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What is a Benefits Broker (and How Do You Hire One)?

Benefits account for 29.6% of employee compensation costs, with an average benefits cost of $10.83 per hour worked for private industry workers, according to the Bureau of Labor Statistics. With such a large amount going toward benefits, it’s important to maximize your spending to get the best possible benefits for your employees while managing your budget. Learn how a benefit broker can help you improve your benefits package to attract top talent and stick to your budget.

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What is a benefit broker?

As licensed insurance professionals, employee benefit brokers specialize in creating benefits packages for employers that are customized for each organization’s needs. They shop around with different insurance companies to find plans for your employees. Benefits brokers have access to a wide range of employee benefits from many different companies, which lets them tailor the options to your company. The specific services offered can vary by broker. Some offer a wide range of benefits, while others specialize in one or two types. Some brokers offer additional services, such as providing direct assistance to employees, resolving problems and providing education for employees.

Why you need a benefits broker

Your employee benefits administration can have a major impact on employee morale and your competitiveness when recruiting new employees. A benefits broker can make that administration easier for your HR department and more beneficial for your employees.

Some advantages of hiring a benefit broker include:

  • Saving money for your company on benefits expenses
  • Creating an appealing benefits package within your budget to attract top talent
  • Offering your employees quality insurance that gives them the proper coverage, which keeps them healthier and reduces stress
  • Ensuring your benefits plan complies with regulatory requirements
  • Getting expert advice and recommendations on the best options
  • Educating you on benefits and compliance issues
  • Reviewing and negotiating contracts on your behalf
  • Assisting your employees with enrollment and understanding the benefits options

Tips for choosing the right benefits broker

Before you choose a broker, look at what you need and do thorough research to find a broker who can handle your situation. You need a broker who understands all the regulations and focuses on your needs instead of just making a big commission. Here are some tips to help.

Know what you need

Because brokers offer different services and specialize in different areas, it’s important to be clear on what you need. This helps you ask the right questions to ensure the broker you choose is experienced in your requirements. The size of your company and type of benefits you need are examples of things to compare to what the broker typically handles.

Start looking early

Don’t wait until it’s almost time for your plan to renew. Give yourself plenty of time to screen employee benefit brokers to find one who makes you feel comfortable and can do the best job for your company. Your new broker needs plenty of time to create a strategic benefits plan working with your budget and HR strategies.

Understand the payment structure

A benefit broker can charge either a flat fee or a commission. If your broker is commission-based, they receive a percentage of your premiums from the insurer. You’ll pay the flat fee if that’s the payment structure. Find out how each broker gets paid, and ask about the fees if you choose one with a flat rate.

Treat the hire like an employee hire

Your benefits broker isn’t an employee, but screening them as rigorously as you would job candidates helps you find the best match for your company. Start with three to six options and thoroughly screen each one to find the one who can offer the best service. Set your criteria and ask the same questions of each broker to get an even comparison.

Ask other business owners

Getting recommendations from businesses with needs similar to yours can help you create a list of potential brokers. Ask people in your network which brokers they use and if they’d recommend them. Get a feel for how each broker works and which ones do the best job of taking an employer-centric approach.

Use a checklist

Using a checklist or questionnaire is a consistent, organized way to compare the employee benefit brokers you’re considering. Create a template you can send to each broker. This lets them answer when it works for them, and you get a written copy of the answers. Include necessary information about your company that can help the broker, including why you’re looking for a benefits broker.

Good information to request includes:

  • Company structure for the broker, such as a local broker or a national chain
  • Experience of the people who will work on your account
  • If there’s one point of contact or a team of people who’ll work on your account
  • Licensing and liability insurance
  • Fee structure
  • Services offered
  • Tools and support offered to ensure regulatory compliance with the Affordable Care Act, HIPAA, COBRA and other requirements
  • Software options for HR management of benefits
  • Enrollment process
  • Other specific concerns, special needs or questions you have

Once you get responses from the brokers you’re considering, compare the results to narrow down the pool. You can follow up with a phone or in-person interview to ask additional questions and make your final selection.

Ask about contracts with insurers

Some brokers only have contracts with certain insurers. This can limit your options. However, it could mean the broker gets better rates. Look for a broker who’s transparent about those contracts and relationships.

FAQs about employee benefit brokers

Below are common questions about employee benefit brokers.

What is the difference between a broker and a consultant?

Benefits broker and benefits consultant are terms that are often used interchangeably, but there can be some differences. Benefits brokers often work directly with one or more providers and primarily shop your benefits options for you each year. Consultants often take a long-term, strategic approach to handling benefits. They might offer a wider range of services, including education and risk management, compared to a broker. Some benefits professionals also call themselves benefits advisors to give the impression of a strategic approach to benefits. No matter which option you choose, evaluate the services offered to ensure they fit what you need.

How much does it cost to hire an employee benefit broker?

A benefit broker often receives a commission from the insurance premiums paid by the insurer. The commission amount is typically between 3% and 6% of the total premiums your company pays. While you don’t have to pay that amount directly, you’re likely paying it as part of the premiums. It can also limit your options because a broker might work with only a few companies or might lean toward companies with higher commissions. Some brokers offer a fixed fee that you pay for their services. Expect to pay an amount similar to what the commission would be.

Are benefits brokers worth it?

Hiring a benefits broker helps you set up employee benefit packages that keep employees happy and save you money. Sorting through all the benefits options and putting together the best package for your company is complex and time-consuming. A benefits broker can streamline the process and has access to planning tools and insider knowledge that can improve your benefits package. It’s often worth it to use a benefits broker to ease your workload.

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