Cracking the Code to Employee Benefits Utilization: the Average vs. the Excellent

Low utilization rates for certain benefits can be frustrating, especially after investing so much time and effort in selecting and launching them. Yet many HR professionals are unaware of the correlation between utilization and inclusivity. The more employees who can use a benefit, the higher the utilization is likely to be. To help you evaluate your company's benefits and perks, we have collected national average utilization rates for comparison.

About a 7-minute read

Here's the thing: Your employees see the quality of your employee benefits as a direct reflection of how much you genuinely care about their well-being. No matter what story you try to tell about your concern for your employees, the value of your lifestyle benefits can either make or break your efforts to show that you truly care.

And if employees happen to come across other employers who offer more attractive benefits, they may start feeling tempted to explore new opportunities elsewhere.

Furthermore, considering the current state of the economy, it all adds an additional layer of challenge for companies, and especially HR pros.

With the challenge of uncertain economic times, companies are going the extra mile to keep their employees happy and motivated. They're exploring ways to enhance their current range of employee benefits and perks. Others are tightening their belts and evaluating which benefits are delivering the best results and which ones need to be revamped or replaced.

How to use utilization rates in evaluating your benefits

In today's modern workplace,  HR professionals are fortunate to be able to deliver a wide array of benefits that cater to the individual needs of our employees. From essential health insurance to legal services, these offerings are specifically designed to meet the diverse requirements of today's workforce. With employees coming from different generations, life stages, and backgrounds, it's crucial to offer benefits that have universal appeal and can address the unique needs of every employee.

But how do you know if a benefit is doing its job of helping you retain and engage your employees? 

Measuring utilization can be a good way to identify a meaningful benefit, but there are other factors as well that must be considered.

First, it's important to set the right expectations for utilization. If you set your expectations too high, you may arrive at a wrong conclusion about a particular benefit and consider removing an otherwise popular benefit. If your expectations are too low, you may hang on to a benefit that lacks overall appeal. 

While utilization rates are important, we must also be mindful that each benefit must be personally relevant before an employee will consider signing up for it. 

The Importance of Personal Relevance

During the open enrollment period, employees will evaluate the various benefits offered and consider how each one will affect their families and finances. While some employees take a meticulous approach, thoroughly examining each benefit, others make more spontaneous decisions.

Regardless of their level of diligence, employees engage in a process of assessing each benefit based on its personal impact and practicality. Whether done consciously or subconsciously, their evaluation is based on how each benefit meets the following criteria:

1. Does it solve a difficult or pressing problem?
2. Does it deliver compelling value? (either short-term or long-term)
3. Is it easy to understand?
4. Is it convenient or simple to use?
5. Is it better than what's available on the open market?

Let's take a 401K as an example.

You may assume that if your company offers free money as a benefit, everyone would jump on board, right?

Well, no.

As you will see below, the utilization rate for a generous perk like contributions to a 401K, is only 75% nationwide.

Now, you might be wondering... why would one-quarter of all eligible employees turn down free money?

It comes down to the fact that this "free money" usually has strings attached, as each employee must make their own contribution to the plan as well. Some employees may not consider their retirement to be a pressing issue. Others may consider putting aside money as an inconvenience, preferring instead to spend their money now rather than save for later. Others may simply not want to bother with understanding the complexities of a retirement account and they just think it's too much of a hassle. While each may use different logic and reasoning, in their minds, they are doing what they think is best for their situation. Or at a minimum, they're willing to live with their decision, one way or another.

The same goes for all your other benefits. Each one has specific terms, conditions, restrictions, or caveats that your employees must consider. Consequently, every benefit will ultimately impact each employee differently.

The value equation for each benefit will have a direct impact on their utilization. The higher the value and the greater the overall usefulness, the more employees will engage with it.

That’s why companies that offer benefits and perks that appeal to the largest number of employees will in turn enjoy greater levels of employee retention, engagement, and productivity.

In an era where diversity and inclusion are core values for most organizations, it's imperative to rethink your benefits strategy with inclusion in mind. The key lies in selecting benefits that are relevant to the broadest possible spectrum of employees. By doing so, you not only show your commitment to inclusivity but also ensure that your benefits package genuinely enhances the well-being of as many of your workforce as possible.

Evaluate True Value

In addition to evaluating utilization rates and determining how each benefit is personally relevant, it is also important to assess each benefit's true value. Not only for your company but also the value to your employees.  Are your employees getting the most bang for THEIR buck?

For example, some benefits claim to require no out-of-pocket costs for your company. In such cases, it's crucial to do your research and follow the money. Make sure you know who is profiting from gaining access to your employees, and how much they stand to make. Are your employees getting all the available value, or is your benefits provider skimming off so much value that your employees will eventually ignore the benefit altogether?

The same applies to benefits that promise to generate revenue for your company. While the idea of incremental revenue may be appealing, it often comes at the expense of the overall value your employees receive. In most cases, you can find better alternatives to these so-called "free benefits" from providers that deliver the greatest level of value directly to your employees.

