With many provisions of the Affordable Care Act going into effect next year, business owners are asking a lot of questions about the cost of offering a benefit program to their employees. Dollars spent on benefits are taken directly from the profits of the business. However, small business owners should still consider the value of offering benefits to their employees.
A great benefits package, when added to salary and variable pay, will attract potential employees to your business and will make it a great place to work.
A Brief Review of Benefits
A typical benefits package can include health insurance, dental and vision coverage, paid time off, a retirement plan, a flexible spending account, and a Health Savings Account/Health Reimbursement Account. Other benefits offerings may include life insurance and disability coverage (five states and the Commonwealth of Puerto Rico require that employers provide short-term disability insurance to employees.) Although mandated by federal and state law, Social Security and unemployment insurance taxes are also considered employee benefits as well.
What Benefits Should Be Offered?
Research and determine what other firms in similar industries in your industry are offering their employees – perhaps the local Chamber of Commerce, or local HR Association would have benefits survey results for the local area. Your insurance and tax professionals are also good resources for getting information on "what everybody else is doing." It may also be helpful to talk with the employees and determine what they would most like to have – and there may be an affordable way to get them what they want. Employers can open an IRA or 401K plan without a company contribution; they can set up a high deductible health plan and fund a portion of the deductible through a Health Reimbursement Account – there are numerous options available, and it’s worth having a good conversation with your CPA or insurance broker. It makes the most sense to think about starting or expanding benefits that will mean something to your workforce; and maybe provide tax savings for the business.
What is Affordable?
Some benefit plans do not need any funding from an employer (other than administrative costs to manage the plan), such as a Flexible Spending Account for Dependent Care expenses; dental and vision insurance can be paid completely by the employee who enrolls in the plan. Business owners should also have a conversation with their CPA on whether the size of their business and their payroll entitles them to the Small Business Tax Credit under the Affordable Care Act for their health insurance coverage. Business owners can also look at ways to enrich other benefit offerings to employees – paid time off enhancements, and spot rewards for a job well done (like gift cards for a local coffee house, gas station, etc.) are also valued.
Finally, Communication is Key
Create and distribute a "Total Compensation Summary" for each employee. These statements illustrate, in dollars and cents, the value of not only the employee's salary, but the employer's contribution towards both mandatory and voluntary benefits. Benefits typically add on 35% to an employee's base pay. Seeing these figures in black and while teaches employees the real value of these benefits. Health care reform and its numerous provisions affect all employers – not just those offering health care benefits to their employees. That’s why it’s never been more important for businesses to familiarize themselves with this legislation. This article originally appeared on Paychex.com.