Many companies believe high salaries are the deciding factor when employees evaluate new job opportunities or promotions. But, a survey by Glassdoor found that 4 out of 5 employees would rather have new or additional benefits than a pay raise. With this being the case, affordable benefits for small businesses are a key differentiator for companies.
Employee benefits are any compensation for an employee outside of a regular wage. They come in many forms, including health insurance, retirement benefits, paid time off, technology, and continued education stipends. Employee benefits are an excellent way for small and medium-sized businesses to differentiate themselves when they cannot afford higher salaries.
Example of employee benefits structures
Organizational-oriented benefits are specific benefits or plans offered by small business employers. Employees opt-in or opt out of benefits and do not select the plan type. Examples include 401K plans, formal wellness programs, and traditional group health insurance policies. Organizational-oriented benefits are the more conventional benefits.
Consumer-oriented benefits are growing in popularity with small business owners. This particular benefits structure is employer-funded but allows employees to choose the health benefits that make the most sense for their life situation. Employees have the power to set the dollar amount of the benefits to spend on their own. This allows employees to customize their benefits to their wants and needs. Examples of consumer-oriented benefits are Health Savings Accounts (HSAs), allowances for wellness activities, and Health Reimbursement Arrangements (HRAs).
What are employee benefits?
Employee benefits are any form of compensation above and beyond an employee’s regular salary, such as retirement plans, health insurance coverage, disability insurance, and paid time off.
Types of employee benefits
Financial benefits can not only increase productivity but also help companies to recruit and retain quality talent. Increasing salaries by a fixed percentage annually solidifies a positive work culture and increases employee engagement. Financial benefits include pay increases, financial wellness plans, employee stock options, and loan repayment plans. Other options for rewarding hard-working employees for their performance are cash bonuses, offering flexible work schedules, and additional paid time off.
Also known as ancillary benefits, fringe benefits are meant to be supplemental benefits in addition to medical health insurance benefits. Fringe benefits are a great addition to a company’s offerings as they are low or no cost to the company since employees cover the costs.
Benefits included in this category include:
Dental Coverage – Good dental health help maintain good oral hygiene and fight periodontal disease. Dental health also helps prevent other underlying health conditions, such as heart disease. Employers can choose from a traditional plan where their employees can visit any dentist or a preferred provider plan with both in or out-of-network coverage.
Prescription Drug Coverage – Increasing prescription drug costs can significantly impact an employee’s out-of-pocket expenses and are a great offering to keep an employer’s workforce happy and healthy.
Eye Care Coverage – When left unchecked, vision impairments can significantly decrease productivity and increase accidents on the job. Discounted or packaged eye care plans can make the cost more affordable.
Other examples of ancillary benefits are life insurance, tuition assistance, daycare, gym memberships, and employee discounts. Fringe benefits can help mitigate unexpected costs and may lower long-term health care costs.
Additional insurance options
While the vast majority of employers offer health insurance; employers need to stand out to prospective employees to remain competitive. Additional insurance options can help differentiate a company.
These additional insurance options could include:
HSA’s – Health Savings Accounts allow employees to save for qualified medical expenses with pre-tax wages. Any unused funds at the end of the year are carried over or can be transferred to a new employer.
FSA’s – Flexible Spending Accounts allow employees the opportunity to contribute a portion of their regular earnings into an account to reimburse the employee for qualified medical and dental expenses.
POP – A Premium Only Plan allows employees to pay for a portion of their benefit plan costs before taxes. A POP is not an insurance plan but a tax reduction plan.
Unique employee benefits
To attract the best employees and preserve relationships with existing top performers, small business owners may need to get creative and think outside of the box when considering unique employee benefits. Work-life balance has become a top priority for today’s job seekers. Studies have shown many employees consider these perks when choosing a new position or whether to stay with their current employer. Here are a few examples:
- Paternity Leave
- Legal Assistance
- Free snacks and drinks
- Gym memberships
- Bring your dog to work
- On-site health care
- Back up child care
- Pet insurance
- EAP (Employee Assistance Program)
These extras could mean the difference between landing that top candidate or boosting the morale of your current team.
Flex benefits or “cafeteria plans” provide flexible benefit options for employees. Employees have the same amount of money allotted to their total compensation. They can choose to apply the amount to benefits or add it to their taxable salary. Flex Benefits must meet the criteria outlined in Section 25 of the Internal Revenue Code.
