Business Owner’s Guide to Employee Benefits

Like many small and mid-sized business owners, you may be curious how offering employee benefits can impact your company, if it’s possible to access benefits that fit within your budget, or even if you’re mandated to provide benefits by federal or state laws.

G&A has developed this guide to employee benefits to demonstrate the value they can bring to your business and how you can access options to build a competitive, affordable benefits package.

Offering employee benefits is a strategic investment that extends far beyond providing perks. As a small or mid-sized business owner, you're likely well aware of the challenges in obtaining affordable benefits. 

So why offer employee benefits? 

First, it’s important to understand that employees value benefits. In fact, salary and benefits consistently rank as the top two factors employees consider when evaluating a job opportunity. For your business, though, offering employee benefits is a strategic decision that can significantly impact your company’s success. 

Here are just a few of the reasons that highlight the importance of employee benefits and why offering them is an investment that pays off in the short and long term: 

• Shows employees you value them
• Decreases employee absenteeism
• Improves overall employee well-being
• Lowers costly employee turnover
• Helps you attract top talent
• Improves productivity 
• Provides access to potential tax advantages
• Fulfills legal requirements
• Boosts employee satisfaction and morale
• Improves company culture
• Enhances company reputation
• Fosters employee loyalty

When you build a robust and competitive employee benefits package with intentional perks and benefits, you also demonstrate to your employees – and job candidates – that you are invested in their overall well-being. And when your employees feel supported – physically, emotionally, financially, mentally, and socially – they are more likely to be happy at work, leading to increased productivity and improved performance.

Businesses of all sizes can acquire employee benefits, but for small and mid-sized business owners, the process of identifying, affording, and administering them can feel impossible. 

While larger businesses have more resources – including a higher employee headcount to negotiate better premiums and plans – smaller businesses are often faced with higher costs and limited choices. Your growing business may also lack the in-house expertise to research insurance providers, compare plan options, and navigate complex and complicated compliance requirements.

Understanding the various ways your small or mid-sized business can acquire employee benefits can help address many of these common challenges and concerns. 

Here are three options to consider as you explore how to offer benefits to employees:

Through Self-Sponsored Employee Benefits

You can sponsor your own benefits plans, which means you provide health benefits directly to your employees and your company acts as the insurer. This option requires that your business assumes all risks associated with paying healthcare claims for your employees. Your business will also need the cash flow necessary to meet this obligation, which can make this option challenging for newer or growing organizations. 

Through a Benefits Broker

A benefits broker is a neutral, third-party partner that works on your behalf to understand your company’s benefits needs, research potential providers and plans, and provide the best solutions for your business. A trusted advisor who works on commission, brokers will also facilitate the application process once you’ve selected a plan and provider. 

Though a broker may work well for your needs, it’s important to note that some brokers may have contracts with specific companies to sell their products. However, a benefits broker differs from an insurance agent, who typically works for a single insurance company.

Through a PEO

A professional employer organization (PEO) is an HR outsourcing provider that operates through a unique arrangement known as co-employment. In this model, the PEO manages HR on behalf of your company, and both parties share the risks on employee-related matters. Within this arrangement, your employees become “worksite employees” of the PEO.

For a PEO like G&A Partners, this means we are co-employers to tens of thousands of worksite employees, allowing us to negotiate for better rates and higher-quality plans. Those premiums and plan options are then available to our clients.

It’s important to understand that, as a business owner, there isn’t a universal employee benefits package that fits the needs of every business and every employee. Yes, some benefits options may be more popular than others. But several factors will dictate what’s best for your company – and your employees.

Therefore, it’s critical that you take time before you begin shopping for benefits and understand these key points:

• Your company’s benefits strategy and budget
• Your employees’ needs

Define your benefits strategy

Before you build your employee benefits package, you should understand what your company hopes to accomplish through offering benefits and how much you can spend. Both are key to developing a strategy that will guide you as you choose what to include in your employee benefits package.

Understanding why you are offering employee benefits will help you prioritize what you offer. For example, consider questions such as:

• Are you trying to reduce surging employee turnover?
• Is absenteeism too high amongst your employees?
• Is your business focused on prioritizing employee well-being?
• Is flexibility important to your organization?

Budget planning is important at this stage, as well. Knowing how much you can dedicate to employee benefits will help you evaluate your benefits options, including how to choose the most cost-effective healthcare plans to offer, whether you can afford to make employer retirement contributions, or if you need to rely on low- or no-cost benefits.

Ask your employees what they want

Though this seems simple, asking your employees which benefits they want is an important step in building an attractive employee benefits package. After all, you don’t want to spend time or money offering options they aren’t interested in, especially if minimizing employee turnover or improving company culture is a goal.

