Offering benefits as a small business owner can be expensive – you don’t get the same economies of scale that larger corporations have. It becomes more cost effective per employee to offer a 401(k) plan or health insurance when you have hundreds of workers. However, to attract the best employees in a competitive labor market, you need to offer comprehensive benefits. Read on for some ways to offer affordable employee benefits.
Affordable Employee Healthcare Benefits
According to the Bureau of Labor Statistics, small employers are far less likely to offer comprehensive healthcare coverage to their employees than large corporations. This is especially true for part-time workers at small businesses.
However, health insurance coverage is one of the most highly sought after perks for employees, and employers who skimp on insurance coverage risk losing talented candidates. While it may not be possible to offer 100 percent insurance coverage, small employers can provide good healthcare benefits through a combination of strategies.
One common cost-saving strategy involves offering high deductible employer-provided coverage, which costs less per month since more healthcare expenses are paid out of pocket. To help cover the deductible and other costs not covered by insurance, you can also offer and partially fund for your employees a Flexible Spending Account (FSA), Health Savings Account (HSA) or Health Reimbursement Account (HRA). The full balance in an FSA must be used each year, while funds from an HSA can be carried over from year to year. Unused funds from HRAs remain with the employer. However, HRAs should be administered through outside brokers to avoid possible adverse legal situations, such as employee claims of being passed over for promotion due to health problems.
Another possible approach is to participate in an employer-based direct primary care plan where employees pay fixed monthly fees in exchange for unlimited access to a primary care physician. Direct care plans can also be combined with high deductible insurance policies to cover the costs of catastrophic illnesses or injuries.
For more information on health insurance options, check out our infographic, “Offering Benefits to Your Small Business Employees Will Benefit You Financially.”
Affordable Employee Retirement Benefits
Providing retirement benefits can also help you recruit and retain good employees. In fact, according to a 2018 employee confidence survey by online employment portal Glassdoor, 31 percent of workers valued retirement coverage from a 401(k) or a pension plan more than a pay raise.
Establishing a simple retirement plan like MyRA (a Roth IRA with government bonds) costs employers nothing. The Small Employer Pension Plan Startup Costs Tax Credit from the IRS can significantly reduce the costs associated with establishing more comprehensive retirement plans like a Simplified Employee Pension Plan (SEP-IRA), or Savings Incentive Match Plan for Employees (SIMPLE IRA or SIMPLE 401(k). A SIMPLE IRA and a SIMPLE 401(k) work similarly. The major difference is that withdrawals can be made from a SIMPLE 401(k) prior to retirement as loans.
While healthcare and retirement plans are key benefits, there are other perks you can offer employees to round out a benefits package.
For example, employees are increasingly focusing on work-life balance. Many employees value the opportunity to telecommute or work from home at least occasionally. Likewise, a perk like a flexible work schedule can reduce turnover among young parents, Millennials, adult students, and others. Allowing employees to schedule a four-day workweek to allow a day off for classes, or set their hours so that they arrive early and leave early to pick up their children from daycare involves minimal financial investment from employers.
Paid parental leave is another benefit that can keep working parents engaged with your company. As of 2016, only 12 percent of private sector workers had access to paid parental leave, according to the U.S. Department of Labor. Many small employers assume that providing paid parental leave is simply too expensive. However, in many cases, other employees can cover for new parents while on leave, which reduces costs. Likewise, when compared with the costs of recruiting, hiring, and training workers to replace new parents who quit because of the lack of paid leave, providing paid parental leave tends to make more sense.
Finally, even something as small as regular company lunches or improving the break room space are affordable perks that many small employers can offer to make workers feel valued. This can help improve employee morale and generate camaraderie among employees.