We recently asked VC-backed companies with less than 100 employees how they’re designing their core employee benefits programs and what changes they have planned for the next 12 to 24 months.
We focused on core benefits — healthcare, wellbeing, retirement, and leave policies — because they’ve evolved from being nice-to-have perks to essentials that employees expect and see as reflections of how much their health and wellbeing are valued by their employer.
For employers, core benefits are key to hiring and retention. The pressure to get benefits right is especially high for small or early-stage venture-backed companies who are balancing hiring and retention with conserving cash.
To help companies design core benefits programs that are both competitive and affordable, we’re sharing some key healthcare and wellbeing insights from 2024 Benefits Benchmarking Report, featuring data from more than 1,000 tech companies in the software, AI, and life sciences industries. Plus, we’ll share tips and considerations to guide companies as they develop their benefits programs for the next open enrollment season.
(Related: Top 2024 Core Benefits Insights for Mid-Size & Enterprise Companies)
According to Sequoia’s survey, startups are diversifying their core benefits offerings by adding more options, adjusting existing ones, and becoming more prescriptive in their approach.
PPO (preferred provider organization) and EPO (exclusive provider organization) offerings haven’t decreased from 2023, indicating that companies are adding these plans to their programs, not swapping them out.
We’re seeing the most growth with HMOs (health maintenance organizations), which increased 10%, and high deductible health plans (HDHP), which increased 5%. Of the employers who offer an HDHP, over half (61%) are contributing to their employees’ health spending accounts (HSAs).
How Do Companies Decide What Benefits Are Right for Them?
When you’re creating your benefits package, think about the needs of both your current and future workforce. Here are three tips:
1. While employees value variety, it’s also important to have a prescriptive offering for your workforce, no matter where they are on their healthcare journey. For PPO plans, offer a range of options, including some with national coverage.
2. HDHPs with HSAs are good for low utilizers and those who want the tax benefits of an HSA. Consider contributing to HSAs to drive participation to that plan and to lower your overall premium costs.
3. Add a regional HMO plan. If one isn’t available, add an EPO.
How Much Are Companies Contributing to Benefits?
According to our data , startups are continuing to prioritize healthcare affordability for their employees.
On average, companies pay 89% of single (employee-only) coverage with minimal changes from 2023. For dependent coverage, companies pay 75% on average, up 5% from last year. But that’s likely to shift as healthcare costs increase.
About 62% of companies said they plan to implement strategies to mitigate rising healthcare costs in the next 12 to 24 months. Of these companies, about 25% said they plan to increase employee contributions or add a contribution to a plan they previously covered in full .
How Do Companies Determine Their Contribution Strategy?
How do you find the happy balance between a competitive and budget-friendly benefits package? Here are four tips:
1. Choose a base plan with a capped contribution that’s either a fixed dollar amount or a percentage. This will help with forecasting your benefits budget as you grow.
2. Avoid over-insuring or covering too many plans at 100%, especially your richest plans. This prevents employees from enrolling (and you paying for) plans they don’t need and therefore, won’t use. If you really want to cover 100% or must for compliance reasons, choose a low-cost plan like an HDHP.
3. Have plans that have an employee contribution for the premium and provide ways to help employees select a plan that suits their needs.
4. Cover dependent care at a minimum of 50%. This can help with retaining tenured and experienced employees who are likely to have dependents.
Our data reveals that family and emotional wellbeing options continue to increase year over year and are becoming core offerings to attract and retain top talent. Emotional wellbeing benefits increased 22% from 2022, while family wellbeing benefits increased 28%. Nearly a quarter of employers have added at least one emotional wellbeing benefit since 2022.
Here’s how companies said they are planning to make changes in the next 12 to 24 months:
- About 52% are planning to expand access to mental health services. That says a lot considering 91% already offer at least one emotional wellbeing benefit.
- About 21% are planning on sunsetting programs with low utilization or low perceived value, indicating that they’re being very intentional about what they’re offering.
How do employers know what wellbeing benefits to focus on?
Here are five tips to help you decide what wellbeing benefits to add, keep, or remove:
1. Be proactive ahead of renewal and send out an employee survey. It’s a great tool for learning what benefits employees are using and what they value in programs.
2. Explore what wellbeing programs are already available from your carriers. This can be a cost-effective way to expand your offerings.
3. Consider companywide mental health days or partnering with third-party wellbeing vendors, especially if you have a remote or distributed workforce.
4. Explore healthcare plans that include fertility benefits. Because these plans tend to have higher premiums, make them a buy-up option for employees who want those benefits.
5. If you remove benefits, do it thoughtfully and communicate to employees the reason a benefit was removed or replaced to avoid surprises at open enrollment.
Take Advantage of a Pooled Model for Benefits
For small and early-stage companies, partnering with an experienced PEO (professional employer organization) can be a cost-effective way to offer better benefits.
A PEO pools employees of small companies so they each have more buying power, allowing them to offer large group benefits packages that they wouldn’t be able to access or afford on their own.
As an added benefit, a PEO eliminates administrative burdens for small companies who don’t have an HR infrastructure.
RELATED:
2024 Trends: Long-Term Incentives for Executives
Top 2024 Core Benefits Insights for Mid-Size & Enterprise Companies
Benchmark Your Benefits Offerings
Want more benefits data from tech companies like yours? To get access to the full report and to get your benefits benchmarked against our data, reach out to one of our experienced advisors
