using solutions like pooled plans and working with financial professionals, benefits administrators or other third-party resources can lift the burden, especially on SMBs.

“A reputable provider will make the administration process as easy as possible for the business,” said Kara Hoogensen, senior vice president of specialty benefits at Principal.

Data shows that employee benefits positively correlate with factors like employee engagement, retention and recruitment—even more strongly now than in the past.

In addition to Principal’s research showing that most business owners think employee benefits have increased retention, the study also finds that 58 percent say benefits improve productivity. In 2015, only 42 percent of business owners felt the same. This productivity boost can often be attributed to employees being able to improve their overall well-being through benefits.

“If employers can support employees through comprehensive benefits solutions, employees have peace of mind and are able to devote their time, energy and mindshare to the work at hand,” said Hoogensen.

The value of these types of packages is reflected in recruitment trends, as well. A recent study found that, by a 4-to-1 margin, job seekers would choose a job with benefits over an identical job that offered 30 percent more salary but no benefits.

Healthcare benefits should be part—but not all—of the solution toward supporting employees’ mental health and well-being. Comprehensive health insurance can cover important costs such as those for counseling, as well as potentially providing discounts related to exercise. But employers can strengthen these offerings, or fill in gaps, by providing other types of support.

For example, an employee assistance program (EAP) can be utilized by employees who may be suffering from financial stress, family issues and other challenges where they may need assistance but may not know how or where to find help. Employers might also choose to subsidize gym memberships or provide related exercise benefits that health insurance does not cover, considering the link between physical and mental health.

Less tangible benefits like more vacation time and greater flexibility can also go a long way toward supporting employees’ mental health and well-being. Other benefits outside of healthcare, such as financial counseling, can also make a difference. Employees are increasingly making use of these resources. Nearly two-thirds are using mental health benefits in 2021, up 8.5 percent from 2020, according to recent research.

Employee benefits can and should be customized to a company’s specific needs. Depending on factors like budget, company size and employee values, organizations can pick and choose the types of benefits that make sense for them—including retirement, dental, vision, life and disability insurance. Employers can dive deeper to choose the type of plan, which may vary based on fees, investment options, tax advantages and more.

Online tools such as the Principal^® Benefit Design Tool can help employers get a sense of what peers are doing and figure out what an ideal benefits plan might look like for their organizations.

Business leaders should also solicit feedback directly from employees to ensure benefits reflect what would help their workforce feel engaged and satisfied. Beyond offering traditional benefits like health insurance and retirement plans, employers can customize their employee benefits with more unique offerings that their staff wants, such as providing coworking stipends (to help offset the cost of setting up a home or remote office), or reduced hours or full days off on Fridays in the summer.

“Every business is different, partly because every employee group is different. Talking with employees individually or in small groups can be insightful, as business leaders better understand what’s top of mind for their employees,” said Hoogensen. “Designing a benefit program with these unique perspectives in mind is important for the program to have its intended results and to reinforce the culture the business is aiming to advance.”