How to Measure the Return on Employee Benefits: Cost, Use and Value
Judge each benefit on four measures: what it costs per employee, how many people use it, whether it supports retention, and whether employees understand it. A dollar return is only part of the answer, because many benefits exist to protect employees rather than to pay back.
Why Return Is Hard to Measure
Costs Are Visible
Premiums and fees appear on an invoice every month. That makes the cost easy to count and the benefit easy to overlook.
Value Is Spread Out
A benefit may help retention, attendance, recruiting or protection from a financial shock, and the effects arrive over different time frames.
Benefits Do Different Jobs
Health coverage protects, voluntary benefits fill gaps and perks attract. Compare each benefit against its own job, not against one yardstick.
Four Measures to Track for Every Benefit
Cost per Employee
Total annual cost divided by the employees who can use the benefit. Track it year over year and against your peers.
Use
The share of eligible employees who enroll or use the benefit. A benefit nobody uses costs money and delivers nothing.
Retention
Compare turnover among employees who use a benefit with those who do not, and price what turnover costs you.
Understanding
Ask employees whether they know the benefit exists and what it covers. Low understanding is often cheaper to fix than low value.
Return on Investment and Value on Investment
Return on Investment
Dollars saved or earned per dollar spent. It fits benefits that change cost directly, such as a claims audit or a pharmacy contract change.
Value on Investment
The broader worth of a benefit that protects or supports employees, such as disability coverage. It is judged on whether employees use it and feel better protected, not on dollars returned.
A Four-Step Review You Can Finish in an Afternoon
1. List Every Benefit and Its Cost
Put each benefit in one table with its annual cost, cost per eligible employee and who pays.
2. Pick One Measure for Each
Choose the measure that matches the benefit’s job: use for voluntary benefits, cost per employee for medical, understanding for new programs.
3. Compare With Peers
Use benchmarking to see whether your cost and offering are in line with similar employers.
4. Decide to Keep, Change or Cut
Keep what passes, fix what employees do not understand, and cut what is both unused and not protecting anyone.
Common Questions
Can I calculate a single return on all my benefits?
Not reliably. Different benefits have different jobs, so measure each against its own purpose and then compare the set.
How often should I review benefits?
Annually, before renewal, so you can act on what you learn in the same plan year.
What if a benefit I like scores poorly?
Look at why. Poor use usually points to a communication problem, which is cheaper to fix than the benefit itself.
Do I need survey data?
It helps. Cost and use come from your records, but understanding and perceived value come from asking employees.
Where These Rules Come From
29 U.S.C. §1104 (ERISA §404, Fiduciary Duties)
CFH are licensed insurance brokers, not attorneys or tax advisors. This page is general information, so confirm your situation with your benefits attorney or tax advisor.
Related Guides
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