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Cost Control

7 Strategies to Control Employee Benefits Cost

The Baldwin Group
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Updated: August 8, 2024
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3 minute read

Today, about eight percent of a company’s operating budget goes to pay employee benefits. And it’s growing even more expensive. In the last five years, the cost of offering employee benefits has increased an average of five to seven percent per year.

Finding ways to provide benefits that let you save money, yet still shift as little cost increases as possible to employees is key to attracting and retaining talent. Consider these cost-reducing resources and strategies that can help make a difference on your bottom line.

  1. Determine employee use of programs
    Get employee feedback about what benefits they want and use that information when you analyze utilization rates. Look at the numbers to see how many employees are taking advantage of the programs in your benefits package and if there are any that seem to be underutilized that can benefit from promotional efforts, or be eliminated entirely. For example, you can assess whether:
    • a new offering did/didn’t catch on
    • wellness program has high/low employee engagement
    • a smoking cessation program has high/low participation
  2. Choose a plan, wisely
    A prepackaged, one-size-fits-all approach from an insurance company is likely to cost more money. But a more tailored approach to your employee population may help reduce healthcare spending. Various plan design options and cost containment strategies are available today, such as: high deductible health plans (HDHP), zero cost sharing plans, telehealth options, and subsidized wellness plans can help lower premiums for you and your employees. Work together with a professional benefits advisor to explore which ones may be a best fit for your organization.
  3. Assess pharmacy offerings
    With pharmacy costs continuing to climb, encouraging the use of biosimilars as clinically effective, lower cost options could save you money. You can also consider a prescription risk management provider that can provide specialized expertise and solutions to increase your value-to-expense ratio.
  4. Cut admin costs
    Benefits administration can be costly if you rely too much on your HR team. Whenever possible, use online portals or automated messages for enrollment and benefits communications instead of keeping these as manual tasks for a member of your HR staff. An automated and integrated benefits system can also empower your employees to be more self-sufficient. If you already use one, make sure it offers the latest, most cost-efficient features and options. Finally, consider outsourcing your benefits management to a third-party provider to reduce staffing and overhead costs.
  5. Focus on education
    Employees who don’t understand their benefits are more likely to make poor decisions when they use them. For example, an employee might end up going to the emergency room for a minor issue instead of using telehealth benefits because he/she didn’t know about them, costing unnecessary expenses. Benefits education and training resources can not only help avoid these scenarios, but they can also clear up any jargon or confusion employees may have. If you don’t have the internal resources to do this, work with an experienced benefits advisor to see what strategies you can tap to educate your employees about their benefits.
  6. Encourage use of telehealth
    Telemedicine is here, and it’s here to stay. Encouraging employees to make use of virtual services provides a win-win situation. You will likely spend less on unnecessary emergency room visits, and your employees will gain convenient access to providers who can treat a wide range of their health needs.
  7. Stress wellness programs
    Chronic conditions, such as heart disease, diabetes, and musculoskeletal pain, are the biggest contributors to employer healthcare spending. A well-administered wellness program has the potential to reduce instances of chronic illnesses, and disease management programs can help employees control their conditions. Both of these outcomes reduce healthcare spending. 

While there are many variables to consider when structuring a holistic employee benefits program, you can work together with a trusted benefits advisor to find meaningful ways to contain costs and make more informed decisions about which benefits options to offer employees.


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