Prioritizing the value equation of these benefits in favor of your employees will result in higher utilization, but ultimately higher employee engagement and retention rates.

Average Benefit Utilization Rates

To assist you in strategizing your benefits package, we have compiled a comprehensive list of the most prevalent employee benefits and their average utilization rates. Additionally, we will explore the factors that contribute to either high or low utilization.

Adoption Assistance: 1%

This benefit provides financial support and resources for employees who are in the process of child adoption. This benefit can have a meaningful and significant impact on your employees seeking to adopt a child. (Source: SHRM)

Pet Insurance: 2%

Our beloved pets have become integral members of our families, prompting many employers to recognize the immense value of offering pet insurance. This invaluable coverage typically encompasses veterinary expenses, including wellness visits. Surprisingly, despite the fact that approximately 66% of Americans own a pet, only a mere 2% of employees take advantage of employee-sponsored pet insurance programs. However, this low utilization does not signify a lack of necessity. Instead, it can be attributed to a perception that employees don't anticipate they'll encounter costly medical issues with their furry companions. Additionally, employee-sponsored programs now compete with numerous other pet insurance options in the open market. (Source: SHRM)

Tuition Reimbursement/Education Assistance: 3%

Employers often provide programs to assist with the expenses of further education, such as tuition for degree programs, certification courses, or professional development seminars. However, according to benefit provider Lumina, only 2-5% of eligible employees take advantage of their employer's tuition assistance program. The low utilization can be impacted by the relatively few number of employees willing to attend school while also working. For full-time employees, that's a big challenge. The good news is that employers offering tuition reimbursement typically enjoy higher retention among their top employees who take advantage of the tuition reimbursement benefit. (Source: Lumina)

Employee Assistance Program (EAP): 5%

In 2020, 21% of U.S. adults (52.9 million) experienced a mental health condition, according to NAMI. Clearly, there’s a significant need for programs that offer resources for personal challenges, including mental health and emotional counseling, financial planning, or substance abuse support, among others. Unfortunately, EAP programs struggle to gain widespread utilization -even among HR professionals - and for reasons far too complex to fully address here. However, much of the low utilization rates could be attributed to employees’ preferring to manage their mental health issues privately rather than through their employer. Yet, while this low utilization is a concern, EAPs have relevance for a large segment of your employees, so utilization rates may not always be the best indicator to determine its value to your company. (Source: UpriseHealth)

Legal Services: 5%

This benefit can include prepaid legal services or access to legal advice. It might cover preparing a will or other legal document, traffic violation defense, or legal consultations. The relative lack of interest in company-sponsored legal services can be chalked up to the fact that not many employees find themselves in need of such assistance. However, for those who do require legal help, it can be quite a challenging ordeal. Additionally, the availability of various programs in the open market might also play a role in the lower utilization rates. (Source: SHRM)

Long-Term Care Insurance: 5%

This benefit offers comprehensive coverage for individuals who may require long-term personal and custodial care due to a prolonged physical illness, disability, or cognitive impairment. Although the demand for long-term care insurance may not be high among all your employees, it still provides valuable support and peace of mind for those who may require it. Moreover, employer-offered group policies often come at a substantially lower cost compared to other long-term care insurance options in the open market, making them a more affordable and accessible choice for employees. (Source: SCAN Foundation)

Identity Theft/Credit Protection: 6%

Identity theft is skyrocketing in the USA, causing financial and emotional havoc. That's why the appeal of protection against identity theft is growing so fast. These services diligently monitor and notify employees of potential threats to their personal information and any changes to their credit scores. The relatively low utilization rates may be attributed to the fact that many major insurers offer identity theft insurance as an additional feature to homeowners' or renters' insurance policies. Moreover, there are free services like Chubb available, which can diminish the perceived value and exclusivity of this benefit.  (Source: SHRM)  

Student Loan Repayment Assistance: 12%

These programs help employees with their student loan debts. The latest Consolidated Appropriations Act states that “through December 31, 2025, employers can provide each employee with up to $5,250 per year in tax-free student loan assistance under a Qualified Educational Assistance Program.” Last year, 17% of employers offered their employees student loan debt assistance, with another 31% considering it. These programs offer a solution to a challenging problem for employees, provide significant value, and align with the five key elements of personal relevance.  (Source: SHRM) 

Disability Insurance: 13%

This benefit includes both short-term and long-term disability insurance, which offers income protection in the event that an employee is unable to work due to a disability. It's important to keep in mind that disabilities can take various forms, such as chronic illnesses, back injuries, and diabetes, rather than just life-altering events like cancer or automobile accidents. In fact, statistics indicate that one in four adults will experience a disability before reaching retirement age. Considering that almost 40% of American adults don't have enough savings to cover three months of living expenses, this benefit is of great personal significance and can provide crucial financial support during challenging times. (Source: SHRM)

