As the founder or CEO of a small business, you’re not just passionate about what you do, but also about the people who help you do it – your employees. Offering health and other benefits to your employees is a significant decision that can have substantial financial implications for your business. So, when should you consider offering benefits, and how much will it cost? Let’s dive in.
Firstly, it’s important to understand that under federal law, only large employers (those with 50 or more full-time and full-time equivalent employees) are required to offer health insurance or pay a penalty.
Retirement savings plans, such as 401(k) plans, aren’t mandatory under federal law, but employers may choose to offer them. The cost of employer contributions needs to be factored into the total wage package.
According to the U.S. Bureau of Labor Statistics (BLS), on average, employee compensation and benefits cost employers $34.73 per hour worked, with wages of $24.36 and benefit costs of $10.37. Legally required benefits make up just $2.66 per hour, or 7.7% of those costs.
Now, let’s talk about voluntary benefits. These are not required by federal law, but they can make your company a more attractive prospect for job seekers. Paid leave, health insurance, life and disability insurance, retirement benefits, and fringe benefits are all examples of voluntary benefits.
For instance, health insurance is not required for small businesses, yet roughly half of small business employees receive them. If you do offer healthcare insurance, the Affordable Care Act (ACA) requires that you offer it to all employees when they become eligible. The costs of healthcare benefits average $2.61 per hour worked.
Retirement benefits, such as 401(k)s, are received by roughly half of small business employees. These benefits cost roughly $1.22 per hour worked, or 3.5% of compensation.
While these benefits come with a cost, they can also be seen as an investment in your employees’ well-being and, by extension, the success of your business. Offering benefits can help attract and retain top talent, increase employee satisfaction, and even improve productivity.
However, it’s crucial to consider the financial implications of offering these benefits. You’ll need to factor in the costs of these benefits when setting budgets and forecasting cash flow. It’s also important to regularly review your benefits offerings to ensure they’re still financially viable and meeting your employees’ needs.
Offering health and other benefits to your employees is a significant decision with substantial financial implications. However, with careful planning and consideration, it can be a strategic investment in the success of your business and the well-being of your employees.
