A Start-Up’s Guide to Offering Employee Benefits
For a start-up or small company getting ready to offer benefits for the first time, the whole process can be daunting. How much do you need to offer? What are employees actually expecting in a benefits package? How can you keep costs down as you’re in a growth and investment-gathering stage?
Though Benefit Experts assists clients nationally, we have always been headquartered in Silicon Valley. This means that as a company we have almost 20 years experience setting up companies in the tech start-up space with benefits, and we have become somewhat specialized in this. We’re here to answer your questions and make benefit enrollment a quick and easy process! Here are a few tips if you own a start-up and you are getting ready to offer your employees benefits:
Align Yourself With Employee Expectations:
In a start-up atmosphere, you know that your first few employees are incredibly important to the trajectory of your company. Usually those employees getting ready to take a position with a start-up have curbed expectations from those who are going to work with a large national company; they know that funds and benefits are going to be a bit more limited. But, they still have basic needs and expectations from their company.
Employees feel they need health insurance. When you are first starting out, dental and vision usually fall under the “nice to have” category but access to health insurance has a massive effect on someone’s life. A catastrophic injury, illness, accident, or even pregnancy can indebt someone for life if they do not have health insurance. Many will not consider a full time position if health insurance is not offered with the job. This does not mean the company needs to pay for all of it. Under current ACA laws, it can be difficult to obtain coverage if it is not available through your job; so many prospective hires just want to make sure it is available and are happy to take on part of the cost.
When it comes to what type of coverage a candidate is expecting, this is really regional. Ask your broker about patterns in your specific region. In the Bay Area for example, most employees in the tech space expect access to a high-quality, broad-network PPO plan. On the East Coast, EPO plans are more common.
Be Modest With Contributions:
When you are working hard to bring on a high-stakes employee, it may be tempting to cover 100% of their cost of insurance for them and their family. But a couple things to remember:
- It is better to start low and improve the package for employees as you become more financially stable. It is harder to take benefits away without losing employee engagement.
- You must treat all employees the same, by law. So this means if you pay 100% for your first 5 employees, you need to pay 100% for everyone else you hire after that as well!
We recommend paying 80-90% of the employee’s premium at first, based on a mid-level plan. Let them buy up from that at their own cost if they want. And, if finances are strong, pay 50% of the dependents’ premiums as well. You can always improve the package later if it becomes necessary and/or possible.
Know That Your Benefits Package Should Change As You Grow
As your company and team grows, realize that a diverse work force has diverse needs. A seasoned company officer with a family is going to need and want a different kind of health plan than a new college grad will. Consider offering an array of plans so that everyone can find something that works for them. As you grow, your options and flexibility to do this will increase. In addition, as you increase in size, employee expectations may increase. Some benchmarks to keep in mind to stay competitive:
- 5+ employees = time to add dental & vision
- 15-20+ employees = time to add life and disability
- 20-30+ employees = consider an FSA
Are you the owner of a start-up and have questions about employee benefits?
We’re here to help!: Ingrid@benefitexperts.com or 650.251.4228