As the economy continues roaring, the market for top talent stays exceedingly competitive. Multiple studies have consistently shown that a robust set of employee benefits is a vital component of an overall compensation package.
But it’s tough for smaller companies to compete with their large counterparts, who have the advantage of economies of scale. As a result, many employers are increasingly turning to voluntary employee benefits, which allow them to provide valued, high-demand benefits to employees at little or no cost to the company.
How voluntary benefits work
Voluntary benefits are arranged by employers but either paid for by staff via payroll deduction or by the employers themselves. Businesses generally set up a menu of options that their workers can select from for themselves, based on their own needs.
The employer deducts any fees or premiums for these benefits from employee paychecks and forwards them in a single batch to the benefit vendors.
Once the employee enrolls in a voluntary benefit plan, payroll services companies routinely automate this process for employers, making ongoing benefits administration hassle-free for small businesses.
And best of all, because premiums and fees are often paid by the employees, even small companies can provide popular and highly valued benefits for little or no cost.
Popular voluntary benefits
There are several types of voluntary employee benefits on the market today, with more innovative new benefits and perks rolling out every year. However, the following are among the most in-demand by employees and commonly offered by their employers:
- Dental and vision insurance coverage
- Disability insurance coverage
- Life insurance — can be term or cash value
- Legal assistance/prepaid legal services
- Identity theft insurance
- Fitness/health club memberships
- Long-term care insurance
- Financial planning/counseling services
- Accident insurance
- Hospital indemnity plans
- Pharmacy discount plans
- Critical illness insurance (e.g., cancer insurance)
- Pet insurance.
Employees can often buy these benefits and services via their employer’s group voluntary benefits plan much more cheaply than they could buy them on their own.
Voluntary benefits have been becoming more popular among employers in recent years as unemployment falls. One reason: More employers are offering high-deductible plans as health insurance costs continue to increase.
Critical illness and hospital indemnity policies have seen big gains in enrollment as workers turn to them to help cover those deductibles and copays if they have a costly health event like cancer or another critical illness diagnosis.
According to a recent LIMRA study, seven out of 10 employers surveyed reported that they believe offering voluntary benefits improves employee morale and satisfaction.
A 2023 Harris Interactive poll found that when employers offer voluntary benefits, 55% of workers, on average, report that they are satisfied with their employer’s overall benefit mix. Where the employer did not offer voluntary benefits, the satisfaction rating fell to 32%.
- Don’t overwhelm employees with too many benefit choices at the same time. Roll them out a few at a time, starting with life insurance, dental/vision and/or disability insurance. These are proven high-participation programs.
- Match benefits to your employees’ life stages. Millennials have different needs and interests than baby boomers.
- Put effort into your benefits education and communication plan.
- Use a variety of different communication tools. Embrace digital and in-person communication, in addition to printed brochures — especially for millennials.
- Have a single enrollment period for both employer-paid and voluntary benefits. Research from Des Moines-based employee benefit firm ARAG shows that combining both types of benefits in a single enrollment period results in enrollment benefits that are up to six times higher.
- Include spouses and partners in your communication and benefits education plan.
- Consider offering to pay a portion or all of the costs for some of these benefits.