6 Reasons Small Employers Should Offer Employee Benefits
Small employers often shy away from offering their employees health coverage, due to the perceived cost and administration headache. After all, offering health insurance is not a requirement until your company reaches 50+ full time equivalent employees, and offering other benefits like dental and vision are never a requirement. But those small employers who do offer benefits to their employees give themselves a huge advantage in the marketplace. Here are 6 reasons why you should offer benefits as a small employer:
#1 Benefits make you COMPETITIVE:
A benefits package undoubtedly drives a company’s ability to hire better talent. It is a well-known fact that an employee considers benefit options when making their employment decision. When you have a talented employee who has many job offers, or a particularly good economy with low levels of unemployment, this becomes a bigger bargaining factor for employees.
Depending on the age, family unit, and lifestyle of your potential employee, a lack of health insurance can be a deal-breaker when it comes to the decision to take the job. Some employees find easy-to-access health insurance so important that they would take a lower salary if the job included benefits. For employees with families and young children especially, access to health insurance is very important, and finding it on their own can be difficult, expensive, and result in low-quality coverage. For these employees, availability of health benefits can be a huge deciding factor.
#2 Benefits Lower Employee Turnover:
Employee turnover – the process of losing an employee and needing to replace him/her – is very costly. Every time an employee leaves and is replaced, many expenses come into play: the cost to recruit, train, hire (background checks, etc), HR counsel if necessary, reduced productivity in the time that you are without a staff member, time used by recruiters and hiring managers, new uniforms and supplies… the list goes on. Costs are estimated as follows:
- It costs 30-50% of an entry-level employee’s annual salary to replace them
- It costs 150% + of a mid-level employee’s annual salary to replace them
So for example, let’s take an entry-level employee making $35,000 annually – it might cost an average company $14,000 to replace him/her. Spending the money on employee benefits (as well as taking other steps to avoid turnover such as improving corporate culture and driving internal development) is all going to cost much less than that turnover cost.
#3 Benefits Make Your Employees Healthier – And Healthy Employees Are Better Employees!
If you’re not offering health insurance through your company, there is a high chance many of your employees don’t have coverage outside either. Even though it is legally required to carry health insurance under the Affordable Care Act, many people choose to take the tax penalty vs. pay for a year of health insurance premiums, because the tax penalty is much less expensive. For these employees who don’t have coverage, seeking medical care is likely avoided in all but emergency situations.
Even for those who do have individual coverage, the mentality, specifically among the young and those with low-income, still sometimes swings toward paying for the lowest-premium plan that is available. Unfortunately, this often means a bronze-level plan that acts as catastrophic coverage only with a $6,000+ annual deductible. With that high of a deductible, you’ll see the same behavior as with no insurance: these members are going to avoid seeing the doctor except in emergency situations.
When your staff doesn’t go to the doctor on a regular basis or when they are ill, they don’t get vaccines or medications that could stop the spread of illness through the company. It also takes them longer to recover from illness so they miss more time at work. And they don’t use preventative care, so they are more likely to get sick in the first place.
Healthy employees equate to less sick days and better focus and dedication while they are at work, which means more productivity and better all around morale.
#4 Benefits Can Create a Tax Advantage for Your Business
Employers offering benefits to their employees can deduct 100% of the employer health insurance costs as a business expense. If the business is incorporated, the owners’ health insurance is also deductible.
Furthermore, for small businesses with under 25 employees, and with average employee wages under $50,000, there are also available tax credits.
Benefit deductions for the portion that employees pay for are also generally set up as a pre-tax deduction, giving your employees tax benefits as well.
Talk to your CPA to see if a benefits plan would create a tax advantage for your business.
#5 Advantages for YOUR Family
As a business owner, you can set up a group health insurance plan with as little as ONE other non-related employee, even if that employee waives coverage (with a valid waiver such as coverage under their spouse’s plan). Enrolling in your own group health plan vs. the individual plan you may currently be on is likely to have advantages. Group plans generally cost less and offer more robust benefits than their counterparts in the individual market. You may be able to switch to a group plan, see your same doctor, but have a lower deductible and lower premium cost.
#6 Benefits are Cheaper and Easier Than You Think!
I run into many employers offering benefits for the first time who have been scared away from it because they think it will be a huge financial and administrative undertaking. This does not have to be the case!
Employers often think that to offer benefits, they have to pay for all of it. You actually usually only need to pay for 50% of the employee premium on the lowest-level plan offered. Most employers end up contributing more, but if you are just starting out and want to offer something with a tight budget, all you may need to cover is 50%. Employees pay for the remainder of their premium, and any dependent premiums, with pre-tax dollars. On the low end – let’s take a Kaiser Silver level plan and a young (mid-twenties) employee – this means you might be paying $150 per month.
Past paying the premium, there should be no other charges. Your broker should not be charging you anything; you just pay the premium straight to the carrier.
Furthermore, managing a benefits plan is easier than you think – especially when you choose Benefit Experts as your broker. Once the initial plan is set up, there is virtually no work on your part besides paying the monthly bill and telling us when you have a new hire or when someone has left the company. We will take care of the rest:
- We will contact every new hire and walk them through their options, get them enrolled or waived, and then send payroll deduction calculations straight to your payroll department/vendor with a designated start date.
- We will be the employee’s direct resource with billing questions, claims questions, doctor searches, etc.
- We will be your direct resource for group billing issues, etc.
- We will terminate each employee that leaves the company from the plan and can even be their resource in setting up COBRA or finding individual coverage.
- We will re-analyze the plan at renewal every year to keep costs down and employees happy.
Offering company benefits at an earlier stage than other employers can put you far ahead of the competition, improve your employee’s morale and productivity, help you out on taxes – and it doesn’t have to be difficult or expensive.
For a complimentary benefits evaluation for your company, contact: