How Small Businesses Can Build an Attractive Employee Benefits Package

Small Business
small-business owner stands in the middle of his restaurant: employee benefits package

When you own a small business, recruiting and retaining the best talent is crucial to your business's success. While compensation is typically top of the list for most people when deciding between employers, an attractive employee benefits package could help you land — and keep — top talent.

But how do you build a quality employee benefits package as a small-business owner? Here are some helpful aspects to consider.

Comprehensive Coverage

It may seem like a no-brainer, but fewer small businesses now offer their employees health care coverage. According to one survey by the Employee Benefit Research Institute (EBRI), only about 23 percent of employers with fewer than 10 employees offer health insurance. With rising health care costs, these numbers aren't all that surprising.

However, small-business owners who want to offer employees more coverage and choice have the option of offering a qualified small employer health reimbursement arrangement (QSEHRA), also called a small business HRA. This is where the company can set a monthly allowance and reimburse employees for their health care costs up to this allowance.

The benefit of a small business HRA is that it isn't subject to payroll tax for either the employer or the employees. Small businesses with fewer than 50 employees that don't offer a group health plan qualify for a small business HRA. So, it could be a worthwhile option if you wouldn't otherwise be able to offer comprehensive health insurance coverage.

A Healthy Advantage

Health savings accounts (HSAs) and flexible spending accounts (FSAs) are two other options you could offer employers to help offset health insurance costs, according to HealthCare.gov. An HSA allows you to set aside pretax money to pay for out-of-pocket health care costs. HSAs are offered along with a high-deductible insurance plan.

For example, if you offer employees a health plan with a $2,500 deductible, they'll have to pay $2,500 of their own money before their health insurance kicks in. But with an HSA, they can use the money they've saved before taxes have been taken out of their paycheck to pay for health care costs. HSAs lower employees' taxable income, which also reduces payroll taxes. Employers can contribute to their employees' HSA, but the rules for this vary.

Another benefit of an HSA? It's portable! Employees can take their HSA with them — even when they leave your company. Offering this option could give employees added flexibility and access to more cash while also reducing their tax burden when covering necessary expenses like health care.

An FSA allows employees to set aside pretax dollars to help pay for medical and childcare expenses. An FSA can also reduce your taxes, but unlike with an HSA, employees must use the money they've saved in an FSA within the plan year, or they lose it. However, employers can either give employees two and a half extra months to use the money or allow them to roll over $500 to the next year. As an employer, you can choose to make contributions to an FSA.

Another option is to consider a supplementary insurance product that allows employees to deduct their health insurance premiums directly from their paychecks. Some of these products also enable employees to get life insurance if they wouldn't otherwise qualify — and allow them to keep their policy even when they retire or leave the company. This may be another way to help make your employee benefits package more attractive.

Flexible Alternatives

Depending on your small business, consider offering employees flexible work schedules and telecommuting options. Some small businesses have half-day Fridays in the summer or allow employees to work from home a few days a month or one day per week.

If the work your company does requires just a laptop and an internet connection, that means your employees can work from anywhere — so why not give them the option to work from a location they choose? For employees with children or aging parents, having this flexibility can make all the difference.

If this isn't an option for your business, consider offering more vacation time. You can offer this benefit as a retention bonus. For example, once employees hit their three-year anniversary, they get an extra five days of vacation.

Baby on Board

Paid maternity and paternity leave are also attractive benefits you can offer employees. The Family Medical Leave Act (FMLA) generally requires employers to provide 12 weeks of unpaid leave a year to certain employees. During this time, their employment is also protected. It's important to note that a business is covered by the FMLA if it employs 50 or more employees in 20 or more workweeks in the current or previous calendar year.

As a small business, if you are covered under the FMLA, you likely can't afford to cover the full 12 weeks, but you may be able to partially cover parental or medical leave — even if it's just for two weeks — or offer new parents the option of working part-time from home as a way to extend their leave.

While paid time off comes at a price, the trade-off could be worth it. Employees may be more productive and more loyal to the company if you give them an opportunity to have a greater work-life balance.

Keeping Good Employees

Employee turnover can be costly. It often costs more to replace an employee than to retain a good one. Small businesses generally function like families, meaning every team member is critical. It takes time to train and build relationships with employees, so as an employer you must do everything possible to secure that investment of time (and money).

Start with the options we've outlined, but also ask employees what they'd like. Retirement plans are a popular choice, as well as long-term care insurance and disability income insurance. You may discover some unmet needs you can fulfill while also allowing employees to keep more of the income they've earned.

Ultimately, a great employee benefits package can help you retain the best talent and increase loyalty among the people who work for you — and that's something that doesn't come with a price tag.

IMPORTANT DISCLOSURES
Information provided is general and educational in nature. It is not intended to be, and should not be construed as, legal or tax advice. Western & Southern Financial Group and its member companies (“the Company”) does not provide legal or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. The Company makes no warranties with regard to the information or results obtained by its use. The Company disclaims any liability arising out of your use of, or reliance on, the information. Consult an attorney or tax advisor regarding your specific legal or tax situation.

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