Many small business owners worry that they don’t have the resources to offer benefits to their employees. While small business employee benefits often cost about 18% to 26% of the employee’s salary, gaining loyalty from great employees is easily worth the 18% to 26% of your labor budget. Offering a competitive benefits package makes employees feel valued, which encourages better job performance, less missed work days, less reason to quit, and greater commitment to reaching company goals. In fact, half of all employees say that they are loyal to their employer because of the benefits offered. The important thing is for employers to know the basics of employee benefits for small businesses when putting together a benefits package.
Legally Required Benefits
The following benefits are required by law:
- Time off to vote, fulfill jury duty, and to fulfill military obligations.
- Worker’s compensation if an employee is injured on the job.
- Contribution to social security and medicare expenses.
- The Family and Medical Leave Act entitles employees to 12 weeks unpaid leave for medical events of qualifying family members.
- The Affordable Care Act requires a business offer group health insurance plans if there are more than 50 employees, even part-time.
Commonly Offered Employee Benefits for Small Businesses
The following benefits are often part of employee benefits for small businesses and should be considered when compiling a competitive package:
- The most common optional benefit is paid leave. About 77% of working adults receive paid holidays and paid vacation time.
- About 70% of small business employees participate in employer sponsored health insurance plans.
- Life insurance is provided to 64% of full-time employees within a small business.
- Nearly 60% of small businesses provide paid sick leave to full-time employees.
- Almost half (45%) of small business employees are offered retirement plans through 401k or pension plans.
- One-third of small business employees are offered job-related educational assistance provided by their employer.
Common Benefits Errors that Cost Small Businesses
The biggest cost to employers when offering benefits is making errors that result in legal fines, insurance penalties, or lead to extra costs for the benefits themselves. Such mistakes include:
- Extending insurance to non-qualified people. If an investigation is opened by the insurance company and it becomes apparent that friends or relatives of business owners who shouldn’t qualify are being covered, it might result in rejected claims or cancellation of the entire policy.
- Missing open enrollment for new employees. Most insurance companies offer a window of time in which employees can be added. If an employer neglects to add an employee in time, proof of insurability must be provided and expensive litigation fines might be incurred.
- Sloppy paperwork. A single erroneous entry in an employee’s paperwork can lead to huge problems and thousands of dollars to correct.
- Paying for unnecessary benefits. Offering benefits that employees don’t care to have does nothing to improve employee loyalty. You can get a gauge of what is important by conducting an employee survey, and then beef up the popular benefits and minimize unpopular ones.
Many small business owners find it beneficial to use a benefits administration system to manage their employee benefits with accuracy so that these mistakes can be avoided.
Does your small business offer employee benefits? Which benefits are most important to your employees? Are there any that you don’t find necessary? Please leave a comment with your input below. Read more here. Find more on this here.