Attract and Retain Employees with Health Insurance Benefits

Employee benefits such as California group health insurance play an important role in recruiting and keeping good employees. A recent study by a leading employee benefits consulting firm found that the number one "top attraction drivers for U.S. employees" across all age groups was "competitive health care benefits."

So how does a small business in California determine if it has competitive group health insurance? There are a number of ways. (See also Five Ways to Spend Less and Give Your Employees More.)

1. ask the people you are interviewing for jobs what type of health insurance plans other employers are offering;
2. ask recruits what type of California medical insurance plans they have or had at their last employer;
3. evaluate the small group health insurance plans that are available in the State of California and see how many plans offer better benefits than the plan that your company offers.

It is easy to compare your current group medical insurance plan to other plans available in California because all of the insurance companies, Blue Cross of California, Blue Shield of California, Pacificare California, Health Net of California, must offer identical plans to all companies in the state. The law, AB 1672, requires this. You can get a quote of all California group health insurance plans by clicking here.

So, if you have cut back on group health insurance benefits for your employees and asked the employees to pay a larger share of the cost, you may have increased your employee turn over. Accordingly, you will pay more to recruit, hire and train replacement workers.

Nothing hurts a company more than when key employees leave. They take knowledge, clients, experience. Their departure can demoralize a small company or a department.

Because employer sponsored health insurance in California is tax deductible for employer and non-taxable compensation to employee, providing California group health insurance is likely significantly less expensive than recruiting, hiring and training replacement workers.

Why do California employers offer health insurance to their employees?
Two reasons:

1. Medical insurance is compensation that is tax deductible to the company and not taxable to the employee;
2. Companies want to have an advantage when seeking to hire the best employees.

California Health Insurance: Tax-Deductible, Non-Taxable Compensation

The tax advantages for an employer to pay for employee and dependent medical insurance in California are huge. Think about it. If an employer pays an employee $1,000 in salary, the company must pay the 7.65 percent FICA (Medi-Care and Social Security) tax and the employer must pay California Worker's Compensation based on the salary (2-5 percent for service sector jobs, 10 - 50% for construction, trucking and high risk jobs). Conservatively an employer would pay $1,100 ($1,000 x 110%). Yet the employee must pay FICA tax (7.65 percent) Federal income tax (estimate 15 percent) and California income tax (estimate 5 percent). After taxes an employee nets $723.50 ($1,000 x (1 - .2765)). So, an employer pays $1,100 and an employee receives $723.50. Nearly 40 percent tax and worker's compensation penalty applies to all salary - in addition to other, lesser taxes, e.g., unemployment insurance, SDI, FUTA, etc.

Competitive Advantage when Seeking to Hire the Best Employees

Interestingly, one of the reasons health insurance attracts employees is that the State of California does not mandate that employers offer health insurance. Because each employer can choose to offer a high level of benefits - a moderate or low level of benefits - or no medical insurance plan, the level of benefits become an important part of an employee's compensation package. If the State of California demanded that employers provide health insurance, as SB 2 would have, then there would have been no advantage for an employer offering coverage - as all employers would have a health plan.

So, couple tax advantages and with the competitive advantages of a medical insurance plan in California and you have a very compelling reason for employers to offer their employees and dependents medical insurance.

Get a Small Group California Health Insurance Quote.

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