California Health Insurance >> Small Group Health Insurance >> Employee Benefits
Employee Benefits: Five Ways to Spend Less and Give Your Employees More1. Use Employee Benefits as a Tool to Attract and Retain Great Workers. There is no law requiring you to offer health insurance or other benefits. Benefits are something special; you should promote the benefits you offer to attract and keep the best workers possible. It's interesting - government required benefits such as workers compensation, unemployment income insurance, and state disability, do nothing to attract and retain employees. On the other hand, non-mandatory benefits such as health, dental and life insurance, disability income insurance and pension plans do wonders to entice employees to work for you. 2. Take advantage of the tax incentives to purchase benefits. Most benefits are tax deductible for employers and non-taxable as compensation for employees. Basically, paying an employee extra salary so that he or she can buy health insurance means that you, the employer, pay tax on the salary spent on health insurance at the same time as the employee pays tax on the salary spent on health insurance. Worker's compensation, Social Security, Medicare, State Disability Insurance, Unemployment Training Tax, and Federal and State Income Taxes can add 30-40% when an employee pays for benefits with after tax dollars. (See below, The Problem with Salary Bonuses to Pay Health Insurance). Also: Some employers think that they've got to pay bonus salary to pay for senior management's health insurance, since they can't afford to pay for health insurance for rank-and-file employees. This is not necessarily true. Health insurance companies allow "management carve-outs," which allow you to purchase insurance for a select class of employees. There are some specific issues that need to be explored before you decide to take this route, but the tax savings of the employer paying for health insurance rather than the employee are huge. 3. Use your competitors to figure out which benefits you should offer. Check out companies in your industry and other companies that might hire your employees. If they offer great benefits, your employees will expect the same. But there are many ways to "slice a pie," so even if competitors offer Cadillac benefits you may be able to meet your employees' needs and also make your payroll, rent, marketing costs, etc. For additional information see below, Buying Health Insurance: Like Slicing a Pie. One excellent source of information on other companies are reports by WetFeet.com. 4. Realize that not all employees need or expect the same benefits. You can offer different benefits to different employees, depending on your type of business and the type of employees you're trying to attract or keep. For example, you could offer different employees different group health insurance plans, ranging from a bare-bones HMO to a premier HMO, a POS, or the Cadillac, a PPO plan. You should tailor your health plan and other benefits to match the needs and expectations of your employees as well as the size of your pocketbook. 5. Offer bare-bones benefits to start, then expand the package as your company grows. Having basic benefits in place may allow you to hire people at a lower wage than you would if no benefits were offered. Couple this downward pressure on wages with the heavy tax incentives that federal and state governments give companies when they pay for employees' health insurance, and it makes a lot of financial sense to offer at least a bare-bones benefits package to employees from the start. One easy way to start is to tell prospective employees that your company will pay $100 per month (equal to about 50 cents per hour in salary) towards a plan and the employee pays the balance. As your company prospers you can pay more for the employee and get the full tax benefit of employee benefits. |
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