If you want to attract and hold onto the best employees, you need to understand the importance of an employee benefits package. Potential new hires will want more than just a salary — they may expect a more robust benefits package. If you don't offer good benefits, you risk losing your workers to others in the industry who may offer better pay opportunities and benefits.
Therefore, business owners should work with their human resources team to create benefits packages that take into account common perks and attract the top talent.
4 Common Types of Employee Benefits
As you begin to create your employee benefits packages, you'll find there are four common types of employee benefits. Some employers may include other types of benefits, such as increased days off, flexible work hours, help for students returning to school, or business retreats. However, many employees look for these benefits first as they review different compensation packages.
Medical insurance is one of the most important benefits that you can offer your employees. The cost of medical care without insurance can quickly become astronomical, so many people specifically seek jobs that offer good medical insurance benefits.
Providing health care for your employees can also benefit your business directly. Quality care can help keep your employees in peak health and reduce absenteeism. This will help your team accomplish more on the job overall.
Health plans generally cover important medical needs, such as primary care doctor visits and specialists. Plans also generally help with more serious conditions, such as hospital stays or surgeries. Keep in mind that if you have employees who work 30 hours a week or more, you may be required by law to provide this benefit to your employees.
The way a health plan is set up typically calls for the employer to split the monthly cost for the plan, known as the premium, with the employee. The employee will then cover a portion of the monthly cost and a payment known as the "deductible." The deductible describes the amount that the employee will need to pay for their health coverage before the insurance company kicks in. Some plans may also require employees to pay for certain medical costs upfront but then offer reimbursement for those expenses.
Depending on the plan you offer your employees, you can also offer employees a flexible spending account (FSA) or a health savings account (HSA). Both options make it easier for employees to pay for medical expenses.
In addition to the health insurance offered as a part of the medical benefits, some employers will also offer additional areas of assistance or coverage to further entice employees. Some important areas to consider include:
To help further promote the health and general wellness of their teams, some employers will offer a wellness program. A wellness program offers employees incentives for taking part in particular health actions. A wellness program might include paying for a gym membership or offering at-work benefits, such as healthier food options.
Participants can then earn rewards based on their participation. For example, going to the gym or lowering their blood pressure might help them earn rewards. Depending on how you structure your wellness program, your business might offer extra vacation days or even more help paying the insurance premium.
Some businesses also include dental insurance options alongside the health insurance coverage as a part of their employee medical benefits. With dental insurance, you offer employees a plan and coverage similar to their medical insurance coverage but focused on dental care. A dental insurance plan offers coverage for routine dental screenings and treatments and helps people cut costs on more expensive dental needs.
Some employers also offer vision insurance as an additional plan that employees can sign up for within the medical benefits category. Offering people coverage to get their eyes checked and then get glasses or contact lenses as needed can also help provide employees with more complete health benefits.
The next important category of benefits consists of disability insurance. Employers can elect to offer short-term disability or long-term disability insurance. This type of insurance helps provide employees with an additional level of protection if they find themselves unable to work because of a prolonged illness or injury. This gives them an additional safety net that many appreciate.
Depending on how the policy is set up, the employee might receive payments of 50% to 60% of their typical salary throughout the duration of the plan. The length of the payments will vary depending on the plan terms outlined.
Life insurance, which can also be called accidental death and dismemberment insurance, is designed to protect the employee's family. If something happens to the employee and they pass away, the insurance will provide a payment to the family to help them following their loss. Often, businesses will offer life insurance that starts at around $25,000 and goes up based on the employee's salary. Those who want to have more insurance available to them can also generally purchase additional coverage.
Finally, the fourth category of benefits is retirement benefits. These plans can help employees plan for their futures when they finish working. Employees like getting help from their employers as they arrange their savings and plan for the future. Typically, there are two types of retirement plans you can offer your employees.
The first plan style is typically known as a defined benefit plan or a pension plan. Pension plans offer a set amount of payment that people will receive upon retirement. This payment is set based on the salary that the employee earned throughout their career and the number of years they worked for the organization.
The second style is a savings type of plan, typically a 401(k). With this savings plan, employees can elect to put a certain amount of their pre-tax income into their retirement account. Some employers elect to offer a variation of the traditional 401(k), called a Roth 401(k), which allows employees to make their contributions post-tax.
Employers will often match employee contributions, which encourages employees to maximize their contributions. The total amount that the employee has at their time of retirement will then depend on outside factors, including the stock market and the performance of the 401(k) account.
Regardless of the type of retirement account you offer your employees, many people appreciate the ability to build up their savings accounts so that they can supplement the Social Security funds they receive in retirement. Considering that as many as 15% of Americans have no retirement savings at all, providing a benefits package that helps people begin to save for their retirement offers an advantage missing from other arrangements.
Planning Your Employee Benefits Package
As you work to attract the top talent for your business, creating desirable benefits packages will help you attract and retain the employees who can grow your organization. To help you plan your employee benefits package, it helps to keep three main factors in mind:
- Watch your budget. Know how much you can reasonably spend on employee benefits and compensation. You can use this to price different plan options and determine what you can reasonably offer your employees.
- Know what others in the industry offer. If you are a small business, you may not be able to offer the same benefits as a larger organization. However, you still want to know what benefits others in the industry offer, particularly those that are similar in size to you. This will help you understand what employees expect from employers like you.
- Familiarize yourself with what matters the most to your employees. You can use surveys to poll current employees to see what you should offer them. You can also look at the research regarding the demographics of your typical employee. For example, you can see what matters more to Gen X members versus millennials.
Let Skynova Help You Build Your Business
As you build your employee benefits package, you need to keep careful track of your expenses and revenue. Skynova's small business accounting software makes this process easy to do. You can manage your receipts, track your expenses, and manage your income so that you know exactly how much you have to spend on benefits and the return that those benefits help produce for you.
See how using a small business accounting platform designed for organizations just like yours can help you drive your business forward.
Notice to the Reader
The content within this article is meant to be used as general guidelines for employee benefits and may not apply to your specific situation. Always consult with a professional accountant to ensure that you're meeting accounting standards.