Small Business Benefits, Balancing Employee Happiness and Cost
With pieces of the Affordable Care Act (ACA) about to go into effect, this is a good time for owners to look at the small business benefits they offer to employees.
Small business owners are struggling with rising healthcare costs, and balancing the financial implications to their company with keeping their talent happy. How do they know the right mix of benefits? When should they ask employees to be responsible for a bigger piece of the cost? Employers are hesitant to small business benefits, yet absorbing the ever-increasing costs are hurting their bottom line.
Back in my corporate days when I oversaw Human Resources, creating the benefits package honestly felt like we were gambling with employees’ financial and health future. The health insurance co-payment and
deductible could have significant financial impact in family lives. While young employees often see little value in life and disability insurance, their potential impact is enormous, although hopefully less called upon. Retirement benefits are increasingly more important to employees, yet business owners often believe retirement to be cost-prohibitive. How do business owners know what the right decision is?
Ask. As in your employees – the people you are trying to help. Personnel costs are often the largest expense and can potentially have the most significant impact on the success of your business so you need to get it right. Yet all too often the benefits’ decision is made in a vacuum, without the input from the people they’re designed to benefit! Ask your employees what healthcare elements are most important to them – out of pocket costs, routine coverage, or catastrophic coverage. Tell them that you will make the decision but that you would like their input.
At first glance, this process may seem risky to your bottom line. Compare headcount costs as a percentage of revenue over several periods; is it growing? Flat? Decide what your business model and you, the business owner, can live with for headcount costs. As long as benefits fit within that framework, and you’ve gotten input from your staff, don’t stress the details. Ask employees’ to share in the costs from the get-go and always let them know the benefits’ cost that the business is picking up.
Retirement plans have the feel of being expensive, yet with the tax credit now available for setting up a plan (check http://www.irs.gov/publications/p560/ar01.html for an overview) a 100% employee-funded plan can have no financial impact to your business. While employer contributions are not required under all types of plans, the contributions are tax-deductible and are a relatively low cost/high value benefit.
Don’t underestimate the value of group life insurance and long-term disability. These costs are miniscule compared to health insurance and yet have the potential to save an employee’s family. While not often called upon, these provide peace of mind to your staff. Peace of mind means your staff can be more focused on the task at hand – growing your business.