As an HR leader, you were on a mission. You rolled out a new wellness stipend, expecting every employee to jump at the chance to sign up. But despite its potential, only 20% have used it.
It wasn’t a bad benefit. The low engagement rate is likely a case of poor strategic planning. Focusing on research-backed strategies can make benefits engagement rates soar.
Here are the top five research-backed strategies you can incorporate to improve your employee benefit engagement rates:
Loss Aversion: Why the Fear of Losing a Benefit is a Motivator
Loss aversion is when people feel the pain of losing something more intensely than the pleasure of gaining something of equal value.
Think about a subscription you have that you love. If you found out you were about to lose access, would you click renew immediately? If the answer is yes, that’s loss aversion in action. The same can be true for your employees. When losing a benefit is on the line, they are far more likely to take action than they are when offered something new.
What Loss Aversion Looks Like in Benefits Enrollment
- Employees are more likely to enroll when reminded of what they’ll lose if they miss the deadline.
- It’s not what you say but how you say it. Saying “Don’t lose your HSA contribution match” has a greater effect than “Sign up for an HSA contribution match.”
- High-deductible health plans often seem less attractive. The focus is usually on the potential loss of paying out-of-pocket even when the overall savings are higher.
The good news is that you overcome loss aversion with the right messaging. Something as simple as a digital postcard with deadline reminders framed around potential losses can boost engagement.
Choice Overload: When Too Many Options Lead to Inaction
Choice overload happens when there are simply too many options, making decision-making impossible. That’s when decision paralysis kicks in, which is defaulting to the status quo or avoiding a decision altogether.
We all experience choice overload constantly throughout the day. Whether it’s lunch at The Cheesecake Factory (the menu reads like a novel) or picking what streaming app to scroll through, we have an abundance of options. And nine times out of ten, the choice is that favorite pasta dish or giving up on choosing a show completely.
When Choice Overload and Benefits Enrollment Collide
- Employees may feel overwhelmed by benefits options, so they default to last year’s plan, even if it’s not the best fit.
- A SHRM study reported that nearly 50% of employees feel overwhelmed by benefits options.
- Increasing investment options for retirement plans can decrease participation rates.
It’s up to HR teams to strike the right balance of options, but not too many of them. Simplify benefits choices by offering pre-curated packages in place of an overwhelming list of options. Provide decision-support tools to help staff compare options based on their needs. It’s all about having the freedom to choose and the support to make the best choice.
The Endowment Effect: Why Employees Value Benefits They Feel They Own
The endowment effect is a cognitive bias where people place more value on what they already own or feel a personal investment in. The bias happens regardless of the actual market value of the item.
How the Endowment Effect Relates to Employee Retention
Employees who feel a sense of ownership over their benefits are more likely to stick around. When benefits feel more personalized and like a reward instead of an offering, they become harder to give up.
- Remember, framing matters. Instead of saying, “Here are the benefits you’re eligible for,” position them as “These are the benefits you’ve earned.”
- Personalized rewards and flexible benefits packages are all examples of rewards that can create a stronger connection.
- Employees who own a piece of the company through stock options and equity tend to be more committed to its long-term success.
- Incorporate milestone-based rewards. Recognize tenure with enhanced benefits like increased 401(k) matching after five years. This can reinforce the idea that benefits grow alongside an employee’s career.
Social Proof: How Peer Influence Drives Benefit Participation
Social proof is the psychological tendency to follow the behavior of others. This is especially true in uncertain situations. Robert Cialdini coined the concept in 1984, and marketers have used it in their strategies for decades. It can be just as powerful in terms of employee benefits.
Everyday Examples of Social Proof in Marketing
Social proof is everywhere. It’s often influencing decisions without us realizing it. Here are just a few you might be familiar with:
- Amazon uses Best Seller Labels to highlight top-selling products. Knowing others have purchased an item can encourage the potential buyer to add to cart.
- Travel sites create a sense of urgency by adding “X People Are Viewing This” in hopes that you’ll buy.
- Brands have leveraged celebrity endorsements for decades to influence consumer behavior.
Ways to Apply Social Proof in Benefits Adoption
HR teams are essentially marketing the benefits available to employees. You want to present the options that make sense to each of them and support them in making the right choice.
- Employees who see their colleagues using a benefit are more likely to do the same. This can be shared through a testimonial, case study, or direct conversation.
- Highlighting the most popular benefits can act as a nudge for those making a decision.
- Employee spotlights and real-life success stories can increase participation.
When benefits feel like a shared norm instead of a solitary choice, engagement and adoption naturally go up.
Nudge Theory: Small Reminders That Have a Big Impact
The nudge theory guides decisions by presenting choices with small, indirect suggestions without limiting freedom. Nudges work by subtly influencing behavior and leveraging cognitive biases (remember the default of sticking to last year’s benefits plan).
These nudges are a form of choice architecture, meaning the way options are structured shapes decisions. For example, putting healthier options at eye level in a cafeteria encourages better eating habits. Similarly, strategic benefits communications can lead to higher enrollment rates.
Use Nudge Theory to Boost Benefits Enrollment
Small changes in how you present benefits can have an impact on employee decisions. Here are some ways we’ve already gone over that apply nudge theory:
- Choice Architecture: Remember to optimize benefits. Prioritize cost-effective plans and use clear language. For example, “75% of employees use this $500 wellness stipend” is more compelling than “25% don’t use it.”
- Timely Reminders: A well-placed nudge can increase action. Send deadline alerts, last-chance notifications to create urgency, and milestone-based messages for new parents and retirees. A strong year-round benefits communication strategy helps everyone stay engaged beyond open enrollment.
- Social Proof: People look to their peers for guidance. Highlight popular plans and employee stories.
Turn Behavioral Insights Into Actionable Benefits Strategies
Understanding how your employees think is the key to improving benefits engagement. By applying the behavioral science principles you’ve read about you can guide your employees to make decisions with confidence. Gone are the days of overwhelm and inaction.
Remember that the small changes in how you present benefits will have the greatest impact. How you frame a benefit, simplifying choices, personalization, and subtle nudges bring everything together.
HR teams don’t need to overhaul their entire benefits strategy. A few thoughtful adjustments with proven communications strategies are all you need to make enrollment easier, more engaging, and more effective.