Good things don’t always come in small packages -- especially when it comes to employee benefits.
Rising health care costs and a struggling economy have created a tough situation for small business owners faced with the task of providing for their workers while preserving their own bottom lines. A solid benefits package is believed to be an effective tool for recruiting and retaining talent, but employers also need to know where to draw the line so it doesn't get too expensive.
Why employers offer benefits in the first place
Benefits packages may appear to help only the employee, but they’re hardly one-sided. From the employer’s perspective, providing employees with adequate benefits and training helps maximize employee loyalty and productivity.
“What we get in return is so far greater than the cost of medical insurance,” said Danielle Prezioso, director of communications and marketing at McDonough Bolyard Peck, a construction consulting company.
The Fairfax, Va.-based firm, which currently has about 200 employees on payroll, absorbs 100% of the health-care costs incurred by employees and their families -- a rare and generous perk for any company to offer. Prezioso believes that policy has played a big part in allowing employees to become more productive.
“We take the concern and stress away so that our (employees) can concentrate on their families and their work,” she said.
The company’s unique benefits plan has also helped to give it an edge in a very competitive industry, said Prezioso, touting the company’s 85% retention rate last year.
And turnover is an important indicator, considering how costly it is for companies to train employees. With the average cost of training a new employee equivalent to about one-third of the employee’s annual salary, employers can’t afford to lose the employees they’ve got, said Renee Schaaf, vice president at Principal Financial Group and leader of the company’s small-business benefits recognition program.
“The end game for most companies is that they want to be in business for the long-term… and to do that, [they need to] invest in their employees,” said Schaaf.
Still, numbers aren’t everything. Some small business owners, like Bud Sullivan of the N.J. Sullivan Company, feel a moral obligation to provide for their employees.
“This is a family,” Sullivan said of the 29 employees who work at the 50-year old Sterling, Va.-based metal manufacturing company. “If I couldn’t [absorb the costs] of the benefits, I would probably shut down.”
Striking a balance
The key to supporting one’s staff and bottom line is all about the way benefits are structured, Schaaf of Principal Financial said. Small-business owners should consider the benefits offered by competitors on the local and national levels to gauge how their own benefits stack up, Schaaf said.
But, what’s worth the expense for one company won’t always be worth it for another. Schaaf recommends that small-business owners gain insight from a benefits advisor and/or from the employees themselves -- which is exactly what David Gray did when he developed his company’s benefit plan.
Gray, who serves as president and chief executive of Birmingham, Ala.-based software company DAXKO, said his employees started out with a pretty basic health package and self-directed 401(k) plan. As the company gained financial footing, Gray consulted with members of his staff to figure out which benefits were most important to them.
“We sat with groups [of employees] and asked what the biggest needs were,” he said. “It wasn’t about the external adviser, it was just about asking the team.”
Finally, and perhaps most importantly, Schaaf of Principal Financial believes employers should instate a strong communications program to make employees aware of the benefits available to them.
“A benefit that’s not recognized can’t be appreciated, so the educational component is important,” she said.
The deal breakers
While there may not be a golden rule in how companies structure their benefits, health and retirement perks are generally considered the most important.
“These are what I would call the ‘big rocks’ -- they’re foundational,” said Schaaf. “If [either] of those is missing, the long-term financial security of the employees is jeopardized.”
Still, a lack of health and retirement coverage isn’t always an employee deal breaker. In fact, young, healthy workers with no dependents often have to be convinced that there’s a need for health insurance, said Schaaf. For those with employees in this category, the best type of health plans are ones with higher deductibles and lower premiums, or even flexible spending accounts, she said.
The frills
Some companies go beyond standard benefits to offer employees more nontraditional advantages. At DAXKO, a Birmingham, Ala.-based software company with about 70 employees, each employee receives standard medical and 401(k) benefits, as well as a professional development budget to spend on training programs and classes of his or her choosing.
“We spend a lot more money on training than we used to, which I think is a good thing,” said DAXKO’s chief executive and president David Gray, who believes giving employees a sense of ownership increases their quality of work.
DAXKO also differentiates itself from other local competitors by allowing employees to wear shorts and flip-flops and ride scooters around the workplace -- perks that don’t cost much, but mean a lot to his employees.
Gray's approach to benefits is to listen to his employees and do the best he can to keep them satisfied.
“I couldn’t care less if I couldn’t wear shorts or flip-flops or ride around on scooters, but it’s not about what I like. It’s about what the other 68 people like.”
Taken from FoxBusiness
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