When it comes to attracting and retaining high-quality employees, business owners are discovering that generous wages sometimes aren’t enough. Employers who aren’t offering retirement, insurance, and other benefits may find themselves passed over for better prospects.
So how can small businesses offer competitive benefits without breaking the bank and drowning in paperwork? With modern resources and careful planning, it’s more affordable and less time-consuming than you might think.
1. Offload the Administration
Some small businesses attempt to offer benefits such as flex spending or health savings accounts and keep track of everything internally. For some accounts such as dependent care, employees must submit receipts to HR or other administrative staff to request reimbursement. In addition, all transactions must be tracked and meticulously recorded. Depending on what software you use, you might have numerous sprawling Excel spreadsheets being constantly updated with every payroll.
While it’s a time-consuming headache, this approach might seem more cost-effective than working with a third party. However, this is often a misconception, as it fails to account for expensive staffing requirements to manage benefits in-house. Administering benefits in-house also runs the risk of incorrect tracking and reporting. Small businesses are at higher risk because owners often lack benefits administration training.
It’s common for small businesses to engage a payroll company for payroll processing, but they can easily offload benefits administration as well. In fact, most payroll and benefits administration can now be bundled with one or two providers. Payroll solutions for small businesses can conveniently integrate all fringe benefits and wage data into one, easy-to-access location. This integration streamlines the process, results in lower costs, and decreases the reporting and liability burden of the employer.
Another perk of sending benefit administration to a third party is employee access. An increasing number of payroll and benefit providers offer online portals, which allow employees to view details of their account at their convenience. This is a wonderful asset for two reasons.
First of all, employees almost universally appreciate having instant access to their information. Secondly, employers and/or their administrative staff spend far less time pulling requested records for employees or answering their questions. This, again, can potentially decrease overhead costs and administrative workload.
2. Don’t Pay for More Than What You Need
Robust benefits are wonderful when it comes to things that are used to their fullest potential and promote employee retention. Robust benefits are less wonderful when they are rarely used but come with the full sticker price. With numerous options for retirement, insurance, and other benefits, it’s important to know which ones will provide the best fit.
For example, let’s say you have consistently achieved profit margins high enough to contribute substantial discretionary matches to employee retirement accounts. In this case, you might be justified in offering a standard 401(k) plan, which requires expensive annual testing and tax returns.
In contrast, maybe you want to offer a retirement plan to employees but are unlikely to make contributions beyond a 3% match. In this instance, a SIMPLE 401(k) is much more affordable due to its fewer reporting and testing requirements. Without substantial employer contributions, the more expensive 401(k) plan is not an advantage to you or your employees. By adopting a SIMPLE 401(k), you can still offer your employees a viable retirement plan and avoid unnecessary expenses.
Choosing the benefits that attract high-quality job candidates and don’t overextend your resources requires thoughtful planning. Consult with benefits providers and other investment professionals to see what options you can combine into a comprehensive benefits package.
3. Focus on What Employees Will Most Appreciate
Especially for small businesses, it’s not always possible to offer the highest tier of every benefit. Thankfully, multiple benefits can complement each other to provide something useful and cost-effective.
For example, if you can only offer high-deductible health insurance, you might consider annual contributions to each employee’s HSA. This is far less costly than shelling out for low-deductible insurance. It can also help your employees offset any sizable medical expenses not covered by the health coverage you provide.
Choosing a low(er)-cost benefit that makes you unique among your peers can be another way to successfully draw interest. Small business owners who can’t afford to offer retirement matching might offer two to six weeks of paid parental leave instead. If few small businesses in your area offer this benefit, the novelty could generate interest from higher-caliber candidates. Alternatively, if most employers cover 50% of employee insurance premiums, covering 100% might make candidates overlook your modest PTO allowance.
Surveys can also be useful in getting a better understanding of which benefits your employees value the most. This data can help you determine how to split available funds between wage bonuses, HSA contributions, and 401(k) profit sharing. The same $30,000 of bonus funding can be spent in multiple ways but generate vastly different levels of appreciation by employees.
Using this benefits survey method can be both a candidate draw and a tool for retention. When employees feel like their preferences are being acknowledged, it can significantly improve their overall workplace satisfaction.
High-Quality Benefits Are Within Your Reach
Small business owners might sometimes think that well-rounded employee benefits are only possible for the powerhouse corporations of the world. Fortunately, this isn’t the case, as modern benefits options and technology have made employment perks more accessible than ever. By implementing a well-conceived plan, you can stay competitive and attract and retain prime candidates.