Employee Benefits Utilization: the Average vs. the Excellent

The quality of the employee benefits your company offers is essential to driving employee satisfaction and engagement, attracting new talent, and retaining your top performers. Delivering quality and compelling voluntary employee benefits is no longer just a nice-to-have, it's a must-have if you want to stay ahead of your competition.

Here's the thing: Your workers see the quality of your benefits as a direct reflection of how much you genuinely care about their well-being. If actions speak louder than words, the benefits you provide will do more to prove you care than your words ever can. In other words, the value of your lifestyle benefits can either make or break your efforts to show you truly care.

If workers happen to come across other employers who offer more attractive benefits, they may start feeling tempted to explore new opportunities.

This is growing more evident in today’s uncertain economic climate. The lingering effects of high inflation, plus salaries that haven’t increased at the same rate, have left many Americans with less disposable income and rapidly rising debt.

With many workers under the stress of living paycheck-to-paycheck, companies are going the extra mile to keep their team members happy and motivated. They're exploring ways to enhance their current range of employee benefits and perks.

Unfortunately, many businesses are feeling the economic pinch as well. They’re tightening their belts and evaluating which benefits are delivering the best results and which ones need to be revamped or replaced. Utilization rates can be a crucial factor in determining the value of a benefit.

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 workers. From essential health insurance to legal services, these offerings are specifically designed to meet the diverse requirements of today's workforce. With team members 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 team member.

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

Measuring utilization among your unique workforce can be a good way to identify a meaningful benefit, but there are other factors that must also be considered.

It's important to set the right expectations for utilization. Setting expectations too high could lead to misjudging a benefit's value and potentially removing one that is actually popular and well-received. For example, your company’s utilization for a particular benefit may appear objectively low, but if it is higher than the national average, that’s a good indication it is a popular benefit among your team members. On the other hand, 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 is personally relevant before a person will consider signing up for it. 

The Importance of Personal Relevance

During the open enrollment period, workers will evaluate the various benefits offered and consider how each one will affect their families and finances. While some people 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. 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?

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

Well, no.

The utilization rate for a generous perk like contributions to a 401(k) is only 83%. This is up from the nationwide average of 75% from previous years because of the SECURE Act 2.0 legislation which mandated auto-enrollment of new plans.

Now, you might be wondering... why would so many eligible workers actively turn down free money?

Ultimately, this "free money" comes with conditions, requiring people to contribute to the plan themselves. Some people don’t want to dedicate a portion of their paychecks to a 401(k), others can’t. Right now, many Americans are struggling to pay for food and shelter each month, leaving them with nothing left over to save for the future.

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

Companies that provide benefits and perks with broad appeal tend to see higher retention rates, greater employee engagement and improved productivity.

In an era where diversity, equity 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 workers. By doing so, you not only show your commitment to inclusivity but also ensure your benefits package enhances the well-being of as many of your workforce as possible.

The Balancing Act of Value vs. Cost

How do you calculate the overall value of an employee benefit? As we discussed above, calculating utilization rates and determining personal relevance will give you a lot of the information you need.

It is also important to balance each benefit's cost vs. the value it delivers. We’re not just talking about the value it delivers to your company, but also the value to your workers. Are they getting the most bang for THEIR buck? In other words, a good deal is only a good deal if the benefit is actually delivering on its promises.

Example 1: With a budget of a few dollars per person, you could give every worker a candy bar every month, and gain a little bit of good will each time. Or, for the same price, you could give each worker access to one million discounts nationwide to use on their everyday expenses, like cell phone bills, dining out, shopping and travel. This approach effectively helps them combat inflation and stretch their paychecks every time they shop. A quality employee perk can be exponentially more impactful than a lame one, even if the price is the same.

Example 2: Some perks providers claim their benefits require no out-of-pocket costs, or may even promise to generate revenue for your company. In such cases, it's crucial to do your research.

If you can find a provider that offers demonstrable value to your workforce while still being free for the company, that’s a benefit worth exploring. However, “free” can be deceptive. Make sure you know who is profiting from gaining access to your workforce, and how much they stand to make. Are your workers getting all the available value, or is your benefits provider skimming off so much value they’ll eventually ignore the benefit altogether?

The same applies to benefits that promise to generate revenue for your company. Incremental revenue done right can benefit everyone. For example, high-value benefits (like a large cash-back offer on a hotel stay) can effectively be shared between providers, employers and workers, with everyone receiving enough to feel satisfied. However, trouble comes when the benefit isn’t valuable enough to segment, or if the employer or provider takes too high of a percentage. In this case, your workers are unlikely to take advantage of the offerings (meaning you won’t see any incremental revenue from it either). The worth of the benefit depends solely on how much value your workers see.

