How to design an employee benefits program in 2026

Designing an employee benefits program can feel overwhelming when you have so many stakeholders, needs, and choices to consider. You know you need competitive benefits to attract talent, but the options seem endless.

Most companies struggle to balance what employees want with what budgets allow. The result? Generic benefits packages that satisfy no one.

The solution starts with understanding what a modern, competitive benefits program should actually include and how to structure it for your specific workforce.

What is an employee benefits program?

An employee benefits program is a structured package of non-wage compensation offered to employees beyond their regular salary. These programs form a significant part of total compensation and directly impact recruitment, retention, and employee satisfaction.

Benefits programs typically include health insurance, retirement plans, paid time off, and other perks that support employee wellbeing and financial security. Traditional offerings like medical coverage and 401(k) plans remain foundational, but they represent just the starting point for competitive packages today.

Modern benefits programs have evolved beyond these traditional offerings to include flexible spending accounts, wellness initiatives, and lifestyle benefits. Companies now offer customizable spending accounts that let employees choose benefits matching their personal needs - from fitness memberships to childcare support to professional development funds. This shift reflects changing workforce demographics and the recognition that one-size-fits-all approaches no longer work.

Effective programs balance employee needs with organizational objectives and budget constraints. You achieve this balance by conducting needs assessments, analyzing utilization data, and creating benefits tiers that provide choice while controlling costs. The best programs align with company culture and values while remaining financially sustainable.

Why employee benefits design matters for your organization

The connection between comprehensive benefits and workforce performance shows up in measurable ways. Employees with access to ten or more health and wellbeing benefits are 59% less likely to leave their employer, while those with limited options show only 24% loyalty. This translates directly to productivity — engaged employees who feel supported deliver better results and take fewer sick days.

Benefits typically represent 30% of total compensation costs, but this investment pays off through reduced turnover expenses. Replacing an employee often costs between 50% to 200% of their annual salary when you factor in recruitment, training, and lost productivity. A well-designed benefits program can significantly reduce the likelihood of having to shell out for these high replacement costs.

Customizable spending accounts and personalized benefits like LSAs and Rewards & Recognition allow employees to choose support that matches their life stage, family situation, and personal priorities — whether that's caregiving support, education assistance, fitness and wellness accounts, or any other meaningful category.

Properly structured benefit plans also provide significant tax advantages. Pre-tax accounts like FSAs and HSAs help to reduce both employer payroll taxes and employee income taxes. Health Reimbursement Arrangements (HRAs) offer additional tax-advantaged ways to supplement coverage while maintaining compliance with federal regulations.

How to design an employee benefits program in 9 steps

Creating an employee benefits program requires a systematic approach that balances workforce needs with organizational resources. The following steps guide you through building a customized and personalized employee benefits program that attracts talent, supports your workforce, and manages costs effectively.

1. Define your benefits objectives and budget
2. Conduct a comprehensive needs assessment
3. Gather employee input and feedback
4. Design your core benefits package
5. Add strategic personalized benefits
6. Build flexibility into your program
7. Develop a communication strategy
8. Implement the right technology
9. Monitor, measure, and adjust

1. Define your benefits objectives and budget

Start by aligning your benefits strategy with overall business goals and HR objectives. Your benefits program should support what your organization wants to achieve, whether that's rapid growth, improved retention, or enhanced innovation. Write down how benefits will contribute to these larger goals.

Create goals for your benefits program. Set specific targets like "reduce turnover by 15% within 12 months" or "maintain benefits satisfaction score above 80%." These measurable objectives guide your design decisions and help demonstrate ROI to leadership.

Establish a realistic budget considering that benefits typically cost 30% of total compensation. (This percentage varies by industry and company size, but provides a starting benchmark.) 

Calculate what this means for your organization based on current payroll, then adjust based on competitive positioning needs. Factor in tax advantages and deductions available for various benefit types. Pre-tax benefits like health insurance premiums, FSAs, and retirement contributions reduce payroll taxes. Section 125 plans allow employees to pay for certain benefits with pre-tax dollars, lowering both employer and employee tax burdens.

2. Conduct a comprehensive needs assessment

Analyze your workforce demographics to understand who you're designing benefits for. Break down your employee population by age groups, family status, and job types. A workforce with many Gen Z and millennials may need different benefits than one dominated by Gen X employees. Similarly, single employees value different perks than those supporting dependents.

