6 steps to benchmarking employee benefits (and staying competitive)

The days when companies could attract and retain talent with just a decent salary and basic benefits are behind us. Employees expect more — and they're not afraid to look elsewhere if they don't get it.

Benchmarking your benefits isn't just about keeping up with competitors. It's about recognizing that your team members have diverse needs and motivations that evolve throughout their careers. Your senior developers might value comprehensive health coverage and retirement plans, while your marketing specialists might prioritize flexibility and professional development opportunities.

The most successful companies in 2025 aren't necessarily the ones offering the most expensive perks. They're the ones who have taken the time to understand what genuinely matters to their workforce and have built benefits packages that address those priorities. 

This guide takes a practical approach to evaluating and enhancing your benefits package. You'll see how leading organizations are rethinking employee benefits, where most companies fall short, and how to create a benefits strategy that actually resonates with the people you want to keep and attract.

Key takeaways

• Employee benefits benchmarking ensures your offerings remain competitive, attract top talent, and align with workforce needs.
• Regular benchmarking helps identify gaps, optimize costs, and improve benefits utilization to enhance employee satisfaction.
• Key benchmarking steps include analyzing current benefits, surveying employees, comparing industry data, and refining your strategy.
• Tracking metrics like benefits costs, utilization rates, and employee contribution levels ensures data-driven decision-making.
• Flexible benefits, holistic well-being programs, and clear communication improve retention and employee engagement.
• Forma streamlines benefits benchmarking and administration — <span class="text-style-link text-color-blue" fs-mirrorclick-element="trigger" role="button">schedule a demo today</span> to optimize your benefits strategy.

What is employee benefits benchmarking?

Employee benefits benchmarking involves analyzing various aspects of your benefits offerings. The goal is to assess how your benefits compare to industry norms, competing employers, or even different departments within your own organization.

This process helps you understand the competitiveness of your benefits package and identify potential gaps or areas for improvement. By comparing your offerings to relevant benchmarks, you can gain valuable insights into whether your benefits effectively attract and retain top talent.

Employee benefits benchmarking is not a one-time exercise. It should be conducted regularly to ensure your benefits remain competitive and aligned with the evolving needs and preferences of your workforce.

Benefits of employee benefits benchmarking

Employee benefits benchmarking helps companies stay competitive by ensuring their offerings meet employee expectations, attract top talent, and support long-term retention. Here’s why you should be regularly auditing your employee benefits.

1. Competitive advantage

Employee benefits benchmarking helps you understand how your benefits stack up against competitors. By analyzing industry norms and trends, you can identify areas where your offerings may be lacking or exceeding expectations.

This information empowers you to design more attractive benefits packages that align with employee preferences and market demands. When your benefits are competitive, you position your organization as an employer of choice, making it easier to attract and retain top talent.

2. ROI analysis

Benchmarking allows you to evaluate the effectiveness and ROI of your benefits programs. By comparing utilization rates, costs, and employee satisfaction levels against industry benchmarks, you can assess whether your benefits investments are yielding the desired results.

This analysis helps identify areas where you might be overspending or underutilizing certain benefits. Armed with this knowledge, you can make data-driven decisions to optimize your benefits budget and allocate resources more effectively, leading to potential cost savings without compromising employee satisfaction.

3. Employee satisfaction and retention

Tailoring your benefits to meet the diverse needs and preferences of your workforce is key to boosting employee satisfaction and retention. Employee benefits benchmarking provides insights into what other companies are offering and what benefits resonate with employees in your industry or region.

By understanding the evolving expectations and priorities of your workforce, you can design benefits packages that cater to their specific needs. This could include offering flexible work arrangements, mental health support, financial wellness programs, or unique perks that set you apart from competitors.

When employees feel that their benefits are comprehensive, relevant, and valuable, they are more likely to be satisfied with their overall compensation package. This, in turn, enhances employee engagement, productivity, and loyalty, reducing turnover rates and associated costs.

4. Market trends and best practices

Employee benefits benchmarking keeps you informed about the latest industry trends and emerging benefits practices. By regularly monitoring market developments, you can stay ahead of the curve and anticipate changes in employee expectations.

