HR Glossary  /  Benefits Administration
Benefits Administration7 min read
Table of Contents:

What is Benefits Administration ?

The correct administration of employee benefits can kick off a cycle of retention, engagement, and success. A recent study by MetLife found that workers who choose and use benefits are 30% more likely to stay at work and be engaged. In turn, a separate study demonstrated that engaged workers are 59% less likely to look for a new job and 18% less likely to change employers in a year.

That’s how important a company’s benefits administration is. Employee benefits administration significantly impacts employee satisfaction, retention, and, thus, overall business efficiency too. This article explains more about managing employee benefits, including its definition, importance, best practices, and outlines what type of software works better for managing benefits.

Let's take a closer look into benefits administration meaning. Benefits administration refers to the systematic process of managing and implementing an organization's employee benefits programs. It consists of various activities, including:

  • Benefit plan design: Developing viable benefit packages that align with employee needs and company objectives.
  • Communication: Giving employees clear information about available benefits and helping them choose the best option.
  • Benefit eligibility and enrollment: Determining employee eligibility for different benefits packages and helping with the sign-up.
  • Benefit delivery and administration: Getting benefits to eligible employees as soon as possible, starting from the moment they choose them.
  • Benefit plan evaluation and improvement: Keeping track of how well benefit programs are working and making changes as needed.

Benefits are typically managed by the HR department or a dedicated benefits administrator. This benefits manager can own the project and be the primary point of contact while still performing other HR tasks.

Employee benefits are additional compensation provided to employees beyond their regular salary or wages. These perks can significantly impact employee satisfaction, loyalty, and overall well-being. But let's focus on the different types of benefits your organization can offer—we’ll then move on to their particular benefits.

Core Benefits

Core benefits are essential components of most employee benefit packages and are often considered standard offerings. They include:

  • Health insurance coverage: Including medical, dental, and vision expenses. Some surveys consistently mention health benefits as the most important, although plenty of others mention time off as even more important.
  • Retirement savings plans: Such as 401(k) plans with employer matching contributions to retirement accounts.
  • Paid time off (PTO): Including vacation, sick leave, and personal days. Employers are not legally compelled to offer time off, but the market demands it so much that it's become a staple in benefits plans.
  • Life insurance: Providing financial protection for beneficiaries in case of an employee's death.
  • Disability insurance: Offering income protection in case of an employee's inability to work due to disability.

Supplemental Benefits

Beyond the core benefits, many employers offer supplemental benefits to strengthen their employee value proposition. These can include:

  • Flexible work arrangements: Options like remote work, flexible hours, or compressed workweeks are very convenient because employees want it, and they are incredibly affordable.
  • Wellness programs: Promoting employee health and well-being. Gym memberships are the typical example, but Canadian doctors are already prescribing visits to national parks, and companies could follow suit.
  • Financial wellness programs: Offering resources and tools to help employees manage their finances. If a company's workforce is international, this supplemental benefit could target those employees who can't access 401(k).
  • Dependent care assistance: Providing support for childcare or eldercare expenses.
  • Language lessons or tuition reimbursement: Supporting employee education and professional development.
  • Employee discounts: Providing discounts on company products or services or letting their families access those discounts as well.
  • Paid parental leave or special parent benefits: Offering time off for new parents.
  • Perquisites (perks): Exclusive benefits typically offered to executives or specialized roles, such as company cars.

The Importance of Benefits Administration

Benefits administration is a strategic decision that significantly impacts an organization's bottom line and long-term success. By managing the benefits well, companies can save money, make employees happier, and avoid legal problems. We'll tell you why benefits matter so much:

Attracting and Retaining Top Talent

Research shows that 66% of job seekers particularly look for benefits and perks when considering job offers, and 61% would opt for a lower salary if offered better benefits. In this sense, competitive benefits packages are key in setting your job offers apart from others.

Improving Employee Satisfaction and Motivation

Benefits communicate that you value employees' well-being and contributions. This sets up a sense of appreciation, which leads to increased dedication, ownership of work, and a positive company culture. Employees who take part in wellness programs, for example, report higher loyalty, performance, and job satisfaction.

Reducing Turnover and Recruitment Costs

High turnover is expensive. Offering attractive benefits can make people stay longer and save money on hiring and training. To be precise, bad hires can cost your business 30% of the employee's first-year earnings.