Benefits required for small business
Whether you’re a small business owner or employ more than 50 FTE (Full Time Equivalent) employees, certain benefits are mandatory by law. The following is a list of employee benefits required regardless of the size of your business.
Employers are legally obligated to take appropriate measures to ensure workplace safety. Workers’ compensation insurance protects the employer and the employee when an employee sustains an injury or illness while on the job. Workers’ compensation insurance covers the cost of medical care, rehab, and lost wages in the event of disability.
If you have employees, you must pay into State Unemployment Insurance (SUI) and the Federal Unemployment Tax Act (FUTA). Unemployment Insurance, unemployment compensation, and unemployment pay an employee if they lose their job due to permitted reasons. Small business owners need to familiarize themselves with the particulars of unemployment insurance in their state.
Disability insurance is not included in standard health insurance benefits. Employees who suffer a long-term injury or illness would use sick time and paid time off to continue receiving wages. In some cases, employees may not be able to return to work. As you can imagine, this would be incredibly difficult and stressful for an individual. There are two options when it comes to disability insurance. Short-term disability compensates an employee a portion of their salary for 2-6 months after a non-job-related injury. Long-term disability coverage typically pays 50-70% of an employee’s monthly income. These payments can continue for years. Typically, only full-time employees are eligible for long-term disability.
Businesses with more than 50-full time employees are required to provide health insurance benefits under the Affordable Care Act (ACA).
An employee’s health and well-being are essential to any business’s overall health and productivity. Providing a health care benefit program is a great way to maintain that balance.
Types of health insurance plans:
High Deductible Plans: Although these plans have a higher deductible than standard plans, they typically offer a lower premium.
Managed Care Plans: PPO’s and HMO’s provide care for their members at a reduced cost.
Fully Insured Plans: This is a traditional employer-sponsored. The company pays monthly, and annual premiums to the insurance company with fixed amounts based on employees enrolled.
Partially Self-Funded Plans: With Medical Expense Reimbursement Plans (MERPs), the employer reimburses the employee for out-of-pocket health costs. The business shares the risk of paying claims with the insurance company.
Physical Hospital Organization (PHO): An association of hospitals and doctors who sell their services directly to employers.
What is open enrollment?
Open enrollment is the annual period when individuals have the opportunity to enroll or make changes to their health insurance benefit selections for the next calendar year.
How do businesses purchase health coverage?
Plans are purchased through brokers and agents, insurance carriers, or the health care marketplace or exchange. The federal government operates a website called the Small Business Health Options Program, where employers can shop for plans approved by the ACA.
How to choose the right coverage
When assessing potential plans, businesses should consider:
- Needs of the workforce
- Which plans do employees value most
- Does the plan meet ACA requirements
- What is the level of support provided by the carrier
COBRA insurance provides employees who lose health insurance benefits, the right to choose to continue group health benefits provided by their health insurance plan for a limited period under certain conditions, such as:
- Voluntary or involuntary loss of employment
- Reduction in hours worked
- Other qualifying life events
Family and medical leave
The Family Medical Leave Act (FMLA) gives eligible employees up to 12 weeks of unpaid, job-protected leave for qualifying family and medical reasons. The employee maintains all health care benefits during the leave period. To be eligible, employees typically must have worked 1250 hours in the previous 12 months, and their employer must have employed at least 50 employees within a 75-mile radius.
Qualifying events include:
- Caring for an immediate family member with a serious health condition
- Adopting or fostering a child
- Giving birth to a child
- The employee’s ability to work is limited by a serious health condition or illness
Cost of employee benefits
Businesses can help to streamline the ever-increasing cost of employee benefits by working with an insurance professional. Other techniques to manage employee benefits costs include purchasing what is needed, assessing unused benefits, and offering employee-funded premiums. Leveraging programs such as EAP can save on long-term insurance premiums by encouraging healthy habits.
Stay on Top of Your Employee Benefits with Gro HR
Between the legal requirements and available options, choosing the right benefits package for your company can feel overwhelming. Your benefits package offerings speak not only to your current team but also to any prospective employees that you’re hoping to recruit about your company’s culture and overall health.
Here at Gro HR, we work with you to make sure you are offering competitive benefits that fit your company and your team.