This proactive approach allows you to adapt your benefits strategy to remain competitive and attractive to top talent. For example, if you notice a growing trend toward offering student loan repayment assistance or pet insurance, you can evaluate the feasibility of incorporating these benefits into your own package.

Steps to benchmarking employee benefits

Benchmarking employee benefits requires a structured approach to ensure your offerings remain competitive and valuable to your workforce. Here’s how you can conduct a thorough audit of your benefits in six steps.

Step 1: Analyze existing benefits

Start your benchmarking journey by evaluating your current benefits offerings. Take a comprehensive look at the various components of your benefits package, including health insurance, retirement plans, paid time off, and any additional perks or wellness programs.

Assessing your existing benefits helps you establish a baseline understanding of what you currently offer and how it aligns with your organizational goals. The best employee benefits not only meet the needs of your workforce but also position you as an attractive employer in the talent market.

Step 2: Run employee benefits surveys

To gain a deeper understanding of how your benefits are perceived and utilized by your employees, conduct employee benefits surveys. These surveys provide valuable insights into the effectiveness of your current programs and help identify areas where improvements can be made.

Ask employees about their satisfaction levels with specific benefits, their understanding of the offerings, and any additional benefits they would find valuable. Encourage open and honest feedback to ensure you capture a comprehensive picture of employee sentiments.

Step 3: Compare data to industry standards

Once you have gathered internal data through employee surveys and an analysis of your existing benefits, it's time to benchmark against external standards. Obtain benchmarking data from various sources, such as industry reports, surveys, and professional associations.

Compare your offerings, contribution options, coverage levels, and utilization rates against those of similar organizations in your industry or region. This external comparison helps you assess how your benefits stack up against competitors and identify potential gaps or areas where you excel.

Step 4: Identify areas for improvement

With the data from your benchmarking insights, pinpoint areas where your benefits package may be falling short or where there are opportunities for enhancement. Look for discrepancies between your offerings and industry standards, as well as any benefits that consistently receive low satisfaction scores or utilization rates from your employees.

Identifying these areas for improvement sets the stage for developing a more competitive and employee-centric benefits strategy. It allows you to prioritize changes and allocate resources effectively to address the most pressing needs and preferences of your workforce.

Step 5: Develop a competitive benefits strategy

Based on the benchmarking data and employee feedback, develop a comprehensive benefits strategy that positions your organization as an employer of choice. Prioritize the changes and enhancements that will have the greatest impact on employee satisfaction and retention.

Consider the advantages of a flexible benefits platform that allows you to tailor offerings to the diverse needs of your workforce. Evaluate the feasibility of introducing new benefits, such as wellness programs, financial planning services, or unique perks that align with your company culture.

When designing your benefits strategy, strike a balance between meeting employee expectations and managing costs. Explore cost-effective solutions and negotiate with providers to ensure you are getting the best value for your benefits investments.

Step 6: Communicate benefits changes to employees

Once you have refined your benefits package based on benchmarking insights, it's time to communicate the changes and improvements to your employees. Clear and effective communication is key to ensuring your workforce understands and appreciates the value of their benefits.

Develop a comprehensive communication plan that includes multiple channels, such as email, intranet, and in-person or virtual meetings. Provide detailed information about the updates, highlighting how they address employee needs and enhance the overall benefits experience.

Educating your employees on their benefits is an ongoing process. Offer regular training sessions, FAQs, and resources to help employees navigate their benefits options and make informed decisions. Encourage open dialogue and provide avenues for employees to ask questions and seek clarification.

If communication has been a major blocker towards improving your utilization rates, working with a third-party administrator can be the solution. These TPAs can fully take over the communication process and educate your employees about any changes on your behalf.

Key metrics to track in employee benefits benchmarking

When conducting employee benefits benchmarking, it's important to track key metrics to assess the effectiveness and competitiveness of your offerings. 

