Whether you have a long runway or have taken out loans to start your company, you know that every dollar counts when it comes to business expenses. In fact, a Bank of America survey deduced that 72% of small business owners are concerned about healthcare costs.
That’s one reason of many why accessing benefits for your small business can feel so anxiety inducing. Maybe you’ve asked yourself if you can afford it. The question, however, should be can you afford not to?
Employee Insurance 101
Why It’s Risky to Skimp on Benefits
According to a survey conducted by Glassdoor in 2015, 79% of employees would prefer new or additional benefits to a pay raise. Perhaps that’s because many workers at companies with 100 employees or less don’t even have access to health care sponsored by their employers.
So, why is it such a big deal to offer benefits? Here are just a few reasons:
If you want to attract and retain the best talent, you need to include employee benefits on the menu to be considered by desirable candidates. Whether you offer benefits a la carte (like FSA’s) or with a cherry on top (benefits and perks) is up to you — but more employee options bode well for winning the talent war.
- Employee Happiness
Studies have shown time and time again that employee happiness is tied to higher productivity and overall business success. And employees who aren’t stressed out about whether they can afford a routine doctor's visit are more likely to be in good health and in good spirits.
Employees who have benefits are more likely to be satisfied with their jobs and less likely to leave for greener pastures. In fact, a CAP study found that it can cost between 16-20% of a person’s salary just to replace them — which means it will save you money in the long haul to have those benefits around.
Benefits You Can Offer
- Health Insurance
If there’s one thing you shouldn’t skip out on, it’s this. Health insurance plans may range from low to high deductible plans depending on what you’re offering your employees.
- Retirement Plan
There are plenty of options for retirement plans, one of which you’ll recognize instantly.
- Simplified Employee Pension Plan (SEP IRA) - Best for small business owners to save for retirement and get a tax-deferred benefit
- Savings Incentive Match Plan for Employees (SIMPLE IRA) - A non-conventional plan due to lack of start-up and operating costs of a traditional plan, employers match the amount their employees contribute
- 401(k) plan - A widely used plan with companies, employees allocate a portion of their paycheck pre-tax to their retirement savings.
- Unemployment Benefits
Both state and federal law require you to have unemployment insurance. It will protect both you and your workers from unforeseen circumstances, and you can check out our guide to it here.
- Disability Insurance
If your business is located in New York, New Jersey, Hawaii, California, or Rhode Island, you’re required to offer disability insurance. If your company is in a different state and you can’t afford it, consider voluntary benefits — a small amount of money will be pulled out of an employee’s paycheck to cover the insurance.
Related Article: What’s the Difference Between an Employee Benefit and Perk?
How to Explore Your Options
There are plenty of ways to go about getting small group benefits, what matters is that you find the right fit for you and your company. Here is an overview to help:
- SHOP Marketplace
The SHOP Marketplace (Small Business Health Options Program) is part of the Affordable Care Act’s initiative to bring healthcare to small businesses. In order to be eligible, you must have 50 or fewer employees. However, there are variations on these laws state by state, such as how many employees need to enroll for eligibility. If you use SHOP, you’ll get small business tax credits and brokers to help you select small group plans.
- Individual Health Insurance
If you’re buying individual health insurance, you’ll have to go through a broker or the public marketplace. Employees then select from a plan and carrier that’s available. If your employees have health insurance tax credits, they may also be eligible for discounts on premiums.
A broker will act as a consultant for the small group. That means he or she will set up the defined contribution allowances and sell individual policies to your employees. Most people who choose this option aren’t eligible for group health insurance. If you feel like you’re priced out of group health insurance, consider going with a PEO.
PEOs are the secret sauce for small group benefits at enterprise prices. We’ve written a more extensive blog post about PEOs here, but the nuts and bolts go like this: PEOs aggregate small groups together, so your company can get all the healthcare bargaining powers that corporations and large businesses take advantage of everyday.
Whether a PEO is right for you depends on various factors. PEOs also manage HR paperwork, take care of payroll, and safeguard you from being fined for compliance risks. Ultimately, you have several options to decide which small group benefits options will work best for you.
Get the full guide on how PEOs work for small businesses.
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.