Discretionary benefits refer to any type of benefits you are not required to provide by law. This umbrella term includes myriad benefit types, from supplementary dental and vision insurance to perks like wellness programs and child care stipends. In a competitive job market, a generous benefits package sets you apart from competition and helps you attract top talent.
Big tech companies like Google and Twitter are well-known for incredibly generous perks, ranging from catered meals to weekly massages to vacation reimbursement. While these types of discretionary employee benefits may not be tenable for the average company, many perks that fall outside a traditional benefits package will not cost you a significant amount of money.
What are the benefits and drawbacks of discretionary benefits? What type – if any – should you provide your employees? Below, we will go over the pros and cons of discretionary benefits and offer some brief suggestions on building a competitive package.
The Pros Of Discretionary Benefits
Builds A Positive Relationship With Employees
Turnover can cost your company a lot of money. Estimates vary, but losing an employee can cost 1.5 to 2 times an employee’s salary, and that cost is even greater for higher level workers. In addition to a loss of revenue, high turnover rates can hurt your company in less tangible but equally harmful ways. Low morale and low employee/employer trust can result in a loss of productivity as a whole.
Discretionary benefits can help you foster a positive relationship with your employees. A generous package can help both attract and retain top talent. While certain discretionary benefits may cost your company more in the short term, this is money that will be made up over time if you keep turnover low and morale high. This fosters a more productive atmosphere overall.
Match Your Competitors’ Benefits
When you are pursuing employees with impressive credentials, having a benefits package on par with the competition is vital. Employees weigh many factors when considering an offer, including things like discretionary benefits. If another company is offering more paid time off or flexible working hours, that may be enough for an employee to opt for them over you – even if the salary is similar.
You cannot always match a competitor’s benefits exactly. Every company’s budget is different, but do consider the market to see what perks are common in your field.
Appeal To A Diverse Range of Employees
In the coming years, we are looking at a more diverse workforce than ever before. According to the Bureau of Labor Statistics, almost every single demographic is slated to get more diverse in the next six years. Offering a range of discretionary benefits allows employees to make a personalized package that meets their specific needs.
Allowing employees to opt in or out of benefits cuts down on unnecessary costs. It also makes your company look attractive to a wide range of potential employees. Younger employees may be excited about the prospect of paid vacations, while middle-aged employees could benefit from childcare stipends.
The Cons Of Discretionary Benefits
For smaller businesses especially, many discretionary benefits may be too expensive to be feasible. Some benefits – like dental and vision insurance – can be quite costly, and premiums can increase from year to year. There are also administrative costs associated with discretionary benefits, which can add up quickly if you are offering a larger package.
Lower Employee Paychecks
If you are offering a more extensive benefits package, this may mean lower paychecks for employees. While some studies indicate about 30% of employees would accept a lower paycheck for a better benefits package, it is still a risky move – especially if you are offering a significantly lower salary.
Having a salary slightly below market rate might not be much of a deterrent if you make it up in generous perks, but make sure you are not paying significantly less than what is expected.
What Discretionary Benefits Should I Consider?
Know What Employees Want
A recent survey by Fractl found that dental and vision insurance topped a list of desirable discretionary benefits. While one of the more expensive discretionary benefits to provide, it is worth serious consideration if it is within your budget.
Also high on the list were things like flexible hours, more vacation time, and work-from-home hours. Benefits that encourage a better work-life balance can be very appealing, and you can provide them without a lot of added cost.
Look Into A Wellness Program
One of the most popular discretionary benefits is an employee wellness program. Such programs include multiple ways to keep employees healthy from diet guidance, smoking cessation programs, and even free gym passes. You can also provide benefits related to mental health, like weekly meditation sessions or free subscriptions to apps like Headspace.
Wellness programs do not just benefit your employees; they benefit your company, and may actually make money over time. Healthier and happier employees are much more productive, and a healthier workplace can cut down on insurance costs overall.
Consider Supplementary Products
Supplemental benefits products are insurance policies that provide protection against expenses not covered by insurance. Supplemental products include anything from accident insurance to critical illness or specified disease insurance. They give employees added financial security as they can protect against gaps in coverage.
Discretionary Benefits: The Bottom Line
Offering discretionary benefits can make your company look appealing to potential employees. Benefits are one of the most important factors people consider when deciding whether to accept a job offer. Discretionary benefits can increase morale, raise retention rates, and increase profits in the long run.
Need some help? At UBC Insurance Solutions, we worked for you – not insurance companies. We work one-on-one with every one of our clients to develop a cost-efficient benefits package to meet their unique needs. If you’re looking for ways to save, reach out here and someone will be in touch shortly.