How Small Companies Can Maximize the Impact of Their Benefits Package

As a small business, you need to craft a benefits package to attract and retain workers without breaking the budget. Employees take benefits seriously when deciding where to work, so you can win or lose the competition for top talent by what you include in your package. Naturally, you know you need to pay a fair wage, but the right benefits can make a difference when candidates consider the overall offer.

If you want to offer benefits to your workforce, it’s probably best to start with the basics and then add extras that you can afford, preferably the ones that make the most sense for your workers. The most-preferred benefits typically include health insurance, paid time off, dental coverage, and retirement assistance. After that, the choices start to spread out, but flexible schedules and work locations have recently been rising on the list.

Health insurance is expensive but essential.

Depending on the number of employees your company has, you may or may not be required to offer employee health care coverage under the Affordable Care Act. However, if needed, you have to offer Minimum Essential Coverage as defined by the ACA. The essential coverage includes injury, illness, emergency room visits, prescription medication coverage, and more, but premiums, deductibles, and copayments can vary tremendously.

Companies with fewer than 25 employees may be eligible for a tax credit to assist them with offering health coverage to employees. In addition, businesses with fifty or fewer workers may be able to buy coverage at a more affordable cost through the Small Business Health Options (SHOP) Marketplace. The ACA defines large employers as having fifty or more workers and requires these companies to file an annual information return reporting on their insurance.

For small companies, the cost of insurance may be lower if you can join a multiemployer plan or share the premium expense with your employees. Talk to your Taylor Benefits Insurance consultant for assistance.

Paid time off

Determining the actual cost of time off is not as simple as it might seem. In some cases, it appears straightforward: if one employee takes the day off and gets paid while the business pays another worker to cover that shift, it’s paying double for the work to get done. But in real life, it isn’t necessarily a one-to-one replacement. Depending on the nature of the work, some tasks might get postponed until the worker returns, while others get shared between the remaining staff for the day.

The U.S. Department of Labor estimates that paid leave (including vacation, personal leave, sick time, and holiday pay) equals almost seven percent of total compensation, a portion of the estimated thirty percent of total compensation comprised of benefits. Paid time off is not required in the U.S, unlike other major industrialized countries. Nonetheless, the Bureau of Labor Statistics estimates that three-quarters of private industry employees (and virtually all public sector workers) have some paid vacation time, and 79 percent receive some paid holidays.

In most companies, the amount of paid vacation time depends on the length of service (although there is a growing trend in some sectors toward unlimited PTO, it isn’t yet widespread.) The BLS reports the following averages for U.S. businesses:

• Tenure from one to five years: ten days off with pay
• Tenure from five to ten years: fifteen days off with pay
• Tenure from ten to twenty years: seventeen days off with pay
• Tenure over twenty years: twenty days off with pay

California and ten other states require that employers offer paid sick leave for employees, although the rules vary by state. Across the country, about the same percentage of employees with vacation benefits also have access to paid sick time.

Dental insurance

Dental care coverage is not always considered a core benefit and is more frequently offered by large employers. Still, some smaller companies may negotiate a group discount that they can provide to their workers with either a subsidy or at the employees’ expense. Dental insurance is typically an indemnity plan, preferred provider organization, or managed care. If you offer an indemnity plan, then the employee will have expenses that can seem onerous:

• Premiums which are paid with after-tax dollars
• Copayments
• Deductibles

If the indemnity plan covers a service—say the worker needs a root canal—at a specific cost, the patient can obtain the service from any dentist but will have to pay the difference between what the plan pays and what the provider charges. So, if the plan pays $800 for a root canal, and the patient can find a dentist that will perform one for that amount, that’s fine, but more likely, the patient will pay some additional cost.

A preferred provider organization is a middle range for dental coverage, with a lower premium than an indemnity plan but a network of dentists covered by the program. For example, suppose the employee uses one of the network dentists. In that case, they receive the preferred pricing, and the plan will pay all the cost for some services (usually preventive care like cleaning and diagnostic services) and part of the cost for major services like crowns and root canals. However, most plans do not cover cosmetic options.

If the plan is a managed care program, the choice of dentist is often more limited, but the premium and the patient share should be lower. The challenge might be in finding a selection of providers. In each type of plan, additional restrictions like annual or lifetime limits may be applicable. Some cover orthodontia for children, but many do not.

Planning for retirement

You can hardly open a web browser without reading about the lack of preparation for retirement and the low level of savings in the U.S. For employees of companies offering sponsored retirement plans like a 401(k), not participating in the program means failing to save your own money and losing out on “free” employer contributions. Still, according to the Federal Reserve Bank of New York, only sixty-five percent of employees with access to an employer-sponsored plan take advantage of it. The rate increases with income, age, education level, and time on the job and is also enhanced by employer contributions.

Small companies wanting to offer retirement accounts have more options and assistance, thanks to the SECURE Act, which made it easier for them to implement and administer. The legislation opened access by expanding the ability to offer safe harbor contributions and provides a credit for small companies to defray the administrative costs of new plans. Small businesses can also work together to create multiemployer plans that offer retirement programs for their collective teams, sharing the benefit of a larger pool of workers.

Going beyond basics to include extra perks

Some companies are known for providing endless snacks, free lunches, happy hours, and shuttle services. Others offer “optional” or “voluntary” employee benefits like pet care, legal plans, long-term disability insurance, and other ancillary offerings that the employee pays for, but at a discount based on numbers.

Recent data shows that employees still want the flexibility to work where they want and have the ability to shift their hours as needed to meet personal demands. Working remotely and changing schedules are options that employers can provide across the board or on a limited basis, possibly without a significant financial investment. Aside from managing one’s time more effectively, the allowance for remote or altered shift work demonstrates that employers care about the worker’s needs, which can go a long way toward promoting retention and loyalty.