Two of the constant challenges for business owners are hiring great talent and keeping great talent. Bringing in and then keeping great people can often hinge on the employee benefits you offer. Great benefits are a major draw for a lot of prospective employees. But offering an attractive benefit package is easier said than done.
For small to mid-sized businesses the question of benefits is a conundrum. You want to attract talent and keep your people happy by offering great benefits, but, in most cases, you can’t afford it. Every penny spent on employee benefits directly impacts your bottom line.
So what should you do? Let’s start with which employee benefits you “have to” offer (legally), and then we’ll look at other benefits that you “can” offer and “should” offer.
What you legally have to offer:
- Give employees time off to vote, serve on a jury and perform military service.
- Comply with all workers’ compensation requirements.
- Withhold FICA taxes from employees’ paychecks and your own portion of FICA taxes, providing employees with retirement and disability benefits.
- Pay state and federal unemployment taxes, thus providing benefits for unemployed workers.
- Contribute to state short-term disability programs in states where such programs exist.
- Comply with the Federal Family with Medical Leave Act (FMLA) – if you have 50 employees or more (in most states).
What you are not (technically) required to offer:
- Health plans (except in Hawaii)
- Retirement plans
- Dental and/or vision plans
- Life insurance plans
- Paid vacations, holidays or sick leave
But, let’s be realistic. If you want to be competitive in the talent market, then you will need to offer some or all the above options. The labor force is tight, and the value of any or all of these benefits contributes to an employee’s overall compensation, and in some cases, peace of mind.
Most employers provide some combination of the following:
New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas. These are pretty much expected. Many employers also offer one paid flexible day off during the year. And, of course, employees are given the option to take time off without pay if they have used all their vacation time.
Most companies offer two weeks’ vacation time. However, a new employee often doesn’t start accruing vacation time until they are 90 days into employment. A couple of points on this: to be more competitive, you may want to consider combining sick and vacation time into one bucket and giving your employees four weeks off per year. This is a much better benefit and a better way to take care of your employees.
Of course, it’s important to be clear on how much time an employee can take off at any given time. Often, allowing an employee to take more than a week off at a time can be harmful to your organization. If an employee is planning on taking a big chunk of time off (maybe a big trip, etc.) then make sure there is a backup in place for them so that the hit isn’t as big to your organization.
Legally, you don’t have to offer time off for funerals, but most companies offer three to four days for family members.
Standard practice is 3 months off for the birth or adoption of a baby. The FMLA requires that employees receive 12 weeks of “unpaid, job-protected leave… with continuation of group health insurance coverage.” At the end of the leave, the employee must receive their same position or an equivalent when they return.
The groaner of them all. It is expensive. Period. There are a variety of different plans and options available. Get a good broker, and they will help you find what is best for you. Another option is to not offer health insurance but to give every employee a fixed amount every month that goes towards their health insurance. It would likely be something like what they would pay for an average deductible, but the choice is yours. Going this route can potentially bring significant savings to your bottom line.
Most owners think they can’t afford a retirement plan. The reality is, there are a variety of plans available, some with tax benefits. Talk to your CPA and/or financial advisor to find out which is best for you and your company. Again, this is a great selling point for employees.
These are just a few of the benefits you can offer. Make sure to look at them collectively so that you understand the cost implications and balance it against employee salaries.
If you do opt to provide some or all of these benefits, at the end of the year, send your employees a letter or give them a report from your payroll system that outlines everything you have contributed on their behalf. When you take their base salary, commissions and/or bonuses, taxes you have paid on their behalf, vacation, contributions to health and retirement, and anything else you contribute, the employee will see that it is a significant number. If they were looking to job hop, they would need/want to match that.
The employee benefits you offer are part of your culture as well as taking care of your employees. It will also help acquire new employees because existing employees will tout your offering.
What types of benefits do you offer your employees? Let us know.
By Blair Koch