A jumping-off point for creating a great benefits package
The conundrum of a small-business owner: Cut into profits and offer nice benefits to your valued employees, or cut back on the benefits package to save the company money but risk losing good employees who might go elsewhere for better insurance?
There’s no one perfect insurance plan that will make everyone happy, but according to the employee-benefits experts speaking to Maureen Farrell of Forbes, there is a well-balanced benefits package that will keep your company on pace with or ahead of the competition.
“The general consensus: To attract talent and compete effectively, entrepreneurs should offer health insurance, some life and disability insurance and probably a retirement savings plan,” Farrell summarizes. “For specialty benefits—like vision and dental coverage—take time to understand what your current employees want and whether they’ll be willing to chip in.”
Regardless, rest assured that an employee insurance package is not going to break the bank for your company. Principal Financial Group found that providing health insurance, a retirement plan and a few extra perks costs only between 30 and 40 percent of total payroll expenses. Plus, FindLaw says businesses’ health care costs are tax-deductible.
Don’t know where to start? Don’t stress out, according to Principal Financials’ Vice President of Voluntary Benefits Amy Friedrich.
“Start the selection process by breaking the benefits world into three main buckets: health care, retirement and specialty benefits,” says Friedrich. “While there’s no one-size-fits-all solution, there are guidelines for choosing the right benefits package, as well as for picking a local broker to help you navigate the myriad offerings.”
Health care benefits are recommended for any company, no matter how small or large. The extent of coverage, however, is a bit more debatable. Small firms have a choice between traditional health insurance and managed care. Managed care plans carry low premiums but a small selection of service providers, while traditional plans generally have higher premiums but a wider choice of doctors and hospitals.
Most states mandate that employers cover at least 50 percent of the premiums, not 100 percent, like is commonly misconceived. Many small businesses opt for high-deductible plans because they have lower premiums, thus making employees pay more upfront before the insurance kicks in, Farrell notes.
“Experiment with different premium/deductible ratios, depending on what your employees are looking for,” she writes. Other offerings to consider are health savings accounts and wellness components.
Though not technically considered insurance, a retirement benefits package is still an important aspect you need to consider to ensure that your offerings are competitive. You have a couple of options here: a defined-contribution plan, such as a 401(k), or a defined benefit plan, also known as a pension.
Most small businesses opt for a defined contribution plan, in which employees set aside their own funds for retirement out of each paycheck and can invest the money however they please. Some companies even match a certain percentage of what employees contribute, which comes with a tax advantage.
These include perks like disability insurance, life insurance, dental and vision coverage. The experts in Forbes say to pick a disability plan covering at least 60 percent of an employee’s salary, should you opt to offer this specialty. If you offer life insurance, the policy should pay out at least $20,000. With dental and vision, it’s best to first find out how much employees would be willing to contribute toward their coverage.
Choosing a broker
An insurance broker is a great asset to have as a small-business owner, as he or she can help immensely in comparison shopping. It’s best to find a broker who has experience dealing with businesses in the same industry as yours and who comes with rave reviews. Be advised that brokers receive commission on the insurance products they sell, so do your research and keep an eye out for conflicts of interest.
Also keep in mind that insurance costs often vary based on a myriad of factors, such as company size, industry, location and demographics of workforce. This variance is yet another reason why proper planning and a good broker can make a world of difference in helping you settle on the best possible insurance plan for your employees.
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