Employee benefits benchmarking is the process of comparing your organization's benefits offerings against those of similar companies in your industry, region, and size band. It answers a fundamental question: How do our benefits stack up?
This guide covers what benchmarking is, why it matters, what metrics to track, and how to use benchmark data effectively.
What is Benefits Benchmarking?
Benefits benchmarking compares your health insurance, retirement plans, and other employee benefits against a relevant peer group. Instead of guessing whether your benefits are competitive, you get data-driven answers.
A good benchmark answers questions like:
- Are our premiums higher or lower than similar employers?
- What percentage of premium do peers pay vs. employees?
- How do our deductibles and out-of-pocket maximums compare?
- Are we offering the right plan types for our workforce?
Why Benefits Benchmarking Matters
Benefits are a significant cost—often the second-largest expense after payroll. They're also a key driver of talent attraction and retention. Benchmarking helps you optimize both.
Talent Competition
Candidates compare offers. If your benefits lag the market, you'll lose talent to competitors—even if your salary is competitive.
Cost Optimization
Benchmarking reveals where you're over- or under-spending. You might be paying above-market premiums without realizing it.
Renewal Negotiations
When carriers propose increases, benchmark data gives you leverage. You can push back with market evidence.
Strategic Planning
Long-term benefits strategy requires knowing where you stand today. Benchmarks provide the baseline for planning.
Understanding Plan Scores
Good benchmarking gives you a score that summarizes where your plan stands compared to peers. But here's the key insight most people miss:
50 is the target, not 100.
A score of 50 means your plan matches the market median—perfectly balanced with what similar employers offer. Scores above 75 aren't automatically better; they indicate richer benefits that may or may not align with your strategy and budget.
The right question isn't "How high is the score?" but "Is this score aligned with our goals?" A score of 35 might be exactly right for a cost-conscious organization. A score of 80 might be intentional for a company competing aggressively for talent.
Key Metrics to Benchmark
Not all metrics are equally important. Focus on these core areas:
Premium Costs
Total monthly premium for single and family coverage. This is the most common starting point for benchmarking.
Employer Contribution
The percentage of premium the employer pays vs. what employees pay. This directly impacts employee take-home pay.
Deductibles & Out-of-Pocket Maximums
How much employees pay before insurance kicks in, and their maximum annual exposure.
Plan Type Mix
PPO vs. HDHP vs. HMO vs. EPO. The mix of plan types offered says a lot about your benefits philosophy.
Finding Top Performers & Under Performers
The overall score tells you where your plan lands. The outliers tell you why. These are the metrics that stand out from your peers:
Top Performers (75th percentile+)
Areas where your plan is notably richer than peers. These might be:
- • Strategic differentiators worth highlighting
- • Potential over-investments to evaluate
- • Selling points for recruiting
Under Performers (below 25th percentile)
Areas where your plan lags behind peers. These might be:
- • Genuine gaps affecting retention
- • Intentional trade-offs for cost control
- • Priority areas for improvement
Top Performers and Under Performers are where the real conversations happen. They help you understand not just where you stand, but what to do about it.
Choosing the Right Peer Group
The value of a benchmark depends entirely on who you're comparing against. "National averages" are rarely useful. Instead, filter by:
Industry
Tech companies benchmark against tech. Healthcare against healthcare. Industry norms vary significantly.
Company Size
A 50-person company shouldn't benchmark against Fortune 500 employers. Size bands matter for realistic comparisons.
Geography
Healthcare costs vary dramatically by region. A California employer faces different economics than one in Ohio.
Pro Tip
The best benchmarks combine multiple filters. "Technology companies with 100-500 employees in the Northeast" is far more actionable than "all U.S. employers."
Where Benchmark Data Comes From
Not all benchmark data is created equal. Understanding the source helps you evaluate its reliability:
Self-Reported Surveys
HR professionals fill out surveys about their benefits. Prone to errors, inconsistent definitions, and response bias. Often annual and quickly outdated.
Broker Book-of-Business
Data from a single brokerage's clients. Limited scope, potential conflicts of interest, and reflects what one firm sells rather than the broader market.
Validated Direct-Source Data
Data submitted directly by plan sponsors and benefits consultants from actual plan documents, then validated through multiple checks. No third-party aggregators. This is what Bnchmrk uses—real plan data from real employers, updated in real time.
Using Benchmarks Effectively
Benchmarking data is a tool, not an answer. Here's how to use it well:
Do:
- Target the Balanced range (25-74) for sustainable positioning
- Use Top Performers and Under Performers to focus conversations
- Consider your organization's unique strategy and culture
- Re-benchmark annually to track trends
Don't:
- ✕Assume Robust (75+) is always better—it may signal over-investment
- ✕Ignore context when comparing data points
- ✕Make major decisions on a single metric
- ✕Use outdated or unvalidated data sources
See How Your Benefits Compare
Get a benchmark report for your organization and see exactly where you stand against your peers.