1. Start by measuring overall benefits costs, which include the total expenses associated with providing benefits to your employees. This metric helps you understand the financial impact of your benefits package and identify potential areas for cost optimization.
2. Next, monitor employee contribution rates, which represent the portion of benefits costs that employees pay out of their own pockets. Comparing your contribution rates against industry benchmarks can reveal whether your employees are bearing a higher or lower financial burden compared to their peers.
3. Lastly, keep an eye on utilization rates, which reflect how frequently employees use specific benefits. These are probably the single most important metric when it comes to employee benefits. Calculating the cost of benefits per employee can provide insights into the ROI of your offerings. Low utilization rates may suggest that certain benefits are not meeting employee needs or that there is room for improvement in terms of awareness and accessibility.

How often should you conduct employee benefits benchmarking?

Employee benefits benchmarking is not a one-time event. To stay competitive and ensure your benefits package remains relevant, it's recommended to conduct benchmarking at least annually or whenever there are significant changes in the market or your company.

Regular benchmarking allows you to stay attuned to evolving industry trends and employee preferences. It helps you identify areas where your benefits may be falling behind or where you have opportunities to innovate and differentiate your offerings.

Consider aligning your benchmarking schedule with your benefits renewal cycle or open enrollment period. This timing allows you to gather the most up-to-date data and make informed decisions about any necessary adjustments or enhancements to your benefits package.

Additionally, if your company undergoes major changes, such as a merger, acquisition, or significant workforce expansion, it's important to reassess your benefits through benchmarking. These events can impact employee demographics, competitive landscape, and benefit needs, making it crucial to ensure your offerings remain aligned with the new reality.

Regularly monitoring key metrics, such as overall benefits costs, employee contribution rates, participation rates, and utilization rates, can provide ongoing insights into the effectiveness of your benefits package. Tracking these metrics over time allows you to identify trends, measure the impact of any changes you implement, and make data-driven decisions for continuous improvement.

Tips for staying competitive with employee benefits

Staying competitive with other companies is the most important reason behind auditing employee benefits. Here are a few tips to help you stay up-to-date with your employee benefits.

• Prioritizing flexibility: As an employer, it’s important to recognize that your workforce has diverse needs and preferences and to tailor your benefits package accordingly. Consider offering a range of options that cater to different life stages, family structures, and personal goals. This could include flexible work arrangements, customizable health plans, or lifestyle spending accounts that allow employees to allocate funds based on their individual priorities.
• Look after your employees’ well-being: Embracing a holistic approach to employee well-being sets you apart from competitors. Comprehensive benefits should support not only physical health but also mental and emotional well-being. Offer programs that promote work-life balance, stress management, and personal growth. 
• Communicate benefits effectively: Even the best benefits package won’t make an impact if employees don’t fully understand or utilize it. Make sure to clearly communicate available benefits through multiple channels, such as onboarding sessions, HR portals, email updates, and one-on-one meetings. Once again, TPAs can help take the responsibility of communication off your hands and educate employees on your behalf.

Is employee benefits benchmarking really worth it?

Yes, employee benefits benchmarking is absolutely worth it. Offering a strong benefits package isn’t just a nice-to-have — it’s a necessity for attracting and retaining top talent. Benchmarking allows businesses to compare their offerings against industry standards, ensuring they provide benefits that align with employee expectations. Without it, companies risk falling behind, leading to higher turnover, lower engagement, and difficulty in hiring.

Beyond staying competitive, benchmarking helps businesses make data-driven decisions about which benefits truly matter. It prevents wasted spending on underutilized perks while highlighting areas where improvements can drive employee satisfaction. Additionally, it ensures compliance with regulatory changes and evolving workforce trends, giving businesses an advantage in long-term talent retention.

Managing benefits benchmarking and administration doesn’t have to be complicated. Forma simplifies the process by offering a flexible benefits platform that adapts to employee needs. With lifestyle spending accounts, wellness stipends, professional development funds, and more, Forma ensures companies provide benefits that employees actually use and value. Our platform also takes care of compliance, claims processing, and communication, reducing the burden on HR teams.

Honda, lululemon, and Tripadvisor trust Forma to help them stay competitive. <span class="text-style-link text-color-blue" fs-mirrorclick-element="trigger" role="button">Schedule a demo today</span> to see how we can do the same for you.