Employee Benefits – A Cost-Benefit Analysis

We are often asked at Xexec about how to justify and measure the costs of running a company-wide, national, or global employee benefits scheme. The answer we often give is that there are many ways to skin a cat! But the truth is, that each client we work with must do their own cost-benefit analysis. But where to start?

A cost-benefit analysis is a process that businesses use to analyse decisions. The business or analyst sums up the benefits of a situation or action and then subtracts the costs associated with taking that action. Some consultants or analysts also build models to assign a monetary value to intangible items, such as the benefits and costs associated with rewarding and recognising staff.

The process can be complex, and it is often hard to know where to start. Hence, below we have set out some guidance to help you put your own cost benefits analysis (CBA) together:

Identify all the potential costs and benefits

The first step when looking into a CBA for your employee benefits is, obviously, to compile a comprehensive list of all the costs and benefits associated with your scheme. These might include the following:


  • Salary of those involved in running the scheme, hours invested by others.
  • Technology and infrastructure investment and ongoing costs including third party vendors and supplier subscriptions.
  • Annual / monthly budgets for reward and recognition and provision of service.
  • Intangible costs such as the impact on customers, employees, or potential employees.
  • Opportunity costs such as financial bonuses versus personal reward or recognition.
  • Cost of potential risks such as loss of key industry talent to competition, and reputational risks based on non-provision of benefits.

Benefits might include the following:

  • Revenue and sales increases from increased productivity.
  • Savings for staff.
  • Reduction of costs due to bigger appeal in attracting and retaining staff.
  • Intangible benefits, such as improved employee engagement and morale, as well as customer satisfaction and reputation due to enhanced company performance.

Look at original objectives

Once you have your list of costs and benefits as above, it is important to measure these benefits and costs against the original objectives for the scheme. For example:

  • To support the implementation of company values and behaviours.
  • To attract top talent and reduce churn.
  • To better the lifestyle and well-being of every member of staff.
  • To increase overall productivity and efficiency of staff.

Once this has been done, you will be able to place a tangible costs saving against each objective; reduction in talent acquisition and retention costs, increase in overall business output or even reduction in costs associated with HR legal fees or customer satisfaction issues.

Look at areas to reduce costs

Many businesses believe that benefits provided to staff need to be financially based, especially when you expand this to include your reward and recognition programme. Traditionally, rewards to employees have either been in the shape of financial bonuses or related items such as meals, trips, or gifts. Over the period of a year it is possible to track the overall spend of this and see it as a percentage of the overall costs.

This can then be an area to focus on when looking to reduce overall costs without risking the potential benefits of your scheme. We have seen a rise in the number of business using non-financial reward to engage, motivate and reward their staff. These can include days off or additional holiday days, parking spaces in the office, non-work-related training courses or shadowing company management for the day.

By implementing these non-financial rewards and benefits, you can not only save costs, but also add something extra to your employees. In addition, this be a key indicator for the success of the programme – being able to deliver more for less.

Map, Measure and Repeat

Once you have managed to identify all the costs, benefits, wastes and opportunities, it is important to put this down in your CBA and ensure this is a living document. Although it can be seen as a snapshot in time, it is also an important reference document.

Your CBA should form the basics of your key metrics to success and be revisited on a quarterly basis. You will be able to map the success of your programme against costs savings, increased performance, and overall adoption of benefits, reward and recognition scheme across the business.

Finally, a CBA is seen as a recognised document that is used as much in the company board room as it is at a divisional and project basis. By producing an updated CBA and sharing it with your management or other key decision makers, you will also help gain senior buy-in to what you are trying to achieve.

No one likes reporting but if you weigh up the benefits of producing a CBA to demonstrate the success of your employee benefits scheme, it surely outweighs the cost and effort of producing one….

To find out more about how an employee benefits programme can support your business, download our free e-book on employee benefits.