So, start by asking for, and then truly listening to your employees’ feedback. Online survey tools, a companywide poll, and an employee focus group are all low-cost ways to get valuable feedback.

If you aren’t currently offering benefits, consider questions such as:

• Which is most important to you: a lower premium or larger provider network?
  This type of question will help you understand whether cost or network are more important to your employees.

• Rank the following benefits in order of importance (then provide a list of options, such as 401(k), short-term disability, dental, vision, etc.).
  Provide a thorough list of ancillary benefits, then let your employees tell you what matters most to them.

• What benefits are you aware other companies offering that you wish we could offer?
  Responses to this question may spark new ideas while also giving you insight into what other companies are doing to attract talent.

• Describe your current stage of life (planning for retirement, focused on self-care, raising a family, caring for elderly loved ones, etc.).
  Today’s workforce spans five generations, so a benefits package should meet the needs of all employees. Understanding the various stages of life your employees are in can help you prioritize certain benefits.

• How often did you visit a doctor in the past 12 months?
  Questions related to how often your employees are visiting the doctor and whether they are seeing a primary care physician or specialist can provide insight on the best plans to offer.

• From this list, choose the most common reasons you miss work or need to adjust your work schedule.
  (Include a comprehensive list of options, such as illness or medical appointment, family illness or appointment, lack of childcare, pet illness, lack of transportation, stress at work, stress at home, burnout, etc.)

  Many employers are offering benefits that alleviate stressors at work and home, allowing employees to be more focused and productive at work. Understanding the reasons your employees are missing work will help you prioritize which resources will be most valuable to them.

If you have previously offered benefits or are revamping your entire benefits package, you may also ask your employees questions about their satisfaction with the current level of coverage and provider options within the network.

Another important consideration in building an employee benefits package is to understand what the most important benefits to employees are.

Workforce demands and trends can give us insight into what’s most important to employees in the current labor market, as benefits offerings evolve to meet the needs of the workforce. Consider how life insurance became a traditional employee benefit. In the late 1800s, the hazardous nature of mining and railroad jobs prompted employees and employers to form mutual benefit associations, allowing them to obtain affordable life insurance.

When the economy shifted from agrarian to industrialized in the early 1900s – and as families no longer lived exclusively off the land – workers recognized the need for long-term financial security.

“U.S. workers now needed to ensure that their dependents would have adequate financial means in case of the premature death of the principal wage earner.” - economist Michael Bucci

Today, the benefits landscape continues to shift. Workers are expecting benefits that address overall well-being and better work-life balance. Health insurance continues to be a top priority for many employees, and in some cases, it may also be required by federal laws. (We’ll dive into that more in a moment.)

Beyond health insurance, what are the most important benefits to employees? Let’s break it down based on two categories:

As a business owner, you’re already aware of ever-changing employment-related laws and regulations at the local, state, and federal level that your business must comply with. Employee benefits are no exception.

The reality is that labor laws and regulations are constantly evolving. Therefore, it’s vital that small and mid-sized businesses stay up to date on the latest labor laws and regulations and understand how these requirements impact their business.

Though not a comprehensive list, here’s a roundup of some mandatory employee benefits businesses may be required to provide:

1. Social Security and Medicare
   Employers and employees are required to contribute a certain percentage of each paycheck toward Social Security and Medicare benefits. These contributions are made over the life of an employee’s career, and the benefits are accessible once the employee meets a certain age requirement.
   
   
2. Unemployment Insurance
   Employers must abide by federal and state laws regarding unemployment insurance, which provides cash benefits to eligible employees. While all states must follow guidelines established by the federal government, each state administers its own program and may set additional requirements.
   
   
3. Workers’ Compensation
   Most states require companies to provide employees with workers’ compensation insurance, which protects employees who are injured on the job or during work-related activities. As with unemployment insurance, requirements vary amongst states and may also be based on company size or other variables.
   
   
4. Health Insurance
   Under the Affordable Care Act, businesses with 50 or more full-time employees are required to provide health insurance options that meet certain requirements. While smaller businesses may not be required to offer health insurance, you may qualify for tax credits if you do choose to offer a qualified plan.
   
   
5. Retirement/Pension Plans
   Nearly all U.S. states have passed or introduced legislation requiring employers to provide voluntary or mandatory retirement plans. Again, requirements vary by state and also differ based on the size of your business. Though some states provide a state-directed retirement option, businesses often can choose their own retirement plan for its employees.
   
   
6. Family Medical Leave
   The Family Medical Leave Act (FMLA) is a federal law that requires certain businesses to provide unpaid family medical leave and a continuation of group health benefits to eligible employees for up to 12 weeks for certain medical or familial reasons. Additionally, employees are entitled to resume the same or equivalent job when they return.
   
