What Is Benefits Benchmarking?
Employee benefits benchmarking is the process of comparing your employee benefits plan against plans of similar organizations. Benefits benchmarking helps employers decide what benefits they should offer employees, and how much they should budget for their employee benefits plan.
Typically, benefits benchmarking will compare against plans from organizations of similar company size, industry, or region to provide the most useful, accurate information. However, in some cases it may be useful for organizations to benchmark more broadly. Good benchmarking should cover several, or all, variables in a benefits plan. Typically, this should include benefits included, benefits not included, coverage levels, coinsurance, deductibles, and several other variables unique to each benefit. Without a thorough breakdown of each variable, benchmarking won’t serve it’s purpose.
In the CloudAdvisors marketplace, we break down benchmarking by industry, region, and company size, and benchmark by percentile. This allows employers to understand exactly where their plan sits on a competitive scale. You can see visually which benefits are competitive (typically 70th percentile or higher) and which need improvement (25th percentile or lower). You can download our sample benchmarking reports here.
In the article below, we break down why benchmarking is important, where to access benefits benchmarking, and what good benefits benchmarking looks like.
Download a Sample Benchmarking Report
Curious what’s in a benchmarking report? Download a sample here:
Why Is Benefits Benchmarking Important?
When making any business decision, it can be difficult to know where to start without a baseline to compare against. The same goes true for employee benefits. While it may be a common misconception that all benefit plans are built the same, this is just plainly not true. There are hundreds of variables in an employee benefits plan, and it can be difficult to know where to start. Read our guide here on how to build a benefits plan for the first time.
Benchmarking presents a thorough breakdown of what your peers are offering their employees. Employers who wish to competitively recruit the best talent should prioritize meeting or exceeding the plans of their competitors. Meanwhile, organizations working with a smaller budget should utilize benchmarking to prioritize the most important benefits above others.
Recruitment and Retention
The most common use of benchmarking is to improve recruitment and retention strategies. Organizations should aim to include their benefit offerings in job descriptions and on company career pages so high value applicants have more incentive to apply. Companies that wish to differentiate themselves in what is currently a job-seekers market should begin by consulting their benchmarking data. High talent job seekers understand their worth, and will frequently choose a job with better benefits over one with a higher salary.
Another common issue that relates to recruitment is plans that have gone out of date. At one point in time your plan may have been competitive, however many employers fall into the trap of renewal without assessment. If a plan hasn’t been changed or updated in a number of years, there is a good chance the plan is no longer competitive. Employees that have been in your organization for a while may also be susceptible to leaving for better benefits. While salary improvements, bonuses, and promotions are expected annually, benefits should improve as well to account for inflation, and competitive trends.
Benchmarking tip: Don't just compare your plan to others in your industry. Employees often have highly transferrable skills they can take to another industry - or remote work options that could have them sitting anywhere in the country. 🌎
— CloudAdvisors (@cloudadvisorsCA) July 11, 2022
Budgeting
In addition to recruitment, allocating a sustainable budget for your benefits plan is a critical element to consider. A number of plan variables will affect the overall cost of your benefits plan. A thorough benchmark will break down all the elements that may affect your monthly premium.
For small business owners, or plan sponsors working with a restrictive budget, benchmarking can help you prioritize coverage levels versus adding more benefits to your plan. For instance, offering 100% coverage may be typical for all basic health care items in your industry. If your plan only covers 80% of costs, you may want to reallocate funds to offer higher coverage levels – particularly if those are considered the most competitive elements in your comparison group. This may come at the expense of other benefits, however if this coverage level is what employees come to expect, it should be prioritized.
Benchmarking will tell you which benefits are the most popular in your industry, and which ones are uncommon. This can be used to differentiate your plan, or meet basic expectations.
Some budgeting considerations include decisions around coverage levels, whether to require a deductible, using a coinsurance model, maximums versus reasonable and customary amounts, and other line items specific to each benefit.
How Does Benchmarking Work?
Benefits benchmarking is only as good as the sample it was compared against. The process of benchmarking includes selecting a sample group, taking the averages of each metric being compared, and comparing where your plan sits against that average. The larger the comparison group used in your benchmark, the more accurate and useful your data will be.
Traditionally, benefit advisory firms will benchmark using their own client data, purchased data, or use an external benchmarking software like CloudAdvisors. CloudAdvisors contains one of the most comprehensive data sets in Canada, with more than 15,000 organizations to create a comparison group from.
Benefits benchmarking will pull a number of different metrics and compare them by averages, percentiles, both, or more. Reports can become quite comprehensive with more than 100 data points to compare, or can stay relatively simple. Your advisor will know how comprehensive to make your report depending on the goals of your organization.
In the sample benchmarking report below, data is compared against all 15,000 employers in the CloudAdvisors database. Generally, reports should be broken down by industry, or company size to provider the most informative benchmark for recruitment or budgeting goals. While it can be useful to understand the benefits landscape as a whole, decisions should be built around more specific information relative to your organization’s demographics.
Benchmark Your Benefits Plan
Get an estimated quote for your benefits in no time. Tell us a little about your company, and we'll show you a plan within your budget.
What Does Good Benchmarking Look Like?
The best benchmarking reports typically hinge on three criteria: 1) the sample size, 2) level of relevant detail, and 3) complexity. We’ve covered your options for choosing a sample size above, with internal advisor databases being the least comprehensive, to CloudAdvisors as the most. Generally, sample size is important because it determines the accuracy and integrity of your data. When making a decision as important as your employee benefits, it’s better to err on the side of caution and choose stronger data. You don’t want to be caught making large changes to your plan that don’t accurately reflect the competition in your comparison group.
Furthermore, not all benchmarking reports are built the same. Depending on where your benchmarking comes from, it may only include averages, which can easily be skewed by large discrepancies. We recommend selecting one of CloudAdvisors’ benchmarking reports, which contain varying levels of detail depending on your needs. Reports go from introductory information, to a thorough 14 page breakdown of your comparison group. All benefits are broken down into percentile rankings so you can see where you stand against the majority of plans. This also allows plan sponsors working within a limited budget to choose how good they want each benefits to be. For example, they may select coverage in the 75th percentile for popular benefits (offered by 70% or more organizations), and maybe the 25th percentile for add on benefits.
Finally, the best benefits benchmarking should be intuitive for the user, and easily broken down. Even with a group advisor, understanding all the nuances of a full benchmarking report can be complex. In addition, your advisor may not have time to cover every aspect of your plan. This can make it challenging to know where to start when analysing for improvements.
For this reason, CloudAdvisors uses additional technology such as the Bar Score, which provides an at-a-glance summary of what your benchmarking actually means. You can use intuitive tools like the Bar Score in conjunction with our Priority Insights feature to select areas of your benchmarking to begin with. In essence, some benefits are more important in your comparison group than others, and our AI technology will tell you which ones. This allows plan sponsors to narrow in on the benefits that may be impacting their plan most negatively.
Benchmark Your Benefits Plan
Get an estimated quote for your benefits in no time. Tell us a little about your company, and we'll show you a plan within your budget.
