Once you have great employees on board, how do you keep them? One way is by offering a good employee benefits package.
Many startup or small business owners believe they cannot afford to offer employee benefits. While going without benefits may boost your bottom line in the short run, this penny-wise philosophy could have a negative impact on your business’s chances for long-term prosperity.
Benefit packages are one of the most basic employee engagement and retention strategies, and they support talent attraction as well.
But where do you start?
Employee Benefits Basics
Employee benefits are any kind of tangible and intangible compensation given to employees apart from base wages or base salaries.
According to a 2019 report by the Bureau of Labor Statistics, employee benefits in the U.S. make up 30% of total compensation costs. Insurance benefits accounted for 8% of compensation costs and legally required benefits were at 7.7%.
The law requires employers to provide employees with certain benefits. You must:
- Give employees time off to vote, serve on a jury and perform military service.
- Comply with all workers’ compensation requirements.
- Withhold FICA taxes from employees’ paychecks and pay your own portion of FICA taxes, providing employees with retirement and disability benefits.
- Pay state and federal unemployment taxes, thus providing benefits for unemployed workers.
- Contribute to state short-term disability programs in states where such programs exist.
- Comply with the Federal Family and Medical Leave (FMLA).
You are not required to provide:
- Retirement plans
- Health plans (except in Hawaii)
- Dental or vision plans
- Life insurance plans
- Paid vacations, holidays or sick leave
In reality, however, most companies offer some or all of these benefits to stay competitive. In addition, other perks such as flexible hours and/or work from home policies, stock option plans, bonuses, meals/snacks, and company equipment (vehicles, computers, etc.) have become commonplace among employee benefits packages.
Most employers provide paid holidays for New Year’s, Memorial Day, Independence Day, Labor Day and Thanksgiving Day and Christmas Day. Many employers also either allow their employees to take time off without pay or let them use vacation days for religious holidays.
Most full-time employees expect 1-3 weeks paid vacation time per year. There are no laws that require employers to provide funeral leave, but most do allow two to four days’ leave for deaths of close family members.
The federal Family and Medical Leave Act (FMLA) requires employers to give workers up to 12 weeks off to attend to the birth or adoption of a baby, or the serious health condition of the employee or an immediate family member. After 12 weeks of unpaid leave, you must reinstate the employee in the same job or an equivalent one. The 12 weeks of leave does not have to be taken all at once; in some cases, employees can take it a day at a time.
In most states, only employers with 50 or more employees are subject to the Family and Medical Leave Act. However, some states have family leave laws that place family leave requirements on businesses with as few as five employees. To find out your state’s requirements, contact your state labor department.
When Mistakes Happen
Providing benefits that meet employee needs and mesh with all the laws isn’t cheap, and that makes it crucial to get the most from these dollars. Unfortunately, mistakes can often be costly. The most common mistakes are:
- Absorbing the entire cost of employee benefits. Fewer companies are footing the whole benefits bill these days. Many employers require employee contributions toward health insurance or require employees to contribute toward the cost of insuring dependants.
- Covering non-employees. This can happen when business owners want to buy group-rate coverage for their relatives or friends. Trouble can occur if there is a large claim which the insurer may want to investigate.
- Sloppy paperwork. A common mistake here is not enrolling new employees in plans during the open enrollment period. Most plans provide a fixed time period for open enrollment. Bringing an employee in later requires proof of insurability. Expensive litigation is sometimes the result.
- Not telling employees what their benefits cost. It is suggested you provide employees with an annual benefits statement that spells out what they’re getting and at what cost.
- Giving unwanted benefits. Typically, medical and financial benefits, such as retirement plans, appeal to the broadest cross-section of workers. A simple employee survey before choosing an employee benefits package will help you identify which benefits are most important to your employees.
From choosing the right employee benefits package for your employees to the day-to-day management of employee benefits, it can seem overwhelming. But it doesn’t have to be.
HRO’s approach to employee benefits starts with balancing the employee experience with the most competitive options for cost and coverage.
We are a digital-first insurance agency that brings convenience to you, benefits to your employees, and competition to our insurance partners. From online applications to benefits enrollment technology that is integrated with payroll, you and your employees will have a seamless digital experience.
We bring the latest knowledge, technology, and partnerships to bear when we work for you. Get started with a quote today.