The report, Money Talks: communicating employee benefits, found employers who are unaware of the benefits on offer are less loyal and productive, and as a result are more likely to call in sick or leave the company altogether.
Author of the report Nick Bacon said a good benefits package can aid companies with staff retention.
"When organisations can't easily increase salaries, they need to identify other ways to build staff loyalty and a good benefits package does this," he said.
"However, the research shows even if companies are offering good benefits, if they fail to tell staff what's available, it's no better than not offering these benefits at all."
The research commissioned by income protection firm Unum, showed the cost of replacing a member of staff equates to a year's salary due to recruitment and training costs, combined with lost productivity.
Failing to communicate benefits costs companies almost £1.5 billion a year. This rises to around £2.7 billion when higher workplace absence costs for this group are included.
CEO of Unum UK, Peter O'Donnell, said the report shows simply offering a benefits package isn't enough if you want to promote wellbeing and financial security.
"Our experience shows that contrary to employers' beliefs, communicating with staff about financial protection and well-being initiatives such as income protection and private medical Insurance, leads to lower absence rates and reduced time off sick," he said.
"Having an open dialogue between employers and employees about benefits builds a more productive and loyal workforce, and the bottom line benefits are evident."
The report used data from the UK Government's 2011 Workplace Employment Relations Study (WERS) and included data from employers and employees in 2,680 workplaces.