Examine industry standards and emerging trends shaping employee expectations. Professional associations publish annual benefits surveys showing adoption rates for various offerings. Newer trends like mental health support, fertility benefits, and education assistance like student loan support are gaining traction quickly in certain sectors.

Consider operational factors that affect benefits design. Remote workers will need different support than on-site employees. Shift workers face unique challenges accessing healthcare and childcare. Geographic locations influence cost structures and available providers. A benefits program that works in urban headquarters might fail rural satellite offices.

Evaluate current utilization data if you have an existing program. Low utilization rates signal misalignment with employee needs. High usage of certain benefits indicates strong value perception. Claims data reveals health trends and potential areas for preventive programs.

Identify gaps between current benefits offerings and what employees actually want and need based on real data. Compare your program against market research on valued benefits. Note where competitors offer advantages. Document areas where employees express dissatisfaction or confusion. These gaps represent opportunities to improve attraction and retention through strategic benefits design.

3. Gather employee input and feedback

Design and distribute anonymous surveys to understand what benefits matter most to your workforce. Online survey tools make it easy to gather preferences on everything from healthcare options to work-life balance perks. Keep surveys short — 10-15 questions maximum  — and use a mix of rating scales and open-ended questions to capture both quantitative data and personal insights.

Conduct focus groups with diverse employee representatives from different departments, tenure levels, and demographics. Small group discussions reveal nuances that surveys miss. Try scheduling 60-90 minute sessions with 6-8 participants each. Create a safe space where employees feel comfortable sharing honest feedback about current benefits and unmet needs.

Include benefits questions in stay and exit interviews to capture real-time feedback. When employees choose to stay, ask what benefits keep them engaged. During exit interviews, probe whether better benefits elsewhere influenced their decision. This data directly links benefits design to retention outcomes.

Track recruitment data to identify benefits-related offer rejections. Work with your talent acquisition team to document when candidates decline offers due to benefits gaps. Note which specific benefits come up repeatedly. This information highlights competitive disadvantages in your current package.

Create feedback mechanisms for ongoing input throughout the year, not just during annual enrollment. Set up a dedicated benefits email address, suggestion box, or monthly office hours where employees can share concerns and ideas. Regular pulse surveys help you spot emerging needs before they become retention issues.

4. Design your core benefits package

Select health insurance options that balance coverage quality with cost management. Most employers offer multiple plan tiers, such as a high-deductible health plan paired with an HSA, a traditional PPO, and sometimes an HMO option. Price each option carefully, considering both employer and employee contributions. The average employer covers 83% of individual premiums and 73% of family premiums.

Design retirement savings plans with employer contributions that attract talent while managing costs. A 401(k) match remains the most common approach - typically matching 50% of employee contributions up to 6% of salary. Some companies use automatic enrollment at 3% to boost participation. Consider safe harbor provisions to simplify compliance testing.

Establish paid time off policies that reflect your workforce needs and industry standards. Companies increasingly move toward flexible PTO banks rather than separate vacation and sick leave buckets. Many choose to start new employees with 15-20 days annually, scaling up with tenure. Include standard holidays plus floating days for personal observances.

Disability and life insurance protect employees during unexpected events. Short-term disability typically covers 60-70% of salary for up to 26 weeks. Long-term disability extends coverage at similar rates. Basic life insurance usually equals one to two times annual salary, with options to purchase additional coverage.

Build flexibility throughout your core package. Let employees choose between plan levels, adjust retirement contributions, and customize coverage for dependents. This choice architecture helps diverse employees find options that fit their specific situations while keeping administration manageable.

5. Add strategic ancillary benefits

Lifestyle Spending Accounts expand benefits beyond traditional categories. These employer-funded accounts let employees choose how to spend allocated dollars on wellness, fitness, home office equipment, or personal development. You set the eligible categories and annual limits while employees select what matters most to them - yoga classes for one person, ergonomic desks for another.

Rewards & recognition programs are designed to increase employee engagement and foster a culture of appreciation, which leads to greater productivity and retention. Employers are now looking at ways to bring recognition perks into their strategic benefits stack for a better experience and cost-effectiveness.

Professional development and education assistance programs address skill gaps while showing investment in employee growth. Structure these as annual allowances for conferences, certifications, online courses, or degree programs. Set approval workflows to ensure alignment with role requirements. Many companies offer $1,000-5,000 annually per employee for continued learning.

