Data-Driven Benefits Strategy: Lessons From Last Year to Transform This Year
Benefits decisions are too important to base entirely on assumptions about what employees want.
An employer might add a wellness program, expand family-care benefits, or introduce new perks because those offerings seem like a good fit for the workforce. But without considering participation, employee feedback, costs, and other available information, it can be difficult to know whether those investments are delivering value.
A better approach is to use the data you have to make more informed decisions.
Look at utilization where reliable data are available. Review turnover and retention patterns. Ask employees what they value. Compare your benefits with relevant benchmarks. Then use those findings to decide what to keep, change, communicate differently, or explore further.
Here’s how to make benefits decisions with more evidence and less guesswork.
Quick Answer: A data-driven benefits strategy uses the information you already have, including utilization, costs, turnover, and employee feedback, to decide which benefits to keep, change, or communicate better. Low utilization is a signal to investigate, not proof that a benefit lacks value. Combine multiple data sources, compare results with benchmarks, and repeat the review regularly.
What Benefits Data Are You Already Collecting?
Start by identifying what information is actually available to you.
Depending on your providers and systems, you may have access to aggregate enrollment or utilization information for health, dental, retirement, dependent care, health savings accounts, professional development programs, and other benefits.
Your payroll or retirement plan systems may show participation and contribution information for programs such as a 401(k), an HSA, or a dependent care flexible spending account.
Your HR system may contain turnover, tenure, department, location, and other workforce information that can help identify patterns.
Employee surveys can show you that you value employee input, which helps build trust and engagement and makes benefits feel more relevant.
Some organizations may also have utilization information for programs such as tuition reimbursement, financial wellness education, or professional development.
Recognize that not all organizations have every data point; understanding what reliable information is available and its limitations helps HR professionals avoid misinformed decisions and identify where employee feedback or additional research is needed.
Employers should also handle benefits and employee data carefully, considering privacy, confidentiality, and legal considerations. When possible, analyze appropriately aggregated data and involve qualified HR, benefits, legal, or privacy professionals when necessary, ensuring compliance and maintaining employee trust.
What Can Benefits Data Tell You?
When employers analyze benefits information, they may discover that actual employee behavior differs from their assumptions.
An attractive benefit may have low participation, but understanding why requires analyzing whether low utilization reflects limited interest or barriers like poor communication, enrollment issues, or eligibility restrictions. Clarifying this helps you decide whether to improve communication or reconsider the benefit’s value.
That distinction matters.
Low utilization does not automatically mean a benefit has little value. Some benefits, particularly insurance and other forms of financial protection, can be valuable even when employees do not frequently make claims or actively interact with them.
Cost also needs context. A high-cost benefit with limited utilization is worth reviewing, but cost per participant alone should not determine whether the benefit stays or goes. Employers should consider the purpose of the benefit, employee demand, competitive value, workforce needs, contractual obligations, and other relevant factors.
Broader benchmarking can provide useful context as well. SHRM’s benefits research consistently identifies health care, retirement, and leave among the benefits employers consider most important, with flexible work, family care, and professional development also receiving significant attention.
Employee engagement metrics can add another layer to that analysis by helping employers evaluate workforce trends alongside benefits participation and employee feedback.
How Should You Use Benefits Data?
Start by pulling the benefits information available from the previous year.
For benefits where utilization is an appropriate measure, calculate participation or usage rates. Then compare those numbers with prior years, relevant benchmarks, and employee feedback when available.
Next, examine retention and turnover patterns.
Look at turnover by department, location, tenure, job category, or other relevant factors. If appropriate data are available, compare those patterns with benefits eligibility and participation.
But be careful about the conclusions you draw.
If employees who use a particular benefit have higher retention, that is an association, but it does not prove causation. Clarifying this distinction helps HR professionals avoid misinterpreting data and making ineffective decisions about the actual impact of benefits on retention.
Use the data to identify questions worth investigating rather than automatically treating correlations as answers.
Employee feedback can help fill those gaps. Ask employees which benefits they value, which they understand, which they use, and what they believe is missing.
You can also calculate measures such as employer cost per eligible employee or cost per participant when those metrics make sense. A costly benefit with low participation deserves examination, but the next question should be why participation is low, not simply whether the benefit should be eliminated.
Benchmark your benefits against similar employers to help you feel confident in your benefits strategy and ensure it meets workforce needs.
Then ask a practical question: Based on everything we know, where would an additional benefits dollar provide the most value to our workforce and organization?
What Is the Benefits Utilization Gap?
Offering a benefit does not guarantee employees will use it.
Employees may not use a program because they face barriers such as confusing enrollment processes or privacy concerns. Addressing these shows you understand and support their needs.
Low utilization can therefore be a signal, but it needs investigation.
