Intro:
Before you begin
Step 1:
Assess the competition
Step 2:
Provide the legal minimum
Step 3:
Cover the basics
Step 4:
Consider a more complete plan
Step 5:
Check out inexpensive extras
Step 6:
Shop around for good deals

2torial #0803:
Learn2 Choose Employee Benefits

A perfect (bene)fit

It's not easy to attract and retain top-notch employees, and a strong benefits package can be a big selling point for your business. In fact, good benefits can do just as much as a good salary to attract and retain employees.

From health insurance to retirement plans, benefits offer workers a sense of security. At the same time, the group rates and tax deductions you'll receive can work in your financial favor. We'll explain what's available (and legally required), as well as some low-cost extras, so you can better prepare a package that benefits everyone involved.

Assess the competition

Since competition for hiring (and retaining) talented employees is fierce, you need to find out what kind of benefits companies like yours offer their employees, and, if possible, try to match or beat the average. If you can't, make sure you emphasize your company's other attributes during the recruitment process.

To find out what the competition is offering, consult the following sources:

• Industry newsletters and magazines

• The U.S. Bureau of Labor Statistics

• Job listings, which often list benefits packages

• Personal contacts you have within your industry or related fields

• Industry groups and organizations

Of course, your package should also reflect the workers you will (or already) employ. A competitor's employees won't always fit the same profile as your employees. The package should also vary between what full-time, part-time, and contracted employees receive.

Provide the legal minimum

Since labor laws vary by location (and business type), you'll need to check locally to make sure you're meeting the legal minimum. Here's a rundown of what it may include:

Workers' compensation insurance. Every state requires employers to purchase workers' compensation insurance or else pay into a state system through employer payroll taxes. Very small businesses are sometimes exempt, as are employees in certain professions (such as domestic workers). Be sure you know the rules in the state(s) where you're doing business, or you could leave your business open to potentially huge liabilities if a worker is injured on the job.

Time off. While no state mandates regular vacation time, employers are obligated to give workers time off--sometimes paid time off--for special circumstances such as voting, jury duty, and military service.

Disability insurance. Several states, including California, Hawaii, New Jersey, New York, and Rhode Island (and Puerto Rico, too), require employers to contribute to a fund for employees who are unable to work due to a non-work-related illness or injury. The fund then helps replace the disabled worker's lost salary.

Family leave. Though very small businesses (under 15 people) may be exempt, many states require employers to offer unpaid leave to pregnant women and parents (father or mother) with a newborn or recently adopted child. Federal law requires that businesses with more than 50 employees provide up to 12 weeks of unpaid leave per year to care for newborn or recently adopted children, or for immediate family members with a severe illness.

Cover the basics

For most workers, health insurance and paid time off (sick days, vacation days, and holidays) are by far the most important benefits they receive. They're also the most popular benefits provided by employers in the U.S. Keep in mind that full-time employees--especially those in professional positions--will think twice about taking a job that doesn't address these bottom-line concerns.

Health insurance. Health plans are expensive and take significant research to select and administer, but they do help keep your employees healthy--which is good for both of you. If costs seem enormous, remember that corporations get tax deductions for group health plans. In addition, businesses can buy in bulk, which further reduces costs below what employees would pay on their own.

Paid time off. If your employees are working on a day when the rest of the world is at the beach, you can be sure they're not going to get much done. In other words, don't think of paid time off as a zero-sum game. Giving your employees time off may actually increase their productivity in the end. The amount of paid time off a worker receives generally depends on length of service. In the U.S., recent hires commonly get an average of eight to ten vacation days per year (not counting holidays or sick time). Employees with up to ten years of service tend to average 14 days. In addition, employees get an average of nine paid company holidays per year.

Consider a more complete plan

If your business can afford the basics comfortably, it's time to move on to additional perks. This is when taking a close look at the people you will (or already) employ really comes into play. But again, it's ultimately up to you to decide what's important to you and what's right for your company. The following outlines some of your choices:

Life insurance. A relatively inexpensive option, employer-paid life insurance is especially important to older employees as well as those with children. This is one of the most popular "extras" employers offer.

Dental insurance. Only about one-third of America's workforce receives dental insurance, and the number is even smaller for small businesses. That said, group dental insurance is cheaper than individual plans, so it can be an appealing option.

Retirement plans. Workers, even young workers, are increasingly interested in retirement plans. And offering a plan based on employee contributions (like a 401K plan) could cost relatively little--unless you provide matching funds. However, you'll probably need advice from a lawyer and/or accountant about tax issues, and you'll need to budget some administrative time to select and administer a program.

Disability insurance (long- and/or short-term). If an employee is unable to work due to illness or absence, disability insurance pays a portion of their salary. Their condition doesn't have to be work-related (that's covered by workers' compensation insurance). In states where providing insurance isn't legally mandated, it's a relatively inexpensive way to give employees an added sense of security. On the other hand, only about one-fourth of all U.S. workers receive this benefit.

Day care and other family benefits. Only a tiny percentage of small businesses provide benefits regarding day care, adult dependants and spouses, but they are tax deductible. And since workers don't often expect this type of benefit, it could just set you apart.

Check out inexpensive extras

Creative managers have discovered low-cost ways to boost morale and improve employee retention rates. While not traditional benefits, some may be tax-deductible. Here are a few examples:

Gym membership. You can probably get a business discount even if you have only a small number of employees. Gym attendance helps ensure good health for your employees and can even increase worker productivity. If you can't pay for the membership, you can at least pass along the group discount.

Food and drink. Everyone likes a free lunch on occasion. Plus, workers get a chance to interact, and employers may be able to write off the costs. If lunch isn't an option, free drinks and snacks are always appreciated.

Massage. Massage has been shown to reduce injuries, especially when employees spend a lot of time at their keyboards. By providing a massage program, you may even receive a reduction in workers' compensation insurance rates. And who wants to leave a job that includes a weekly rubdown?

Transport passes. Everyone appreciates free or subsidized transport to and from work. Passes aren't usually costly, and tax breaks and volume discounts can sweeten the deal for both of you.

Purchasing clubs. You can purchase group memberships in discount retail organizations, saving employees money over the long term.

Shop around for the best options

Small business owners have long complained that they have a harder time finding affordable benefits for their employees, particularly insurance. Insurers have largely ignored the market because marketing costs are high and returns are low. When small businesses do find a plan, they often pay more than a large business would for the same products.

Fortunately, you have some options. The Internet is changing the dynamic by bringing small businesses into direct contact with insurance companies, thus decreasing marketing costs (e.g. agents' commissions) and letting insurers pass these savings on to clients.

You should also check out the Small Business Administration, trade magazines, and local resources for small businesses. They may be able to guide you to good deals from dependable suppliers, and can connect you to purchasing alliances with other small businesses so you can benefit from volume discounts. A few hours of research could net a great deal in annual savings.

For small businesses, it's hard enough to meet payroll at times, let alone consider fancy benefits packages. But you may be able to find low-cost alternatives. And before you eliminate any options, ask yourself how much a restless workforce will cost.

-end-