Mental health support extends beyond basic EAP services. Consider adding therapy session allowances, meditation app subscriptions, or stress management workshops. Some employers now include mental health days separate from PTO banks. Virtual therapy platforms make access easier for remote workers and those in areas with limited providers.

Remote work stipends acknowledge the shift in where work happens. Monthly allowances for internet, cell phone bills, or coworking space memberships support distributed teams. One-time home office setup funds help employees create productive workspaces. These benefits level the playing field between office and remote workers.

Flexible spending accounts (FSAs) and health savings accounts (HSAs) give employees tax advantages while reducing your payroll tax burden. FSAs work well for predictable expenses like childcare or regular medical costs, while HSAs pair with high-deductible health plans to create long-term savings opportunities. Employees appreciate keeping more of their paycheck through pre-tax contributions.

6. Build flexibility into your program

Create tiered benefit options that give employees meaningful choice without overwhelming them. Start with a basic tier covering core needs, a standard tier with enhanced coverage, and a premium tier for maximum benefits. Each tier should clearly show what's included and the associated costs, making decisions straightforward.

Cafeteria-style plans let employees allocate benefit dollars across categories that matter to them. Set a total benefit allowance, then allow employees to distribute funds between health coverage, retirement contributions, paid time off, and lifestyle benefits. Someone might choose minimal health coverage but maximize retirement savings, while another loads up on family benefits.

Design contribution strategies that balance affordability for both parties. Consider these approaches:

• Fixed dollar contributions regardless of plan choice
• Percentage-based contributions that scale with plan costs
• Tiered contributions incentivizing efficient choices
• Age or salary-banded contributions for equity

Voluntary benefits expand options without increasing your base costs. Employees purchase additional coverage like supplemental life insurance, accident insurance, critical illness coverage, or legal services through payroll deductions. Group rates provide better pricing than individual policies while adding no employer expense.

Build your program architecture to scale smoothly. Choose benefit structures and vendor relationships that accommodate growth from 50 to 500 employees without major overhauls. Standardize eligibility rules, contribution formulas, and plan designs that work across locations. This foundation prevents painful restructuring as you expand.

7. Develop a smart benefits communication strategy

Clear benefits documentation makes the difference between employees using their benefits and leaving money on the table. Create guides that explain each benefit in plain language, avoiding industry jargon and technical terms. Include real-world examples showing how benefits work in practice, such as what an employee pays for a doctor visit, how to submit a claim, or when to use an FSA vs. an HSA.

Design onboarding materials that introduce benefits gradually. New employees face information overload, so structure benefits education accordingly across their first 90 days. Start with immediate needs like health insurance enrollment, then layer in retirement planning and supplemental benefits. Create a benefits checklist showing key decisions and deadlines.

Annual enrollment requires strategic planning months in advance. Map out a 6-8 week communication campaign starting with benefit changes and ending with enrollment deadlines. Use countdown messaging, decision support tools, and comparison charts. Host virtual benefits fairs where employees can ask vendors questions directly. Schedule multiple sessions accommodating different time zones and shifts.

Train managers to handle benefits conversations confidently. They field questions daily but often lack detailed knowledge. Provide conversation guides, key talking points, and escalation paths for complex issues. Regular manager briefings before major announcements ensure consistent messaging across teams.

Self-service resources reduce repetitive questions and empower employees. Build comprehensive FAQs organized by topic and life event. Create video tutorials for common tasks like adding dependents or changing contributions. Maintain a benefits glossary defining terms employees encounter.

Communication happens year-round, not just during open enrollment. Send monthly spotlights featuring underutilized benefits. Share reminders about FSA deadlines, preventive care coverage, and wellness program opportunities. Time messages to employee life moments, like retirement planning for those turning 50, dependent care options when school starts.

Meet employees where they already engage. Email works for major announcements, while internal chat platforms are great for quick questions. Post updates on company intranets, share infographics in break rooms, and text deadline reminders. Video messages from leadership emphasizing benefits value increase engagement. 

8. Implement technology and administration systems

Select a benefits administration platform that handles enrollment, eligibility tracking, and ongoing management in one place. Modern platforms automate workflows, reduce errors, and give employees 24/7 access to their benefits information. Look for systems with mobile apps, decision support tools, and real-time eligibility verification.

