5 Ways to Reduce Employee Benefits Costs

Updated: June 10, 2009

1. Consider Outsourcing HR to a PEO

Outside of providing experienced professional HR support, outsourcing HR to a PEO can substantially reduce the cost of the employee benefits program. A PEO provide groups all of their clients into a "buying pool" when negotiating rates with insurance providers. SMBs can therefore take advantage of negotiated large company rates despite their smaller size. This is especially advantageous as some insurance providers often utilize "age bands" when pricing out a benefits plan for an SMB. Plan costs per employee are determined by what "age band" an employee falls into. The older the employee, the higher the individual plan cost. SMBs with an older employee mix may therefore face higher costs with these providers. Utilizing a third party HR provider for benefits administration eliminates the use of "age bands." Furthermore, third party HR service providers possess some negotiating leverage with insurance providers due to the number of people they bring to the provider's network. SMBs do not have this leverage. They must either sign on based on the quote or find another provider.

2. Choose higher deductible plans

Choosing higher deductible plans reduces the overall cost of the benefits plan. An employer may also find it possible to reimburse employees for all or part of their deductible and still save money as compared to providing a lower deductible plan

3. Offer a more robust benefits package but make employees contribute.

It is not uncommon for employees to pay 10-20% of the cost of their benefits package.

4. Educate your employees

There is a difference between the costs of HMO and PPO plans. Educating your employees on the costs and features of each as well as helping them choose the right plan can significantly impact overall benefits costs. This is especially true for SMBs with a younger age demographic.

5. Check the market

Although switching providers is a time intensive process, it always a good year to check rates of various provides every year. Annual rate increases are not universal across all providers.

Featured Research
  • 2017 Business Intelligence Trends

    It's long been thought that business intelligence (BI) could only be utilized by highly trained analysts and was therefore unattainable for most businesses. However, advancements in BI have made it so that everyone can utilize BI solutions to help shape business decisions and drive companies bottom lines. more

  • Your Phone System and Your Bottom Line

    Businesses have been using phones to drive increases to their bottom lines for almost a century now. Telephony, much like the rest of the business world, has seen drastic changes with the increase in technological advancement. Voice Over Internet Protocol (VoIP), has enabled companies to connect with consumers at levels that have been seen as unheard of before. And trust us when we say this, it is doing wonders for the bottom line. more

  • How to Scale a Contact Center in 2017

    Are you on the fence about scaling your contact center and not sure how or whether or not now is the time? Studies have shown that 93% of executives expect that contact volume will remain constant or increase within the next two years. This means that now more than ever is the time to begin scaling and we are here to help. more

  • Making the Case for a New CRM

    Did you know that having an outdated CRM is just as bad as not having one at all? Do you find yourself working even just a little too hard to make your current CRM work to maintain your contacts and relationships? While it is increasingly more difficult to reduce customer churn, modern CRM tools are much more powerful and provide much more opportunity to develop stronger relationships with your clients that can provide more stability and revenue to your company and bottom line. more

  • 2017 Phone Systems Checklist

    As you are well aware, we are living in an age of extreme technological growth. With this, an understatement might be that phone systems have changed a bit over the last decade. If you are in the market for a new phone system, it is absolutely essential for you to have knowledge of this vast sector and just what exactly you need in order to have your business succeed. more