   In general, FMLA applies to public agencies (which includes federal, state, and local employers), local education agencies, and private businesses who employ at least 50 workers for at least 20 workweeks in the current or preceding calendar year. (Visit the FMLA government website for full details.)
   
   Additionally, several states have implemented or are preparing to implement mandatory and voluntary paid family and medical leave programs.
   
   
7. Disability Insurance
   Another sign that labor laws are rapidly changing is the emergence of disability insurance, which will typically cover lost wages due to injury, pregnancy, or illness. A handful of states now require short-term disability, but as with other laws, each state has its own requirements.

Managing Compliance with Mandatory Benefits

Most small and mid-sized businesses lack the necessary time, resources, or expertise to manage compliance related to mandatory benefits and HR. But noncompliance can result in costly penalties, fines, and even lawsuits.

However, partnering with a PEO like G&A Partners can be a game-changer for business owners. Our HR and compliance experts will give you peace of mind by helping you navigate federal and state labor laws – including tracking new requirements and updates to existing laws – and understanding the impact of each on your business.

The expense of providing employee benefits – whether health insurance, retirement plans, or other options – can significantly impact your company’s bottom line. So, it’s understandable that cost is often the primary obstacle small and mid-sized businesses face when considering offering employee benefits.

However, there are strategies to assist you in finding and providing affordable employee benefits, such as:

• Using a benefits broker or analyst, who can help you find plans and compare options
• Engaging a PEO, which uses economies of scale to negotiate better pricing on high-quality plans for its clients
• Exploring a group purchasing organization (GPOs), a common option amongst healthcare organizations
• Consulting with an HR or tax expert on potential tax credits, which can offset some costs related to offering certain benefits
• Considering creative plan options, such as a high-deductible health plan coupled with a health savings account (HSA), which includes lower premiums and allows employees to pay for medical expenses with pre-tax dollars
• Reducing the employer contribution for ancillary benefits
• Exploring low- and no-cost benefits

Many small and mid-sized companies are engaging PEOs to access Fortune 500-level benefits within their budget, giving them the ability to compete with larger corporations within the labor market. And with a PEO, you gain so much more. In fact, for about the cost of one, full-time HR employee, a PEO provides a team of dedicated HR experts who help manage daily HR tasks, payroll, compliance, workplace safety, and much more.

Knowing what other types of benefits to offer your employees is dependent upon understanding the needs of your workforce. As we discussed earlier in the article, surveying your employees will help you to identify the most important benefits to employees and the additional benefits and perks they desire.

Within a competitive labor market, companies will also include creative benefits options – such as pet insurance, tuition assistance, or flexible schedules – as a way to stand out in the crowd.

Once you fully understand the importance of employee benefits, have designed a competitive employee benefits package, and are ready to roll it out to your staff, what’s next?

A key – but often overlooked – factor in a successful benefits strategy is ensuring your employees have the tools they need to choose the plan that’s best for them and that they understand how to use their plan. That begins with education and effective communication.

Think back to your first job with benefits. How confident were you that you understood how benefits worked or which plan was the best for you? Education can make all the difference in giving your employees the confidence to select and utilize offered benefits.

“Educating your employees and executing a well-planned open enrollment strategy can also help you manage rising healthcare costs.” - G&A Partners’ Director of Beneficial Jenifer Albright.

Once you’ve built your employee benefits package, strategically plan how you’ll educate your employees on the options available to them, how they can choose the plans that are best for them, and when you’ll provide these educational resources to your employees.

Consider these tips from G&A’s Ultimate Guide to Open Enrollment for Business Owners:

• Educate employees on the basics: Don’t assume your employees know what a premium, co-pay, or deductible is. Provide definitions on basic terminology.
• Explain how the different types of plans work: Sometimes it can be difficult to make sense of descriptions for each plan type, especially if you don’t work with benefits regularly. Provide easy-to-understand explanations with jargon-free language so employees have a clear picture of how each plan works.
• Provide real-life scenarios for each plan: When is it most beneficial to select a high-deductible health plan? In what type of situation would a PPO be more beneficial than an HMO? Give your employees real-life scenarios to help them visualize which plan is best for their situation or current stage of life.
• Teach employees where to go for specific services: One way to manage healthcare costs is to teach your employees that where they go for services can significantly impact the price of healthcare. For example, illustrate when it’s appropriate to utilize telehealth services and how related costs compare to visiting an urgent care facility or waiting to see your primary care physician.
• Promote preventative care and wellness to your workforce: Early detection and prompt treatment are effective ways to manage healthcare costs. Educate your employees on the importance of preventative care and incentivize healthy habits through an engaging wellness program.
• Talk benefits all year: Don’t wait until open enrollment to share benefits-related resources or provide valuable education. Keep the attention on benefits and well-being by educating and communicating throughout the year, rather than only during the open enrollment window.