business Insurance Article

Two Birds, One Stone: Why Your Business Should Offer Employee Benefits

To offer employee benefits, or not to offer employee benefits — that is the question.

At the same time you’re asking yourself that question, potential employees are asking you some too. Potential employees want to know if you offer benefits — plain and simple. It’s always been a frequently asked job interview question, and probably always will be since people want benefits, particularly the insurance ones. images (2)

As of 2012, 57% of private employers offered benefits. That’s a bit over half, but still means there’s a lot of job hopefuls sitting in interviews and hearing “no” to the benefits question. They have to ask if you offer benefits, but you’d definitely never need to ask an employee if they want benefits. They do. Maybe not the same ones, but they do. It’s your answer to their simple question that can spawn more questions and ignite assumption-making. Your “yes” or “no” can be a loaded answer.

Employees sometimes judge an employer’s status, success, and stability by whether or not the employer offers benefits. To employees, not offering benefits can seem like the employer doesn’t believe in their own business enough to invest in it. Employees may assume the business doesn’t have the financial means to offer benefits, which definitely lowers a business’s grade in perceived stability. They may wonder about future growth opportunities, how the possibly “financially shaky” business will handle compensation, and question what the work environment is like, in every sense of the term. Will important tools employees need to do their jobs adequately or that make the employee’s work duties easier be cut? What is the company morale like? Do they care so little that they don’t want to do more for employees than they absolutely have to? (Which prompts a candidate’s next question: Bummer about the whole minimum wage thing, right?) But worst of all, will the business cut them clear out of a job?

People have been asking these questions and making these assumptions for years, and always will, regardless of whether the assumptions are correct or not.

Now flash forward to 2014. The Patient Protection and Affordable Care Act (PPACA) has rolled out, and businesses won’t have the luxury of simply deciding whether or not to offer benefits. They’ll still need to consider that question, the difference being that the PPACA-led sequence of events following their choices will be very different. If business owners don’t want to pay for benefits, they can opt to pay a “penalty” fee. However, imagine what it will sound like to candidates when you still choose not to offer benefits when 2014 rolls around. Potential employees will likely attach that to even worse assumptions and fears than they did pre-PPACA. If you assume only the employees would be hurting, you’re wrong.

Health care reform won’t be a convenient “enabler” to your decision. You may rationalize that employees don’t really need to be offered benefits and that it must not matter that much since the government doesn’t require you to offer benefits, and offers an “out” via penalty fees. If the government doesn’t require you to offer benefits, you can’t really be blamed for not doing so, right? Anything is possible, but it’s worth noting that 99% of full-time state and local government workers are offered benefits.

Tell Me Why

“What’s in it for me?” you ask.

First of all, remember that employees have — to at least some degree — either supporting roles or leading roles that could make or break your business. That old joke about “if mom’s happy, everybody’s happy” isn’t just applicable in families. In a business, it can only take a few unhappy people to bring everyone down with them.

That’s the exact reason why it’s important to offer good benefits for your employees. If for nothing else, do it for the longevity and success of your business. Better work environments lead to better job performance, and better job performance is one of the last bread crumbs on the trail of achieving great success.

Regardless of where you’re at on the “trail to success” right now, you need to do some serious decision making when it comes to the benefits you’ll offer employees. If you’ve just started a business or you’re reconfiguring your benefits model, it can be difficult to choose the right employee benefit plans, but here’s a little “101” on employee benefits and some trail mix for thought.

What’s in It for Them?

When you begin to think about what types of employee benefits you should offer, remember the main purpose of offering employee benefits programs. They’re meant to protect and provide for your employees above and beyond their normal salary.

Some of the best employee benefits include retirement income, workers compensation insurance, short-term disability insurance, long-term disability insurance, health insurance, including dental and vision plans, life insurance, and paid time off. This may seem like a long list, but practically everything that’s important in life has one, and by offering the best benefits, you retain the best employees and potential leaders.

Four Major Types of Employee Benefits

Of course you can pick and choose the type of benefits you offer and you may have no choice. Employee benefits insurance can be costly, but even a basic insurance package can be attractive. The four most common types of employee benefits are:

  • Medical insurance: This can cover hospital visits, doctor visits, surgeries, prescriptions, and possible vision and dental. The employer covers the majority of the premium.
  • Life insurance: If your employee dies, this benefit will provide financial payments to the deceased’s family to pay for funeral costs as well as living expenses.
  • Disability Insurance: You can choose short-term and/or long-term disability insurance. In case your employee is injured or has an illness, this benefit provides payment if your employee cannot work.
  • Retirement Benefits: The most common type is a 401(k) and allows employees to deduct a certain amount of each paycheck to put towards retirement savings. Some businesses choose to match that deduction amount.

What Employee Benefits Are Required by Law?

There are some employee benefits you are required to provide. Forget these and you could face fines and jail time, on top of your business possibly failing in the meantime.

  • Social Security Taxes: You must deduct Social Security taxes from an employee’s wages, pay the taxes to the IRS, and report the wages to the Social Security Administration (SSA). In return, your employee may receive Social Security and Medicare benefits later in life.
  • Unemployment Insurance: For each employee, you must pay unemployment insurance taxes to your state government. In turn, those fees are given to qualified unemployed individuals. Procedure may vary by state.
  • Workers Compensation: This insurance benefit is actually in place for both parties. By complying to pay for injuries and illness that happened or that’s caused by an employee’s job, their right to sue is diminished.

What Employee Benefits Are Tax Deductible?

Every business owner’s favorite question: Is it tax deductible?

As an employer, many fringe benefits you offer employees can be deducted as business expenses. It can be a win-win situation, but make sure you’re aware of restrictions and guidelines when claiming deductions, which may include:

  • Health insurance
  • Retirement plans
  • Services & discounts
  • Random perks
  • Dependent care assistance
  • Educational assistance/tuition reduction
  • Life insurance
  • Health Savings Accounts
  • Commuting benefits

Here’s the bottom line. All employees want to feel valued in the workplace and ultimately, work as a team towards a common goal. But when medical reality strikes, employees need tangible rewards to help offset the high costs of care. Good health benefits can do just that. They also want to know that taking a vacation once or twice a year won’t cost them a job, and that when they retire, they’ll be able to maintain the same lifestyle they enjoy now. Most of us really do want a world where the Golden Rule is RULE. It can hold a double meaning for business owners — not only are you treating your employees the way you’d like to be treated if you weren’t the business owner, but because you’ve created an environment founded upon acknowledging one another’s needs and one that thrives because of a reciprocal exchange of those needs, you’ll probably be able to look pretty far ahead into your business’s future — and best of all, see success.

Follow Desiree on Twitter @DesireeBaughman.

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