One of the best ways to attract employees and keep them working on your business is to offer benefits. Many small businesses mistakenly believe that they cannot afford to offer benefits. However, they do not know that many brokers work hard with insurance companies to tailor benefits based on your budget and needs. Most employees must-have benefits include medical insurance at the very least, especially in the United States, where the vast majority of healthcare is privately run. At the same time, health insurance should be the bare minimum that employers offer as a benefit. Most candidates would like to have a retirement plan, disability insurance, and other supplemental benefits. Most businesses need to strike the right balance between offering no benefits at all and offering the right benefit that is most in-demand from your employees. This will certainly give your businesses more value, help attract or retain talent, and aid in jump-starting its growth.
What the Law Requires
Most businesses must provide their employees with certain benefits by law. This includes:
- Give time off to vote, perform military service, and jury duty.
- Meet and comply with all workers’ compensation requirements
- Withhold taxes from paychecks complying with the federal insurance contribution act and provide employees with retirement and disability benefits.
- Pay state and federal unemployment taxes
- In some states, it is required to contribute to short-term disability programs.
- Comply with all rules of the Federal Family and Medical Leave (FMLA).
You are not required by law to provide retirement plans, health plans, dental or vision plans, life insurance plans, paid vacation, holidays, and sick leave. However, the reality is that most companies do provide some if not all of these benefits to attract talent. According to experts before going out to find coverage, you should understand that there are some legal complexities that could arise, hence, it is important to consult with an expert in this field. From a legal standpoint oftentimes the biggest mistakes employers make is to leave a portion of their workers (i.e. part-timers) out of a certain insurance plan which they have adopted for others. If the management staff gets tax-advantaged benefits, then so should the clerical and custodial staff, meaning that benefits should be for everyone.
Avoiding Expensive Mistakes By Finding The Right Coverage
Providing the right benefit to meet employee needs in combination with meeting all required laws is not cheap, in fact, it is estimated that benefits have a cost of 20 to 40 percent of base pay for most businesses. Most businesses get into trouble by cutting corners and making costly errors. That is why it is important to choose the right broker, lawyer, and plan administrator to avoid making all these mistakes. Some common mistakes include the following:
- Absorbing all the cost of the benefits: Most companies, especially smaller ones are not footing the entire benefit bill nowadays. It is estimated that over 90 percent of companies require employee contributions towards health insurance and the cost of insuring dependents. The benefit of having co-payment plans is that it eliminates employees who do not need coverage because they are covered elsewhere. This saves both the employee and employer from unnecessary expenses.
- Sloppy paperwork management: This problem is especially true for smaller businesses where an assigned employee dealing with benefits paperwork might have several other jobs. This type of employer is not very familiar with most technicalities and misses important details that can expose the company to expensive litigation. Ensuring that you hire the appropriate employee or even outsourcing the paperwork task to an expert will end up saving your business from costly mistakes.
- Giving unwanted benefits: This is self-explanatory, if your employees do not want or need a benefit then you should not provide it. A business can determine which benefits are unwanted by surveying your existing employees about what they value most. Other methods include looking at what your competition offers and by studying your workforce. For example, if most of your workforce is young and single individuals you probably should not provide life insurance. Typically the most commonly valued plans are those that provide medical and retirement benefits.
Choosing the right benefits package can make a world of difference in terms of attracting and retaining your employees. However, care should be taken to avoid many costly mistakes such as giving unwanted benefits, keeping sloppy paperwork, and in general not consulting with an expert in the field. The rising costs of health insurance have forced some businesses to cut back on all benefits altogether, however, many states are trying to pass laws that make it easier for small businesses to get health insurance and prohibit carriers from discriminating against employees who have pre-existing conditions. Many small businesses also band together to have more clout when negotiating with insurance companies. Hence, it is important to join associations in whatever industry your business is in so that your business can benefit from economies of scale.