Building an Employer Brand and Reputation

A reputation for offering generous benefits helps attract skilled candidates and helps strengthen your company's image, particularly beneficial in competitive industries with talent gaps like cybersecurity or healthcare.

Being in Compliance

Benefits administration involves staying up-to-date with complex government regulations. Mistakes can lead to costly penalties. For example, your current benefits could be reached by the California Consumer Privacy Act (CCPA), and employee benefits management helps organizations avoid legal issues with that act or any other.

Setting up a benefits program involves strategic planning and continuous assessment. To take advantage of all the perks an effective benefits administration plan can bring to your company, a benefit manager should consider these best practices:

Communicate—and Help Employees Check it By Themselves

Communicate. Employees usually claim they're not very knowledgeable about their company benefits. So you need to educate employees about their benefits plans. Clearly outline the benefits available, eligibility criteria, and how to access them. Use multiple channels such as employee handbooks, intranet portals, and regular meetings to keep employees informed. If you communicate and also help them check the handbooks, employees could be compelled to access open enrollment (where each employee picks their benefit package). This can only be done if you have the right software running.

Benchmark All the Time

Policies and benefits should be reviewed periodically to make sure they align with company goals and meet employee needs. Conduct reviews annually or bi-annually to check how it started—and how's it going. Benchmarking is also helpful to look at the bigger picture and check if any policy requires a compliance audit. We'll talk about that soon.

Making the Most of Technology

Take advantage of technology to improve benefits administration. Consider implementing HR software to manage enrollment, track benefits usage, and provide employees with easy access to information.

Maintain Legal Compliance

Stay informed about labor laws and regulations related to benefits administration. Compliance means that your program meets legal requirements, including leave laws (if any), privacy concerns, or tax implications.

It's a good idea for your business to invest in HR software that can help you manage your employees' benefits. A benefits management system can speed up administrative tasks and contribute to the overall employee experience. Here's a breakdown of key steps in benefits administration:

Looking at a Company's Needs

  • Identify pain points: Pinpoint the current challenges in managing benefits, such as manual processes, errors, and employee dissatisfaction. However, that might indicate that a company has already tried a benefits policy. Most of the time, the challenge is just getting started.
  • Define goals: Clearly outline the desired outcomes of the system, like being able to deliver the benefits, or offering open enrollment.

Choosing a System

  • Evaluate options: Research and compare different benefits administration systems based on features, cost, scalability, and integration capabilities.
  • Consider vendor reputation: Assess the vendor's track record, their customer support, and what their documentation looks like.

You can always pick a system that does something else than just administrating benefits. Some HR platforms allow you to run ads, onboard employees, and then administer their benefits once they're part of your workforce.

Following Up on Continuous Management

  • Monitor system performance: Once you have your tool, you should continuously assess the system's effectiveness. One of the quickest ways to do it is to actually rely on a tool that has employee analytics. So you can check the system's performance based on the metrics the tool itself offers.
  • Stay updated: Keep up with system updates and industry best practices to further improve the benefits administration process.

One way to follow up and keep up with benefits administration is with TalentHR. TalentHR is a full-featured software solution that offers key tools to automate core HR tasks like time off tracking and people analytics. Among its functions, the platform provides a solution for managing employee benefits. Benefits administrators can adapt employee benefits to how your business runs. With this tool, you can offer benefits to a certain group of employees and keep track of costs, start and end dates for each benefit.

How do companies decide which benefits to offer?

Companies typically consider factors like budget, industry standards, employee demographics, and company culture when selecting benefits. Some benefits—like health-related perks—are more popular than others. There's often a disconnect between what companies offer and what employees want, and companies that can bridge this gap will have a competitive advantage.

What are the tax implications of employee benefits?

The tax implications of employee benefits can be complex and vary based on the type of benefit. Generally, some benefits are tax-deductible for employers, while others are considered taxable income for employees.

What are the emerging trends in benefits administration?

New trends in benefits administration include a focus on employee well-being through expanded wellness programs, personalized benefits packages to meet individual employee needs, and the use of technology to deliver those benefits—or to allow employees to pick them by themselves.

Cut the clutter in HR tasks, and grow
your business faster