When considering benefits, prioritize the value delivered to your team as the more important factor in the value equation. Companies that do will see higher benefit utilization, AND ultimately higher employee engagement and retention rates.

Average Benefit Utilization Rates

To help you plan your benefits package effectively, we’ve put together a detailed list of the most common employee benefits and their usage rates. We will also explore the factors that contribute to either high or low utilization.

Adoption Assistance: 1%

This benefit provides financial support and resources for workers who are in the process of child adoption. Adoption assistance can have a meaningful and significant impact on your workers seeking to adopt a child. While it has the lowest utilization of the common benefits, rates are in line with actual adoption statistics, as only 2-4% of U.S. adults have adopted. (Source: SHRM)

Pet Insurance: 2%

Across the U.S., beloved pets have become integral members of families, prompting many employers to recognize the immense value of offering pet insurance. This voluntary coverage typically encompasses veterinary expenses, including wellness visits. Surprisingly, although about 66% of Americans own a pet, only a mere 2% of them 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 people 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: AON)

Tuition Reimbursement/Education Assistance: 3%

Employers often provide programs to assist with the expenses of further education like tuition for degree programs, certification courses, or professional development seminars. However, only 2-5% of eligible workers take advantage of their employer's tuition assistance program. The low utilization may be influenced by the limited number of workers willing to balance work and school simultaneously. The good news is employers that offer tuition reimbursement typically see higher retention among top employees who take advantage of the benefit. (Source: Quantic)

Employee Assistance Program (EAP): 5%

In 2024, 23% of U.S. adults experienced a mental health condition, according to Mental Health America. 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. Much of the low utilization rates could be attributed to workers’ preferring to manage their mental health issues privately rather than through their employer. Although low utilization may be a concern, EAPs remain highly relevant to a significant portion of your workforce, meaning utilization rates may not always accurately reflect their 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 people find themselves in need of such assistance. Additionally, the availability of various programs in the open market might also play a role in the lower utilization rates. However, for those who do require legal help, it can be a challenging (and expensive) ordeal. Therefore, any assistance is highly valued by those who need it. (Source: AON)

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 team, it still provides valuable support and peace of mind for those who 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 workers. (Source: SCAN Foundation)

Identity Theft/Credit Protection: 6%

Identity theft is skyrocketing in the USA, causing financial and emotional havoc. Protection 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: AON)  

Disability Insurance: 10%

This benefit includes both short-term and long-term disability insurance, which offers income protection in the event that someone 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: AON)

Student Loan Repayment Assistance: 12%

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

Childcare Assistance: 13%

By 2025, a whopping 75% of the workforce will be millennials, and it turns out that 60% of these millennials consider childcare to be an essential job benefit. So, if employers want to keep their teams happy and productive, offering childcare programs is pretty much a no-brainer. Not only does it help people 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 workers, provides immense value, and is often a more convenient option compared to other day-care alternatives. (Source: BLS)

Life Insurance: 15%

Life insurance 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 they are often lower than what an individual might find on the open market. This lower rate makes the coverage more affordable and accessible, which ultimately leads to higher participation rates. (Source: AON)

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 people 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 workers who face heightened health-related vulnerabilities, offering them the essential support they need. (Source: AON)

Wellness Programs: 40%

Wellness programs offer a variety of benefits like 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 your workforce, which can lead to significant reductions in healthcare costs and increased productivity. Motivating your team 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): 45%

Pre-tax health expense accounts are a great option for workers who anticipate significant healthcare expenses, whether they have chronic conditions or are planning for childbirth. Even those who are generally healthy can benefit from using pre-tax funds to cover their medical costs and save a significant amount of money. This is especially true for the increasing number of people choosing high-deductible health insurance plans. Utilization is 45% for an FSA (source: Marketplace), and 54% for an HSA (source: BLS)

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 workers' 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. When discounts are valuable, easy to redeem, and conveniently located, team members truly appreciate having these programs at their disposal. (Source SHRM)

Health/Medical Insurance (private industry): 66%

While most employers offer basic health insurance, many also provide options for more comprehensive or specialized coverage, which often comes with higher out-of-pocket costs. So, what causes a third of workers to opt out? Some people 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 workers to choose whether or not to opt in. By participating in a group plan, everyone 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 (401(k), 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.) Shortly after, the SECURE Act 2.0 went into effect, requiring employers to automatically enroll new workers in their 401(k) plans and implement auto-escalation, meaning contribution percentages would increase annually. Since then, participation levels have risen to 83%, however a surprising number are still opting out. (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 workers. We've summarized our findings and average benefit utilization rates into a single table for easy comparison.

As you can see, only a few benefits are widely utilized by most workers, while others attract a surprisingly small group. 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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