For a small business, finding and retaining quality employees goes beyond the compensation package. The benefits package your company offers is often a deciding factor for candidates. Employers are able to offer benefits that employees can't access on their own, and so benefits are valuable for employees at a relatively low cost for companies.
Corporations and better-funded companies may seem to have access to the best benefits. But small companies can also offer employee benefits that are attractive to employees.
As Soon as you Want, If You Offer Equity
Companies just starting out may lack in money or traditional benefits like healthcare. But all companies have a mission and an ultimate goal. Offering equity share's that mission and goal with employees.
Just do a Google search for “21st Employee of Google.” That’s Marissa Mayer who accrued a significant amount of her wealth due to the company’s success because she was given equity in Google. Now she’s the CEO of Yahoo.
Even if the benefits that Google had to offer were not great at the time, the company was able to offer something even better: the dream that the early employees share in Google's success because they worked there early on.
At a much larger company, that’s not possible. The large company has already scaled a lot and the amount of shares available is significant less. Therefore, as an early company, take advantage of this perk when you might not have the money to offer more lucrative benefits.
Before Getting Talent Becomes a Challenge
Your company should never reach a day where it has a hard time hiring or retaining necessary talent because of its benefits offerings. If that day seems to be approaching, start considering employee benefits. The reality is: people are going to want health insurance, a 401k, dental insurance, and other types of benefits. While many early employees will forsake that in place of equity—to start—after a while, that won’t be enough.
Compare your company’s benefits — or lack thereof — to what other similarly sized competitors are offering. Are they offering healthcare? Are they turning to perks instead of benefits? Weigh the options between offering what everyone else does and offering more to get a competitive advantage.
When Benefits Become Viable Financial Options
Health insurance can be an unusually expensive cost for a small business. If the price is prohibitive, test the temperature of your employees. If your company's demographic is young, perhaps health insurance is not something employees even desire all that much.
But benefits can be offered throughout a large price range.
Consider other benefits - or perks - that will still give value to your employees. One such benefit is subsidized training. If your small business invests in educating employees - sending them to conferences, seminars, and even offering to cover some college classes for them - employees will see you as investing in their future.
Learn which perks and benefits employees want the most.
Or, consider offering unlimited vacation or summer Fridays. The cost for you is relatively insignificant, but it might bring in candidates that are used to more structured vacations and want something more loosely governed.
When You've Grown: Health Insurance is Mandatory at 50+ Employees
There comes a point when small business has no choice but to offer health insurance benefits.
If your company has 50+ full-time employees, the Affordable Care Act mandates that you have to offer health insurance to your employees. It doesn’t mandate that you have to pay for the entire thing, but you must offer it through your business. A full-time employee can entail the aggregate hours of your part-time employees divided by 30 hours. If you have 10 part-timers that each work 24 hours a week, that’s 200 hours. Divide that by 30 hours and you get 8. That is the total number of full-time employees that the 10 part-timers count toward.
For businesses that have 50-99 full-time employees, this mandate doesn’t kick in until 2016. However, the penalty is $2,000 per year for every employee that is uncovered. If you’re at 50 employees and don’t offer insurance, suddenly you have a bill for $100,000. Isn’t it better to give the insurance?
But even if you don’t have the 50+ full time employees, there are perks to offering insurance earlier on. If you have less than 25 employees and provide at least 50% of their insurance to employees with salaries less than $50,000, there is a tax credit available to you.
Justworks Can Help
One of the big reasons many companies avoid offering benefits is because it is too confusing or expensive. By using a service like Justworks, you can focus on building your business while the platform handles all the backend paperwork, salaries, and benefits.
The day you should start offering benefits is the day you decide to do it. And when you do make that decision, make the process as simple as possible. There’s no reason that you should be confused. And even more, there’s no reason to break any rules just because you don’t know them.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.