Be realistic when shopping for benefits you can only offer if you share the cost with your employees. If based on their wages you think that their share of the cost of a certain benefit is going to be more than they can afford, there's no point in offering a benefit the employees will not be able to take advantage of.
How do you accurately determine the cost of benefits? The cost of benefits is hard to determine because costs depend on so many factors. For example, in the case of benefits related to insurance (such as health insurance or life insurance), those factors include:
- the number of employees in a group
- the levels of coverage/reimbursement in a plan
- the demographic statistics of your group
- the geographical area
There is strength in numbers, however. The more employees you have, the better off you are when it comes to benefits. Consider your size when contemplating benefits. It's going to be expensive to offer a rich benefits package to your employees if you have only two or three people working for you. In that case, you'll want to focus on the one or two benefits that you and your employees will value most and that are most cost-effective.
If you have only a few employees, your best bet may be to join a consortium of other small businesses or purchasing alliance in purchasing benefits. To get information about such groups, contact your local chamber of commerce or industry group.
The cost of time-off. Determining the cost of benefits that involve time away from work can be even more complex than benefits that involve premiums. While there are no premiums to deduct, obviously there is still a cost involved. The tricky part is measuring that cost. Factors that affect that cost include:
- how much the employee is paid
- how long you can afford to have the employee be away from the job
- how much it would cost to replace the employee temporarily
- how much productivity would suffer
Benefits Others Offer--Staying Competitive
If you want to offer benefits in order to compete with other employers in your area for the best employees, you need to know what you're up against. Find out what other employers are offering in the way of benefits packages.
How do you find this information? Use your networking contacts to conduct an informal survey. Call other businesses and explain that you're trying to get a feel for which benefits to offer and ask them about their benefits packages. Ask your friends and relatives about their benefits. You should be able to get a fair amount of information this way.
When you do your survey, ask which benefits are most popular and get the most usage. This can give you a good idea of which benefits your employees will value most.
When you're doing your survey, ask for the names of the particular insurance companies and agents that provide the benefits. Ask the people you're surveying if they recommend those agents and companies. This will give you a head start on whom to contact once you've made some initial decisions about what to offer.
In doing your research, don't target other small businesses only. Remember that when it comes to attracting good employees, you have to compete with other employers, regardless of size. Call the human resources or personnel department of larger employers, explain that you're doing some research about benefits, and ask them to send you some information about their benefits package. This information may also be available online, especially for larger employers.
The Impact Offering Employee Benefits Has on Your Business
No matter which specific benefits your employees may want, you need to assess how they will positively impact your business. Obviously, if you offer popular benefits, such as generous time-off policies or health insurance, you're going to be able to attract more and better employees. But will it be worth the cost? That's a decision only you can make.
Which employee benefit is the most popular? While each group of employees has different needs, health insurance is consistently singled out as the most important and highly valued benefit for employees.
Health insurance is tax-deductible to the employer and tax-exempt for the employee, and you can often purchase it at a lower cost than the employee would ordinarily pay for an individual policy. Some employers have found a direct increase in productivity when they initiated health benefits, since insured employees are more likely to see a doctor, take medication, and get well rather than to take many days off trying to recover from an illness on their own.
Trends such as wellness programs and recently enacted health care legislation further reflect the integral part health care plays as an employer-provided benefit.
Other benefits that are popular are time-off programs, such as vacation, personal leave, and retirement programs that employers contribute to and that allow employees to save money.
It's important to at least consider offering benefits that are most popular with employees to keep your work force happy and stay competitive with other employers. Keep in mind, the most common benefits offered by employers continue to include health insurance, paid holidays and vacation, and retirement plan benefits, despite the rising costs of doing so.
Employers should ask themselves what their employees want. The key to giving employees what they want and need (and consequently reaping the benefits in productivity, loyalty, and reduced turnover) is communication. The best way to find out what your employees want is to ask them. You might have informal conversations with them or do a quick survey where you ask them to rank a list of benefits from most valuable to least valuable. You may be surprised with the results.
For example, if you employ a lot of part-timers, health benefits may not be that important to them because they are getting health benefits from another source (from another full-time job, through a spouse's employer, or through a parent's health insurance). In that case, you might focus on offering other, less expensive benefits that would still be considered valuable by employees. Or, you may find that employees would prefer more cash compensation rather than any particular benefit.
Once you've determined which benefits you want for yourself and what your employees would prefer, figured out which benefits you can afford, and considered which benefits other employers offer, you're ready to begin the process of examining individual benefits in detail and putting your benefits compensation package in place.