Should small businesses offer benefits?
Small business have options when it comes to offering their employees benefits. By law, certain benefits must be offered, but including additional incentives can sweeten the pot when hiring top talent. While offering 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, paid vacations and insurance can give small businesses a larger pool of applicants to select from 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 their portion of FICA taxes as well as withhold FICA taxes from an employee’s paycheck for retirement and disability benefits which is 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. For more information, small employers can contact the workers’ compensation programin their state. In Texas, worker’s compensation is optional; however, most professionals agree that the policies are inexpensive enough to cover the great 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.
- Family and medical leaveis required for employers with more than 50 employees, according to the FMLA act. 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 who has a serious 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 which varies by state. Employers must pay into their state’s unemployment fund. 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 why 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 in turn cuts both 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 2 years, but 36 percent of the organizations report that it takes longer to fill those roles at a higher cost.
- Needless to say offering a benefits package minimizes your turnover rate. With dedicated workers, a business can progress to the next phase of growth at minimal cost. When a small business invests in their workers, they are more likely to be productive and high performers.
- Certainly not every employee will need a health plan. For instance, a 16-year-old employee covered under their parents plan may not need one. However, if a majority 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 moral, shows a vested interest in them as valued employees and is the quickest way to higher productivity and a higher level of engagement.
- If a small business offers a health plan, employees are more likely to maintain their health and take less sick days. Many plans offer 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, paid vacations and flexible schedules. Some even offer daycare and dry-cleaning onsite. If you’re not sure 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 Firmif you have any questions about the application of various benefits laws to your company. Our approach in balancing HR and legal services to provide the most cost appropriate results for our clients is unparalleled.