When it comes to your employee benefits program, the goal isn’t just to provide insurance to your employees. It’s also about being able to attract and retain the best talent to help move your business forward. A benefits package is only one part of reaching that ultimate goal. But because we often gravatate toward what’s easy to measure, we can spend a lot of time focusing on reducing insurance premiums when trying to cut costs. As a result, many organizations may be overlooking dollars to save dimes.
While the cost of providing benefits is high, the amount of control you have over the price of your insurance policy is pretty limited. Meanwhile, the influence you can have over other related areas of your business can be quite significant.
In this “500 Words” blog series, we’ll be identifying ways you can look beyond the cost of insurance premiums to save money. To get an understanding of the potential impact of other, non-insurance related areas on your bottom line, let’s take a look at an example we can all relate to: Turnover.
The cost of employee turnover can range from 50% - 150% of annual compensation.
The more engaged your employees are, the harder they work, the longer they stay— and the less you spend on turnover-related expenses.
Breaking that idea down in an actual employer example, here’s a quick look at how reducing turnover can influence your company expenses and profit.
An engineering firm with 150 employees was experiencing 15% annual turnover. After taking the time to uncover and address the issues causing their employees to leave, they were able to reduce their annual turnover to 5%.
Doing the math:
- Average salary of their employees was $50K, and we’ll factor the cost of turnover at the mid-range of 100% of salary
- 150 Employees x 15% = 22.5 employees lost each year
- 22.5 employees x $50K = $1,125,000 in turnover-related expenses EACH YEAR
- Reducing turnover to 5% = 7.5 employees lost each year, which reduces turnover-related expenses to $375,000
- A total reduction of $750,000 – WOW!
Now, let’s look at some benefits-related costs:
- For a benefits program averaging $15,000 per employee for those same 150 people, the total cost of the benefits is $2,250,000 annually.
- If your broker worked hard, negotiated well and managed to save you 5%, you’d see a savings of $112,500.
- If it was a great year and you were able to get a 10% reduction, you’d see savings of $225,000.
While these numbers are nice and negotiation is obviously in your best interest, these savings pale in comparison to the employee turnover example. Of course you should work with a trusted broker to manage the price of your insurance products. That’s a given. But we’re promoting a strategy that also considers the bigger picture.
As our blog series unfolds, we hope you will feel re-energized by these ideas and re-think some areas that might have an even bigger impact on your organization than that ever-increasing cost of insurance.
Photo by Chiakto
This is the first post in a series of blogs designed to help you look beyond the cost of insurance to control employee expenses. For more information on this topic, subscribe to this blog to receive new posts each week or download our free eBook.