Any business hoping for long-term sustainability and profitability should prioritize employee well-being. The reason is that each task necessary for the everyday running of your business involves an employee.
Strictly speaking, employees are like engines that keep your business running. Part of caring for your employee's well-being is providing a conducive work environment. However, that's only a small part of it. Smart business owners understand the invaluable role employees play in their overall business success. They, therefore, provide additional perks besides wages to ensure their employees are happy, motivated and committed to the business's long-term goals.
However, unlike big organizations, small businesses may not have the financial muscle to provide varieties of benefits to their employees. Nevertheless, there are affordable employee benefits small businesses can extend to their workers, guaranteeing commitment to the business's goals and long-term retention. Because let's face it, employee retention is as vital as customer retention. Great talents are not easy to come by.
This article will focus on affordable employee benefits available for small business owners.
What Is an Employee Benefit?
Employee benefits are the additional perks that come with a job aside from a basic salary. Health insurance is usually part of a traditional employee benefits package provided by employers. However, due to a competitive business world, many businesses now offer employees much more. Employee benefits have become a valuable tool in retaining the top talent.
Some popular perks include:
- Financial benefits, like paid time off (PTO), loan repayment plans, financial literacy programs, employee stock options (ESOs), commissions and other bonuses.
- Health care reimbursement and spending accounts, such as flexible spending accounts (FSAs), health savings accounts (HSAs), health reimbursement arrangements (HRAs) and premium only plans (POPs)
- Supplementary health care benefits like life insurance, dental and vision insurance, prescription drug coverage and employee assistance programs (EAPs)
- Other unique voluntary benefits, including gym memberships, yoga classes and pet insurance
The Importance of Employee Benefits
Employee benefits are beneficial to both business owners and employees. They reflect the company's corporate culture, much like customer service. Companies that provide a wide range of employee benefits are perceived as being responsible, possibly giving them long-term access to labor since most people prefer to work for a company invested in their well-being. In addition, it also creates a positive brand image, which may lead to customer acquisition.
Employee benefits are one of the most effective approaches to boosting employees' productivity. When employees know you care about their wellness, they're more likely to be loyal, invested and committed to pursuing the company's long-term goals.
In fact, 80% of employees would prefer benefits packages to pay raises. In a nutshell, financial or health-induced stress that may hamper productivity is removed. Lesser sick days mean more effective workdays, which translates to more profit for the business.
10 Affordable Small Business Employee Benefits
Although some benefits packages are compulsory under U.S. law, voluntary benefits are also available. The bottom line is that small business owners and startups have a wide range of options to extend to their employees. We detail 10 cost-effective options, divided into four mandatory and six voluntary benefits.
Mandatory benefits are regulated by federal law and include the following:
Workers' Compensation Insurance
Workplace accidents, sudden illness and other health emergencies that may impact employees' well-being can be unpredictable. That's why employers are required by law to provide workers' compensation insurance to offset medical expenses and rehabilitation costs due to these unforeseen events. In the event of death due to an accident, monetary compensation packages can be extended to the spouse or children of the employee.
You should verify the requirements of the state where your business is located before signing up, as different states have different requirements for workers' compensation insurance.
The unemployment insurance program aims to provide financial relief for employees who, by no fault of theirs, lose their jobs. It's regulated by the Federal Unemployment Tax Act (FUTA). Unemployment insurance is primarily funded by employers, although states have their specific requirements. So, always verify the specific tax and regulatory requirements of the state you're doing business in.
The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a program that provides health coverage to employees at the end of employment or when qualifying events like death occur. It lasts between 18 and 36 months. Employers offering group health insurance and having at least 20 employees are required to comply with COBRA.
This coverage applies to former employees or their family members. Both employers and employees must understand An Employer's Guide to Group Health Continuation Coverage Under COBRA to enable them to know scenarios where coverage is applicable or not.
