How Does a Small Business Manage Employee Benefits?
Great benefits are key to attracting the best talent. If you want a competent and productive workforce, your employees need to feel that the company has their back. This can be achieved by providing an appealing benefits package.
On the other hand, employee benefits are expensive. You don’t want to stretch the company’s financial resources too thin by over-providing benefits. Finding a healthy balance will help keep everyone satisfied!
Here’s our top advice for managing employee benefits.
Some benefits are required by law. As a small business, you must ensure you are providing and paying for the following:
Social Security and Medicare
Federal Insurance Contributions Act (FICA) includes (per employee) 1.45% for Medicare and 6.2% on the first $137,700 of earnings for Social Security paid as a tax. As the employer, you must match each payment.
Workers’ compensation insurance provides financial support in the case an employee experiences an injury or illness on the job, and as a result is unable to work. Each state has a fund administered by the state labor department that you pay into. This fund provides coverage for medical expenses and a limited amount of income for your employee while they recover.
You are also required to pay Federal Unemployment Tax Act (FUTA) taxes as well as state unemployment taxes.
If you have employees that earn less than $684 per week or $35,568, then you are required by law to pay them overtime (1.5 x normal hourly rate) for every hour worked above the standard 40-hour work week.
Finally, you must provide time off for any employee summoned for jury duty. Some states mandate that this is taken as paid time off.
Here’s where you can really set yourself apart as a desirable employer. While you aren’t required to provide these following benefits, you may have a tough time attracting high-quality employees if you don’t.
Healthcare is vital to employees’ own wellbeing as well as being required by the Affordable Care Act.
Under the ACA, employers are mandated to offer health insurance that is affordable to 95% of their full-time employees and their children up to the age of 26. This applies to employers with 50 or more full-time employees, or full-time equivalents (FTEs). Employees are considered full-time if they work 30+ hours a week.
A plan must provide minimum value, meaning it pays at least 60% of the cost of covered services including deductibles, copays and coinsurance.
With an enormous range of plans at varying price points on offer, you can research a healthcare plan that’s attractive yet affordable for you.
You can also consider providing the options of a Flexible Spending Account (FSA) and a Health Savings Account (HSA). A Flexible Spending Account (FSA) is a designated account into which employees put pre-tax dollars that they can then use to pay for certain out-of-pocket healthcare costs. A Health Savings Account (HSA) is a tax-exempt account used to pay or reimburse employees and their family’s medical expenses if covered by a high-deductible health insurance plan (HDHP).
Unpaid leave is a cost-effective, low-impact benefit that holds great value. Employees appreciate the ability to take unpaid leave for important occasions such as having a baby or family emergencies.
Paid leave is one of the most valued benefits of all. While it is not a requirement to provide paid leave, there are now some requirements to provide it in certain situations. Refer to your own state guidelines to find out what you are required to provide. Sick days, however, are typically required per state due to the natural results of getting ill on the job.
If you want to compete in the job market, however, it is standard for small businesses to offer their workforce seven paid holidays along with ten vacation days. Additional vacation days are usually tied to tenure.
Company-provided retirement plans tend to be defined as contribution plans or 401K’s. Around half of all small businesses offer this benefit to employees.
Life and Disability Insurance
Life and Disability Insurance is a rarely seen benefit in small businesses but one to consider as it actually costs very little to provide. Employees receive a payout if they are rendered disabled and unable to work.
Many of these benefits are also in demand from potential employees. Particularly those that offer flexible working conditions. These are great because they’re typically low-cost but high-impact.
How to Manage Your Employee Benefits
First up, get up to speed on your federal and state laws regarding employee benefits. This will tell you precisely what the law requires you to provide and what is optional.
Next, you’ll need to determine the benefits package. Decide which benefits you will provide, and then find plans that fit within your budget. You can use the following information to ensure your benefits are competitive:
Deploy and run the benefits using an appropriate management system. HR software is key here as it is set up specifically for the purpose of managing employee benefits. The added advantage is that many of the tasks can be automated, which frees up precious time and resources.
Employee benefits are not a “set it and forget it” thing and requires frequent upkeep. First, to determine whether or not it provides value, and secondly if there’s any way to simplify or streamline the management of the program.
Don’t be afraid to make adjustments and improvements, especially if it increases the value or saves you more time.
Getting the experts involved is a wise step at any point in the process. A dedicated employee benefits expert will not only be able to manage the entire thing effectively, they’ll also easily spot where improvements can be made.
Before you shake your head at the extra cost of getting expert help, let us tell you that it’s more affordable than you think! At EvolveCFO, we have professionals on hand to provide all your employee benefits management virtually.
Because our service is remote, you only pay for what you need. This means you can start small and increase the amount of service as you scale your business. Everything, including employee benefits, recruitment, and payroll, can be managed by your EvolveCFO expert, and we’ll even help you craft a winning benefits package. Get in touch today!