Integration with payroll and HRIS systems eliminates duplicate data entry and synchronization errors. Your benefits platform should exchange data seamlessly with existing systems through APIs or file transfers. Set up automatic feeds for new hires, terminations, and demographic changes to keep benefits enrollment current.

Employee self-service portals shift routine tasks away from HR teams. Workers can enroll in benefits, update dependents, view plan documents, and download ID cards without submitting forms or calling HR. The best portals guide employees through decisions with side-by-side comparisons and cost calculators.

Vendor management becomes simpler with centralized administration. Establish clear processes for onboarding new benefit providers, managing contracts, and coordinating open enrollment. Create service-level agreements defining response times and issue resolution procedures. Regular vendor reviews ensure partners meet performance standards.

9. Monitor, measure, and adjust

Track utilization rates across all benefit offerings to understand what employees actually value. Low participation in certain benefits signals misalignment with workforce needs, while high usage indicates strong perceived value. Monthly or quarterly tracking reveals patterns faster than annual reviews.

Monitor employee satisfaction through pulse surveys every quarter rather than waiting for annual feedback. Short, focused surveys asking about specific benefits generate higher response rates and actionable insights. Compare satisfaction scores across departments, locations, and demographics to identify gaps in your program design.

Cost trends tell you whether your benefits remain sustainable. Review monthly spending against budget projections, watching for unexpected spikes in claims or enrollment. Calculate per-employee costs for each benefit type to understand where dollars deliver the most value. Rising healthcare costs might prompt plan design changes or increased employee contributions.

Review your competitive position each year against updated market data. Benefits that attracted talent two years ago may now fall below market standards. Industry surveys, benchmark data, recruiting feedback, and competitor research reveal where you need adjustments to stay competitive.

Measure how benefits impact your talent metrics. Compare turnover rates between employees who use multiple benefits vs. those who don't. Track whether enhanced benefits correlate with improved offer acceptance rates. Document when candidates or departing employees cite benefits as decision factors.

Data-driven adjustments improve program effectiveness over time. If 80% of employees never touch their wellness benefits, it’s time to redesign the offering. When utilization data shows heavy use of mental health service offerings, you may want to expand access or dig deeper into the data. Let employee behavior and feedback guide evolution rather than assumptions.

Plan systematic updates rather than reactive changes. Schedule comprehensive program reviews every two to three years, with minor adjustments annually. This approach maintains program stability while allowing strategic improvements based on workforce changes and market evolution.

5 tips for successful employee benefits implementation

Small adjustments early in the rollout help you build trust and engagement across your workforce. Focus on speed, clarity, and structure to avoid delays and confusion.

1. Start with quick wins: Launch simple benefits employees can use immediately — like wellness stipends, meal allowances, or tuition support. These show early value and help build momentum before rolling out complex programs.
2. Leverage tax advantages: Offer pre-tax accounts such as FSAs, HSAs, and commuter benefits to reduce taxable income. Help employees understand how these accounts work and how they increase take-home pay without raising salaries.
3. Prioritize clear communication: Use plain language instead of HR or benefits industry jargon. Break down benefit options with real-life examples. Show how different employees might use the same benefit in different ways.
4. Plan for scalability: Design benefits infrastructure that supports growth. Select platforms and processes that work across locations, time zones, and job types without adding complexity.
5. Stay compliant: Monitor annual IRS limits, ACA reporting rules, and ERISA guidance. Use internal audits and third-party reviews to avoid gaps that lead to penalties or employee disputes.

Final thoughts  

A benefits program needs regular evaluation to stay aligned with workforce expectations and company goals. What worked last year may not support your team this year. Start with a strong foundation, then adjust based on usage, feedback, and business needs.

Every workforce is different, so copy-paste packages don’t work. A flexible structure lets you serve a wide range of employee needs while staying within budget. Measure outcomes regularly—benefits should support retention, satisfaction, and cost control.

Forma helps you build benefits that flex with your workforce. With a platform designed around employee choice and employer control, you can launch customizable benefits faster, engage more people, and manage less complexity.

Talk with an expert to see how Forma simplifies benefits that actually get used.

‍

Want to see how Forma can support a successful benefits strategy for 2026 and beyond? <span class="text-style-link text-color-blue" fs-mirrorclick-element="trigger" role="button">Schedule a demo today.</span>

‍