Consider a mental health benefit. Low utilization could mean employees do not need or value the service. It could also mean employees do not know it is available, do not understand how to access it, have privacy concerns, or encounter other barriers.
The same principle applies to tuition reimbursement, financial wellness programs, retirement benefits, and other offerings.
Before replacing an underused benefit, find out why employees are not using it.
Sometimes the answer is not another benefit. It is better access to the benefits you already provide.
Simplify processes where possible. Communicate benefits throughout the year, not only during onboarding or open enrollment. Supplement formal plan documents with plain-language educational materials. Make it clear where employees can go for accurate information and assistance.
How Do Benefits Affect Employee Retention?
Retention data become more useful when employers treat them as part of a larger analysis rather than proof that a particular benefit works.
Look at employees with longer tenure. Which benefits are available to them? Which do they use? What do employee surveys or stay interviews say they value about working for the organization?
Then look at employees who leave earlier. Exit interviews, when available and reliable, may provide information about compensation, benefits, management, career opportunities, scheduling, workplace culture, or other factors that contributed to the decision.
Benefits are rarely the only variable affecting retention.
Management, compensation, career development, flexibility, workload, workplace relationships, labor-market conditions, and personal circumstances can all influence whether an employee stays or leaves.
The goal is to combine multiple sources of information so you can identify patterns worth acting on without claiming the data prove more than they actually do.
Organizations using data to make benefits decisions can also benefit from reliable HR systems, workflows, and documentation that make workforce information easier to maintain and evaluate.
How Can You Understand What Your Workforce Needs?
Different employees may value different benefits, but employers should be careful not to assume someone’s needs based solely on age or other demographic characteristics.
A younger employee may have student loans, but many do not. An employee with children may value dependent care assistance, but that does not mean every parent has the same priorities. Older employees may place a high value on retirement planning, while younger employees may care just as much about retirement benefits.
Instead of making assumptions, use workforce information as context and ask employees directly about their priorities.
Consider factors such as workforce location, job type, compensation levels, family caregiving needs, participation in retirement plans, employee feedback, and recruiting challenges.
When reviewing demographic data, employers should use appropriate safeguards and consider privacy, nondiscrimination, and other applicable legal requirements.
The objective is not to assign benefits to demographic stereotypes. It is about understanding your workforce’s needs well enough to build a benefits portfolio that serves it effectively.
What Should You Do Starting Now?
Pull the benefits data you have from the previous year and determine which measures are reliable enough to use.
Review participation and utilization where appropriate. Compare results with previous years and relevant benchmarks when possible.
Ask employees directly. A well-designed survey can help you understand which benefits they value, which they use, whether they understand their options, and where they see gaps.
Review costs alongside participation and employee feedback. High-cost, low-utilization benefits deserve scrutiny, but do not eliminate a program based on a single metric.
Examine retention and turnover data for meaningful patterns while remembering that correlation does not establish causation.
Based on the complete picture, identify one or two opportunities for improvement. That might mean changing a benefit, adding one employees consistently request, improving communication about an existing program, simplifying enrollment, or deciding that the current offering is working as intended.
Communicate significant changes clearly. Explain what is changing, when it takes effect, and where employees can find more information.
Then repeat the process regularly. Benefits strategy should evolve as your workforce, labor market, regulations, costs, and employee needs change.
Why Does a Data-Driven Benefits Strategy Matter?
The goal is not to offer the greatest number of benefits. It is to build a benefits package that supports your workforce and your organization’s recruiting, retention, financial, and operational objectives.
Data can help you do that.
Utilization can tell you whether employees are participating. Employee feedback can tell you what they value. Cost information can help you understand the financial impact. Retention and turnover data can reveal patterns worth investigating. External benchmarks can show how your offerings compare with the broader market.
None of those measures tells the whole story on its own.
Put them together, and you have a much stronger foundation for making benefits decisions.
The gap between the benefits you offer and the benefits your workforce values may already be visible in your data.
The first step is looking at it carefully enough to find out.
Key Takeaways:
- Start with the benefits data you already have and confirm it is reliable before acting on it.
- Low utilization does not mean low value. Find out why employees are not using a benefit before cutting it.
- Correlation is not causation. Use retention patterns to raise questions, not to prove a benefit works.
- Ask employees directly instead of assuming needs based on age or demographics.
- Review costs alongside participation and feedback, and repeat the process every year.
INFINITI HR helps companies evaluate benefits strategies and workforce data to make more informed HR decisions. Contact us to learn more about building a benefits strategy tailored to your organization’s needs and workforce.
Want more on current employment trends? Check out the recent blog, Communication Architecture: A Blueprint for a Smoother Open Enrollment Season, or come back for additional pieces on human resources, payroll, insurance, and benefits.
This article is for informational purposes only and does not constitute legal, tax, or financial advice. Consult qualified HR, benefits, legal, or privacy professionals for guidance specific to your organization.
