It’s not just a competitive salary that reels in top talent — employee benefits are a major draw. According to a study by job review website Glassdoor, 60% of people reported that benefits and perks are a huge factor in deciding whether or not they’ll take a job. In other words, a great potential hire with a lot of prospects is probably most likely to pick the job that offers the best benefits package if salaries are comparable.
It may seem like employee benefits are an unnecessary expense that eats into your bottom line, but a small business can actually save money if it chooses its benefits wisely. In today’s benefits climate, perks can range from free food and extra vacation days to wild fringe benefits like nap pods, massages and even improv classes. So, which benefits help save money and attract quality talent? Employees tend to want the same things.
Employee Benefits vs. Compensation
About 80% of employees said they’d choose additional benefits over a salary raise, which means that direct monetary compensation may not be as important as a comprehensive benefits package. Of course, quantifying how much a benefit is worth is a little more difficult. Things like 401(k) matching and health insurance can rack up a small business’s costs as much as it lets it since business owners can make varying contributions. Other compensation is virtually free or actually saves money.
Regardless of what perks your business offers, there are some benefits required by law. These include:
- Paying Federal Insurance Contributions Act taxes: This is for Medicare and Social Security benefits (i.e., a government health care and retirement plan).
- Unemployment insurance: This is a government program that assists full-time employees in the event they lose their job.
- Health insurance: It’s a requirement if you have 50 or more full-time employees or full-time equivalent employees.
- Workers’ compensation: This is essentially disability insurance for workers who are injured on the job.
- Family and medical leave: As dictated by the Family and Medical Leave Act, employers with 50 or more employees must give 12 weeks of unpaid leave during a 12-month period for qualifying family and medical reasons, like sick leave, dependent care and maternity leave. There is additional time off for military caregiver leave.
- Short-term disability: Only some states have this requirement.
In addition to the required benefits, about 69% of small businesses provide health benefits, 52% provide some sort of retirement benefits, 48% provide family leave and 45% provide some paid time off.
Health, Dental and Vision Insurance
Better health insurance, dental insurance and vision insurance are the most desired employee benefits. Unfortunately, health insurance is generally the most expensive benefit to provide, with an average cost of $6,435 per employee for individual coverage and an average of $18,142 for family coverage. You can mitigate these costs by purchasing a group plan from an insurance company that also provides voluntary dental and vision insurance. Employees get a cheaper group rate, and business owners don’t have to pay into voluntary benefits.
Flexible Work Options
Beyond health insurance, flexible work options are one of the most desired benefits. You may think that offering flexible working hours would smash down productivity, but it’s actually the opposite. The option to occasionally telecommute decreases in-office costs and helps prevent workers from using their paid time off in instances where they would only really need a couple of hours away from the office. Telecommuting options cut down on absenteeism by nearly 60%.
Unlimited paid vacation has also become an increasingly trendy benefit among millennials and tech companies, and this can translate to some major savings for a small business. Research has shown that employees with unlimited PTO generally take about two fewer days off than those with a limited number of vacation days (hello productivity), and you don’t have to pay out any rolled-over days at the end of employment. In addition, research has shown that most employees are willing to take a smaller salary in exchange for unlimited PTO.
Flexible Spending Accounts
Flexible spending accounts have a minimal cost for employers but offer employees savings on their taxes. These types of health spending accounts are typically used when employees have high-deductible health plans to ease some of the burden of medical expenses. For an employer, an FSA costs a moderate annual fee.
On-Site Gym or Gym Memberships
Never underestimate the power of high morale. Having an on-site gym or offering discounted gym memberships to employees only has minimal upfront costs — like the cost of equipment or the membership — but it’s linked to an increase in productivity and stamina. Employees who get exercise:
- Learn quicker
- Have improved memory
- Are more creative
- Have prolonged mental stamina (meaning they can work longer)
- Have lower levels of stress
- Are in a better mood
This translates to a better work environment where employees function at their top capabilities, swiftly collaborate and are happy to do it.
Child Care Benefits and Family Leave
Child care is expensive across the board, but it’s an important benefit for working parents. Just 6% of companies offer child care benefits to their employees, but there are a wealth of affordable options that are clearly underutilized. For example, companies can:
- Offer on-site day care: Employees can still pay for this option. Small businesses need not front the entire cost, but it can prevent absenteeism.
- Offer a dependent care flexible savings account: This helps parents save for child care costs while providing tax benefits.
- Offer predictable or flexible hours: This improves productivity by helping parents maximize work time and family time.
- Paid family leave: Offer both maternity and paternity leave to make employees feel equal and valued.
Remember that a productive environment is a money-making environment. If you treat your employees well, they will reward you.
Tuition Reimbursement or Assistance
This ranks highly on Harvard Business Review’s list of most desired benefits. So, what should you offer? About 3% of companies offer student loan assistance, but the most popular option seems to be graduate educational assistance. A whopping 52% of companies provide graduate tuition assistance and reap the subsequent tax breaks.
401(k) Retirement Plan
A 401(k) retirement savings plan is a fairly standard benefit in a competitive compensation package. This may seem expensive because most business owners are used to hearing about 401(k) matching, where companies match employee contributions. This is actually rarely the case.
According to the Bureau of Labor Statistics’s national compensation survey, about 56% of employers offer a 401(k) plan, but 49% match none of their employees' contributions. The average 401(k) match equals 3.5% of an employee’s salary.
Free Snacks or Meals
Not every company can be Google, which offers gourmet meals to employees, but free snacks are a cost-effective perk that actually saves money in the long run. How? For one, employees don’t need to leave the office to grab a meal and therefore are encouraged to take less time away from their desks. Generally, snacks cost less than losing an employee for an hour break.
Second, offering healthy meal options can actually prevent employee sickness and raise morale, which leads to less sick days and increased collaboration and productivity. Free snacks are basically a win-win, even if it’s just a Keurig and some pita chips.
- Paychex: What Basic Benefits Must a Company Provide Employees?
- Clutch: The State of Small Business Employee Benefits in 2019
- Workforce.com: Unlimited Paid Time Off Is a Deceptive Ploy in Today’s Workplace
- PR Newswire: Half Of Americans Would Take A Job With No Paid Time Off For A Higher Salary
- 1 Million for Work Flexibility: The Business Case: How Work Flexibility Can Help Companies Save Money
- Harvard Business Review: Regular Exercise Is Part of Your Job
- Small Business Trends: Just 6% of Companies Offer Childcare Benefits to Employees
- Harvard Business Review: The Most Desirable Employee Benefits
- 20somethingfinance: Does your 401K Match Up Against the Averages?