Family and Medical Leave
Family and medical leave are regulated by the Family and Medical Leave Act (FMLA) of 1993. It mandates covered employers grant eligible employees about 12 weeks of job-protected and unpaid leave for medical and family reasons. The employee needs to have worked for the employer for at least 12 months, during which they must have logged in 1,250 minimum work hours to qualify. Regulations and requirements differ depending on the state, so always make inquiries to know the applicable conditions. Some qualifying events may include:
- Giving birth to newborn or child fostering
- Having a severe medical condition that may impact work
- Caring for a family member
Voluntary Employee Benefits
Voluntary benefits are not mandatory under U.S. law and include:
Paid Time Off (PTO)
Although not mandated by U.S. law, paid time off is among the top benefits employees look out for in a company. This is especially so for paid vacation days and holidays. The reason is that employees are not robots. They need relaxation time to enable them to reboot and get back to the job. Working around the clock can easily result in burnout.
When employees experience burnout due to overworking, they're more prone to mistakes. Aside from relaxation, paid time off also gives employees incentives to deal with personal obligations that may impact productivity.
Although paid time off may add to a small business's overall expenses, the benefits far outweigh the costs. For instance, apart from giving your business a competitive edge and improving its image, it can significantly boost employee productivity. Employees usually return to work highly energetic, refreshed and efficient.
Health, Vision and Dental Insurance
Employee wellness is vital for the success of every business. It's, therefore, no coincidence that health insurance coverage is often the most desired benefit.
In line with the Affordable Care Act, small businesses with less than 50 employees aren't mandated by law to provide health insurance. However, employees consider health insurance a top priority due to the high cost of health care. Therefore, businesses providing health, vision and dental insurance have a competitive edge regarding employee retention and recruitment.
An affordable and cost-effective way small businesses can provide health insurance for their employees without hurting their bottom line is by purchasing group health coverage through the Small Business Health Options Program (SHOP) marketplace. SHOP also qualifies small business owners for a health care tax credit.
Flexible Work Hours
A large number of employees are placing a greater emphasis on work-life balance rather than bigger salaries. In fact, 80% of workers favor a job that offers a flexible schedule over jobs that don't. It's the most desired benefit after health insurance. This is especially so for millennials and parents.
Many larger companies offer unlimited vacation without having to track employees' time off. However, unlimited vacation may not work in favor of small businesses.
Nevertheless, there are various ways small businesses can offer flexibility. For instance:
- Employees can be allowed to choose their work hours.
- If possible, employees can work from home or remotely.
- Provisions can be made for part-time or temporary work.
As employee well-being takes center stage in corporate culture, many companies are currently prioritizing wellness programs. Wellness programs can help reduce work-related stress among employees.
As a small business owner, perks like an on-site gym may not be economical. However, healthy snacks, workplace yoga, free or discounted gym memberships and athletic gear reimbursements are some affordable wellness programs you can offer your employees.
Retirement benefits consist of compensation given to employees when they retire as active workers for your business. This is a way to thank them for their service and make them know that you value them. Employers can also offer employees a retirement savings plan while still working. These benefit plans are what will help the employee start life after active employment.
Workers will want to give their best to your business when they are sure of a retirement benefits program that will cater to their needs once they stop working. Many retirement plan options, such as a simplified employee pension plan (SEP-IRA), 401(k) and simple IRA are available for small business considerations.
Disability insurance allows eligible employees to file for partial wage replacement due to non-workplace-related severe sickness or injuries. The coverage differs from what the employee will get from Social Security in the event of total disability. Suppose an employee suffers long-term illness or injuries, making them unable to work more extended periods or return to work. They can feel motivated to come back knowing you provide disability insurance. Disability insurance is cost-efficient.
As a small business owner, you can go for short-term disability coverage that lasts between two and six months with benefits ranging from 50% to 67% of an employee's salary. However, you can also go for long-term disability for full-time employees, which mandates you to pay 50% to 60% of the employee's wages.
Keep in mind, though, that employers are mandated to have short-term disability in California, New York, Hawaii, New Jersey, Rhode Island and Puerto Rico.
Stay on Top of Your Business Finances With Skynova
Employee benefits enable you to take care of your workers, thereby earning their loyalty and commitment to your business goals. However, a substantial part of your obligations as a business owner is adequate management of your finances.
While you provide benefits as thanks to your employees, let Skynova's accounting software help with taking care of your bookkeeping. Our accounting software helps you keep track of expenses, generate invoices and give proper account audits.
Notice to the Reader
This article discusses the affordable employee benefits available to small businesses. It may not apply in your specific situation. You should seek professional advice from insurance agencies or agents regarding regulatory requirements and applicable conditions for each package, as they vary across states.