How HR Leaders Can Build a Strong Business Case for Benefits 

Healthcare costs continue to climb, with the medical cost trend for group health plans projected to reach 9% in 2027 — the highest in 17 years.

These increases often lead companies to cut programs or pass more costs on to employees, contributing to avoidable health conditions and higher costs for employees and employers. For HR leaders, this growing cost pressure makes proving the ROI of employer-sponsored benefits a business priority.

Read on to learn about the financial impact of benefits and how to build a strong business case for them.

The Financial Impact of Benefits as Part of a Competitive Rewards Package

Benefits are a key component of any total rewards package, making up about one-third of an employee’s total compensation, alongside their annual salary. In a competitive labor market, an appealing benefits package can set your company apart.

Beyond healthcare, offering benefits like financial wellness programs, mental health support, and flexible work arrangements can create a more loyal and productive workforce. By prioritizing these aspects, companies can position themselves as employers of choice while also fostering a healthier, more engaged employee base.

How to Show Finance the ROI of Benefits 

Focusing on ROI helps HR leaders demonstrate the value of benefits to an organization. Present your case by clearly outlining the cost implications and the potential gains, including financial savings and indirect benefits like improved employee performance and retention. CFOs and other leadership members are particularly interested in how these strategies will impact the bottom line, so demonstrating that you understand what’s important to the business will go a long way in gaining their support.

Start with Data

There are multiple metrics and data points that can be included when presenting your case and will differ based on what’s available to you.

Recruitment: Job seekers are looking for companies that demonstrate genuine concern and care for their employees’ mental health and wellbeing. In fact, 8 in 10 Gen Z and millennial workers cite mental health support and policies as top factors when considering a potential employer, according to a study from Deloitte. To gauge how big a role these policies play in your recruiting strategy, include relevant questions in a new hire survey about why they joined your company.

Retention: High turnover can be costly due to expenses related to recruitment and training. Showcasing how turnover can be reduced through benefits will be compelling. Track retention rates before and after implementing a benefit to show their impact. This can also be measured through employee surveys or during exit interviews.

Healthcare cost savings: When it comes to healthcare, it’s important to take a long view. Utilization and awareness of a program builds over time and is dependent on your internal marketing. Setting a multiyear goal to measure reduced healthcare costs is an effective strategy and critical to call out to finance and leadership. As an example, we often see that mental health solutions carved out of a health plan display incremental increases in engagement in the first three years as employees become more comfortable and trusting of the benefit.

Disability claims: Employees take leaves of absence for a variety of reasons. Among the most common reasons are pregnancy, mental health issues, and cancer. Programs designed to support these conditions may improve outcomes and lower claims. Measuring leaves of absence before and after a program has been implemented can be helpful data to display.

Industry benchmarks: Understanding what your peers are offering in the way of benefits is a valuable metric to measure. It helps paint a picture for leadership of whether your company is competitive and whether gaps exist. Doing so helps ensure your program is attractive to employees and supports both recruitment and retention.

Final Thoughts

Presenting a well-rounded, financially sound strategy will position you to be well on your way to making the business case for benefits. 

By leveraging data, companies can not only manage employer costs more effectively but also prioritize employee needs and build a productive and loyal workforce. Now is the time to invest in a comprehensive benefits strategy that pays dividends for both employees and the organization.

Sequoia can help you understand the benefits data you need to present to leadership — connect with one of our advisors to learn more.  

FAQs

Why should HR leaders build a business case for employee benefits?

Employee benefits make up about one-third of total compensation and can affect healthcare costs, recruitment, retention, and employee performance. A business case helps finance and company leaders compare these gains with the cost of the benefits program.

What data can HR use to demonstrate the ROI of employee benefits?

HR leaders can measure recruitment, retention, healthcare cost savings, disability claims, and industry benchmarks. The most useful metrics will depend on the company’s available data and business priorities.

How should companies measure healthcare cost savings from benefits?

Companies should measure healthcare cost savings over several years because employee awareness and program use build over time. Internal promotion of the program can also affect participation and results.

How can disability claims data support a benefits business case?

HR teams can compare leaves of absence before and after introducing programs that support conditions such as pregnancy, mental health issues, and cancer. The results may show improved outcomes and lower claims.

Why should HR leaders compare benefits with industry benchmarks?

Industry benchmarks show how a company’s benefits compare with those offered by its peers. They can help identify coverage gaps and determine whether the program supports recruitment and retention.