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8 Ways to Reduce Employee Benefit Costs
By Burnham
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8 Ways to Reduce Employee Benefit Costs

It’s no secret that offering employee benefits can be expensive for employers, with the average company spending about 8% of its operating budget on employee benefits. In recent years, the cost of employee benefits has increased by 5-7% annually. However, offering a strong benefits program is crucial for attracting and retaining top talent and creating a positive company culture in which employees feel valued and satisfied.

Strategies you can leverage to help reduce your healthcare spending:

If you’re looking for ways to provide the benefits your company needs in a financially sustainable way, here are eight strategies to consider:

1. Determine employee use of programs

Gather regular employee feedback about their desired benefits and analyze utilization rates to understand which programs are being used. If you notice that a wellness program is not getting much engagement or a new offering has not gained traction, these underutilized benefits may be candidates for elimination. However, you may also want to consult with a broker about ways to increase utilization before making any decisions about eliminating benefits.

2. Choose a plan wisely

Customizing your employee benefits offerings to meet the specific needs of your employee population can help reduce premiums. A prepackaged, one-size-fits-all approach offered by a carrier may be more expensive. Consider exploring plan design options and cost containment strategies with your employee benefits broker that could potentially reduce costs for you and your employees, such as high deductible health plans, zero-cost telehealth, and carrier-subsidized wellness programs.

3. Assess pharmacy offerings

As pharmacy costs continue to rise, you may be able to save money by encouraging the use of lower-cost, clinically effective biosimilars. Alternatively, you can consider working with a prescription risk management provider that offers specialized expertise and solutions to help increase your value-to-expense ratio.

4. Cut down administrative costs

To reduce the cost of benefits administration, try using online portals or automated messaging systems for enrollment and benefits communication instead of relying on manual tasks by your HR team. An automated and integrated benefits system can also help empower employees to be more self-sufficient. If you already use a benefits system, consider reviewing your options to ensure you are using a modern, cost-effective option. Alternatively, you may be able to save money by outsourcing benefits management to a third-party provider.

5. Employee education

Learning about employee benefits can be time-consuming and overwhelming, with a lot of jargon and specific details to understand. This can discourage employees from using their benefits. If employees don’t understand their benefits, they may make poor decisions about how to use them, such as going to the emergency room for a non-serious issue instead of using telehealth benefits. Offering education and resources about benefits can help prevent these types of scenarios. If you don’t have the internal resources to do this, consider consulting with your employee benefits broker about ways to educate your employees about their benefits.

6. Telemedicine

Telemedicine is a convenient and cost-effective way for employees to access healthcare providers. Encouraging your employees to use these virtual services can help reduce unnecessary emergency room visits and provide easy access to a wide range of healthcare needs. This can be a win-win situation for both employers and employees.

7. Shop around

Don’t just automatically renew your employee benefit plans year after year. Take the time to review and negotiate the terms of your plans to ensure you’re getting the best value for your money.

8. Implement a wellness program

Promoting healthy behaviors and lifestyles can help reduce healthcare costs. Consider offering wellness initiatives such as gym memberships, healthy eating programs, and stress management resources. Chronic conditions like heart disease, diabetes, and musculoskeletal pain are major drivers of healthcare spending for employers. Implementing a well-administered wellness program and offering disease management resources can help reduce the incidence of chronic illnesses and help employees manage their conditions, ultimately leading to reduced healthcare costs.


It can be challenging to create a comprehensive employee benefits program while also trying to cut costs. An experienced partner can help you navigate this process and make informed decisions about your benefits offerings. There are many factors to consider when designing a benefits program, and having guidance can be invaluable. If you’re looking for ways to contain healthcare costs, consider reaching out to our Employee Benefits team for an assessment of your current plan and recommendations.