How to create a voluntary benefits package your employees want and need

Long gone are the days of a one-size-fits-all benefits plan. Today, businesses can (and do) choose a suite of benefits that best suits their goals as well as the wants and needs of the people who work there. That includes a surprising breadth and depth of voluntary benefits.

A voluntary benefit is simply a benefit that’s offered by an employer, but one in which participation by employees is optional. Voluntary benefits also tend to be those that typically cost less for employers but offer high value for employees.

What’s the formula to come up with a voluntary benefits package for your business? Read on to find out.

Start by understanding the range of voluntary benefits

A decade ago, there was a fairly limited set of voluntary benefits offered by businesses, but that’s no longer the case. Today, voluntary benefits generally fit into four categories: health and wellness; financial wellness; personal benefits; and security. Within those categories are a host of benefit offerings that are both practical and impactful.

For example, voluntary benefits may cover out-of-pocket medical expenses and related household bills. Or they may be a little more surprising—like pet insurance. In fact, that’s one of the new trends in voluntary benefits, along with travel discounts, caregiving support, and flexible monthly stipends/choose-your-own-perks for employees to use as they see fit.

Why the change—and why does it matter to your business? A distinct set of voluntary benefits works for recruitment and retention, appealing to current and potential employees who consider more than just a paycheck when choosing where to work. Three out of four employees want their employers to add benefits within the year, according to a Principal^® 2024 survey of business owners. If you don’t offer those benefits, competitors might.

“We don’t magically leave our personal lives at the door when we enter our workplace,” says Kara Hoogensen, senior vice president of Benefits and Protection. “Employers are well-served to think about their team members as whole humans—people who will take care of business if the business takes care of them.”

Understand the impact on your budget

Here’s a little-understood secret about voluntary benefits: They’re typically, but not always, less of a cost for employers to add. The real value for employees is access to that benefit as part of your workplace benefit plan.

Take, for example, a hospital stay: The U.S. has about 34 million hospital visits each year,  with an average daily cost of $3,025. Hospital indemnity (indemnity = security) insurance, which is typically a voluntary benefit, enables an employee to opt in for coverage that usually pays most, if not all, of the cost of that stay. Employees, then, have a benefit they can lean on for planned or unplanned hospital stays.

In addition, you can create a voluntary benefits timetable that aligns to your business’s budget, adding what you can, when you can. Those nice-to-haves may be based on age (see below for generational wants and needs for benefits) or feedback from employee surveys.

Ask yourself, ‘What does my workforce value?’

Your workforce may be heavily populated with professionals sharing the same skill sets—an IT firm, for example. Or, your business may employ more people of one age group. Voluntary benefits are a way for an employer to acknowledge those similarities and help appeal to employees with diverse goals—and roadblocks—based on their life stage.

You can use voluntary benefits as a lever to appeal to potential employees you’re actively recruiting, or to encourage retention for existing employees. "A 25-year-old may have student loans, while a 55-year-old may be saving into their retirement account to catch up on savings," says Nate Schelhaas, senior vice president of Benefits and Protection. "Understanding what your employees want is critical to your success."

In general, each of the four generations in the workforce may find some benefits more impactful than others. Those include:

• Gen Z may favor mental health benefits and programs, lower premium and out-of-pocket cost for health insurance, a fitness club membership or a workplace gym, and pet insurance.
• Millennials might look for mental health benefits, a fitness club membership or a workplace gym, paid parental leave (across gender identities), a Flexible Spending Account (FSA) for childcare expenses, assistance with building families (adoption, infertility coverage), vision and dental insurance, and pet insurance.
• Gen X often pays attention to paid parental leave (across gender identities), caregiving benefits or leave, and voluntary coverage (life, long-term care, critical illness, accident insurance, hospital protection).
• Baby boomers may be attracted by a fitness club membership or a workplace gym, vision and dental insurance, voluntary coverage, caregiving benefits and leave, and discounts on health services (e.g., chiropractic care).

Another way to gauge what your future workforce may want is to analyze why employees leave (or stay). If you conduct exit interviews, ask the primary reason the employee is leaving. Watch for trends that point to limited or inaccessible benefits.

Communicate about your voluntary benefits package

More and more employees consider voluntary benefits essential—and are more likely to take advantage of them. But still, there are stubborn gaps between what employees and employers think about benefits. For example, employees often don’t know they have access to a benefit: 25% of small businesses have added benefits, but only 8% of employees said their employers have increased benefits, according 2024 Principal business owner insights research.

When employees are aware of and are using benefits, they are more likely to appreciate them and remain engaged. That’s how you turn your benefits plan into a key differentiator, helping you retain talent, while also making a real difference in the financial lives of your employees.

To get to that point, start with a regular cadence to communicate about benefits, compensation, and culture. At PlanOmatic in Denver, that includes sessions every six months. “Our employees learn something new every single time,” says Kennedy Watson in human resources. “I think that as benefit offerings get more competitive and there's more and more you can offer your team, educating them on how to engage with those, how to take advantage of those, is just a necessity.”