Companies put a lot of time and energy into providing their employees with the best benefits programs they can. But employee benefits can be expensive, and they hugely impact many other aspects of the business’ success. In light of this, it’s vital that company leaders track their benefits program’s ROI to ensure the investment isn’t costing their business more than it can afford. For assistance, review this employee benefits ROI guide.
To learn more about employee benefits ROI, or to request a quote, contact Beckham Insurance Group today.
What is ROI?
ROI, or Return on Investment, is a method by which you can evaluate the performance and profitability of a wide variety of the business’s investments. These investments can range from projects or initiatives taken on by the company to its employees and their benefits. With ROI, companies can remove much of the guesswork when making the best possible decisions for their business’ futures.
There are two main types of ROI—hard ROI and soft ROI—that can help you calculate different elements that play into the long-term success of your business.
Hard ROI, ironically, is perhaps the easiest kind of ROI to consider when looking at the profitability of your company and its assets. It refers to the kinds of investments that are easy to measure when you’re trying to determine how beneficial they are to the success of your company.
Examples of this type of ROI include:
- Leads generated
- Social media followers gained
- Higher conversion rates
- More website traffic
- Lower webpage bounce rate
- Increased numbers of supporters, subscribers, and outside mentions of your company
While hard ROI gives you quick calculations of the benefits of known factors, it’s not capable of quantifying every factor that can contribute to your company’s success. These factors can’t be measured as easily because they aren’t easily quantifiable when held against your immediate financial goals. Therefore, to future-proof your company, you need to use soft ROI measurements to calculate long-term success.
Examples of soft ROI measurements include:
- Positive company culture
- Employee wellbeing
- Increased productivity
- Increased morale
- More brand awareness
- Increased word-of-mouth advertising
How Employee Benefits Can Improve ROI
Company leaders typically have a laundry list of concerns about their companies. They span everything from workable, internal factors like employee productivity to more out-of-control external factors, like economic crises and the enforcement of new government policies or regulations.
With all of these different factors competing for company resources, it becomes vital to turn some of those concerns into ROI advantages for your business. This is especially easy to do when it comes to employee benefits.
Employee benefits hugely impact the majority of internal concerns company leaders face. They are closely connected with three of the top five internal issues plaguing an organization’s success:
- Attracting and retaining qualified employees. When companies have a good benefits program with active employee engagement, the turnover rate decreases by approximately 37%. This is incredibly valuable because, in the U.S. alone, voluntary employee turnover costs businesses a trillion dollars every year.
- Cost of benefits. Well-designed benefits programs reduce costs for employees and employers alike, according to ROI. When companies feature clear benefits programs with strong employee support, individuals can choose the benefits that fit them best. This means that they’ll both receive and use their benefits the way they were intended, potentially saving themselves and their companies thousands of dollars.
- Employee productivity. Companies that feature strong benefits programs are more likely to attract the best talent, which is crucial for businesses’ success. Today, more than ever before, Americans value benefits over salary. A study released in 2018 revealed that employees in the U.S. are four times more likely to choose a job based on benefits rather than salary.
How to Measure ROI for Employee Benefits
There are a few basic steps that you can take to measure the ROI you have for employee benefits:
- Determine the total cost of your employee benefits program.
- Determine your current employee turnover cost.
- Compare the cost of both to the savings it would return to your company.
Now, these steps seem rather straightforward and easy to follow. Why, then, do only 20% of employers measure the ROI of their employee benefits programs when it’s so beneficial?
Simply put, calculating the cost of savings is already difficult with tangible numbers, but it can seem even more challenging when you have to try to calculate intangible savings. These intangible savings will be different for every company, so the best ways to calculate them will differ depending on your circumstances. You’ll need to engage in a bit of creative thinking to quantify these intangible savings estimates.
For example, if you want to quantify the cost and potential savings associated with beginning a remote work program, first calculate all the costs typically associated with in-office work like equipment or electricity. Once you’ve done that, compare the savings you’ll make by not having workers in an office building with the costs of challenge factors like potential decreases in productivity.
Employee Benefits Made Easy
We hope this employee benefits ROI guide assists you! At Beckham Insurance Group, our knowledgeable and experienced employee benefits representatives are here to help make your benefits administration as easy and stress-free as possible. Contact us today to learn more about how we can help you build out a competitive and comprehensive benefits program.