Should Small Businesses Offer Benefits?
Small businesses have options when it comes to offering their employees benefits. By law, certain concessions must be provided, but including additional incentives can sweeten the pot when hiring top talent. While delivering the bare minimum can boost profits now, it can negatively affect a small employer's growth, reputation, and profitability over the long term. A benefits package like pension plans, vacations, and insurance can give small businesses a larger pool of applicants, especially in competitive industries. While it is costly, small employers should consider how cost-effective it is to continually train new employees who then leave versus offering competitive benefits to retain top talent and reduce turnover.
Regardless of the size of a small business, certain benefits must be offered to employees. These benefits include:
Social security and Medicare, otherwise known as FICA. Every small business must pay its portion of FICA taxes and withhold FICA taxes from an employee's paycheck for retirement and disability benefits sent to the IRS.
Workers' Compensation. In most states, every small employer must meet requirements for workers' compensation. Employees relinquish their right to sue their employer if injured on the job in exchange for paid wages and medical benefits. Small employers can contact their state's workers' compensation program for more information. In Texas, worker's compensation is optional; however, most professionals agree that the policies are inexpensive enough to cover the significant risk of an accident occurring on the job.
Disability insurance. It is required by some small employers depending upon the state in which the company resides.
According to the FMLA, family and medical leave are required for employers with more than 50 employees. This act allows employees to take unpaid time off (up to 12 weeks) for family or medical reasons like the birth of a baby or a family member with a severe illness. Small employers must continue to provide insurance coverage as if the employee has never left the company.
Unemployment insurance. Pay state, federal, and local unemployment insurance vary by state. Employers must pay into their state's unemployment fund. Therefore, the rates and requirements differ depending on what state the small business operates from.
Time off for voting, jury duty, and military leave. By law, you cannot fire someone for taking time off work to do any of those activities.
Is there an Advantage to Small Businesses Offering Benefits?
There are many reasons a small business should consider offering more than just that basic benefits package required by law.
Having benefits draws top talent. It can also increase hiring from within, which cuts the cost and time to onboard new employees. According to a 2019 study by Kronos and The Human Capital Institute (HCI), half of the 234 Human Resources leaders interviewed say that open hourly and salaried positions have not only increased in the last two years, but 36 percent of the organizations report that it takes longer to fill those roles at a higher cost.
Offering a benefits package minimizes your turnover rate. A business can progress to the next growth phase with dedicated workers at a minimal cost. When small businesses invest in their workers, they are more likely to be productive and high performers.
Indeed, not every employee will need a health plan. For instance, a 16-year-old employee covered under their parent's plan may not need one. However, if most of your employees are full-time working parents, they may feel otherwise. Another alternative may be to offer paid holidays which may work for a small business workforce. As you can see, selecting the right 'type' of benefits for your employees is just as important as picking the 'right' type of insurance plan. Providing benefits that matter to the majority of the workforce boosts morale, shows a vested interest in them as valued employees, and is the quickest way to higher productivity and engagement.
If a small business offers a health plan, employees are more likely to maintain their health and take fewer sick days. In addition, many programs provide regular checkups and preventative care assistance, and a healthier workforce equals more productivity and, as a result, stable growth for your small business.
Providing benefits gives one more reason for employees to be dedicated and loyal to a small business. A 2018 Employee Benefits Survey by the Society of Human Resources Management (SHRM) revealed that of the 34 percent of organizations that increased benefits, 72 percent cited employee retention as a reason, while 54 percent cited employee feedback as another.
If keeping loyal employees makes a difference to the bottom line, offer benefits that matter to them. Besides health and retirement plans, small businesses can provide other perks and incentives like tuition reimbursement, paid holidays, vacations, and flexible schedules. Some even offer daycare and dry-cleaning onsite. If you're unsure how your workforce feels about its present benefits, plan a survey and get feedback. Knowing what your employees need to be more productive and engaged means a better outcome and happier employees.
Please reach out to the Lynch Law Firm if you have any questions about the application of various benefits laws to your company. Our approach to balancing HR and legal services to provide the most cost-appropriate results for our clients is unparalleled.