Childcare Assistance: 15%

By 2025, a whopping 75% of the workforce will be millennials, and it turns out that 60% of these millennials consider child care to be an essential job benefit. So, if employers want to keep their employees happy and productive, offering childcare programs is pretty much a no-brainer. Not only does it help employees save on the skyrocketing costs of childcare, but it also reduces the challenging issues of lost productivity and absenteeism. This benefit tackles a pressing issue for employees, provides immense value, and is often a more convenient option compared to other day-care alternatives. (Source: SHRM)

Life Insurance: 15%

Many employers offer supplemental life insurance policies to their employees. These policies provide an additional layer of financial protection and peace of mind for individuals and their families. One of the main advantages of these group rates is that they are often lower than what an individual might find on the open market. This lower rate makes the coverage more affordable and accessible for employees, which ultimately leads to higher participation rates. (Source: SHRM)

Critical Illness Insurance: 27%

Critical illness insurance is a valuable option that offers a lump-sum payout when an individual receives a diagnosis for a specific illness covered by the policy. It's important to note that these policies often have strict limitations on the illnesses they cover, and employees may not always thoroughly examine the policy details to understand these limitations. In some cases, disability insurance may be a more viable option, depending on the overall value it provides. However, critical illness insurance can still serve as a valuable supplement, especially considering the increasing number of high-deductible medical plans. Furthermore, it serves as a vital lifeline for employees who face heightened health-related vulnerabilities, offering them the essential support they need. (Source: SHRM)

Wellness Programs: 40%

These wellness programs offer a variety of benefits, such as access to gyms, personalized health coaching, programs to quit smoking, weight loss competitions, and much more. The main objective is to improve the overall health and well-being of employees, which can lead to significant reductions in healthcare costs and increased productivity. Motivating your employees to actively engage in these programs necessitates ongoing reminders and support, but the rewards of achieving high participation rates are substantial. Not only can it significantly reduce the overall utilization of medical plans, but it also holds the potential to result in lower annual rates on your healthcare premiums. (Source: BetterYou)

 Flexible Spending Account (FSA)/Health Savings Account (HSA): 50%

These pre-tax health expense accounts are a great option for employees who anticipate significant healthcare expenses, whether they have chronic conditions or are planning for childbirth. However, even employees who are generally healthy can benefit from using pre-tax funds to cover their medical costs and save a significant amount of money. Utilization is 45% for an FSA (MPR), and 54% for an HSA (PSCA)

Employee Discount Program: 55%

Admittedly, we know a thing or two when it comes to employee discount programs, so we know exactly which types of employee discount programs really get used. Third-party discount programs that rely on making money from your employees' online transactions tend to see the lowest utilization. On the other hand, programs that offer negotiated, exclusive discounts at physical locations like restaurants, retailers, theme parks, and hotels tend to generate much higher utilization rates. These programs tick all the boxes of personal relevance because let's face it, everyone wants to save money on their everyday purchases. And when those discounts are worth the effort to redeem, conveniently located, and easy to use... employees absolutely love having these programs available to them. According to SHRM, "55% of HR professionals reported that their employees highly or somewhat valued these discounts." (Source SHRM)

Health/Medical Insurance (private industry): 66%

While most employers offer some basic form of health insurance, many employers also provide choices for more comprehensive or specialized coverage, requiring greater out-of-pocket costs. What accounts for a third of employees opting out? Some employees may lack a full understanding of the financial risks associated with a major accident or illness. Others may simply choose to be covered on a spouse's policy. Still, it remains one of the most significant challenges for companies to balance higher levels of coverage with the need to offer lower employee premiums. (Source: Bureau of Labor Statistics)

Dental Insurance: 68%

Dental care is frequently provided as a separate benefit from health insurance, allowing employees to choose whether or not to opt in. By participating in a group plan, employees can often enjoy lower costs compared to securing dental insurance individually. The high utilization of this benefit can be attributed to its value, convenience, and ease of access. (Source: NADP)

Retirement Savings Plans (401k, etc.):  75%

According to the Bureau of Labor Statistics, although “69% of private industry workers had access to employer-provided retirement plans in March 2022, (only) 52% of private industry workers chose to participate in a retirement plan, for a take-up rate of 75%. (The take-up rate is the percentage of workers with access to a plan who participate in the plan.) While a base level of retirement savings is often offered, employees can opt-out, or they may choose to invest in more aggressive savings strategies or investment options. (Source: Bureau of Labor Statistics)

Average Utilization Rates for Employee Benefits: A Comparison

For a workplace benefit to be truly inclusive, it should offer value for a diverse range of employees. So we've summarized our findings / average benefit utilization rates into a single table for purposes of easy comparison.

As you can see, only a handful of benefits are utilized by the majority of all employees, with many others that appeal to a surprisingly narrow few. When planning your benefits mix, consider these average national utilization rates to achieve a properly diverse and inclusive benefits package for your workforce.

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