Supplementing Wages with Employee Benefit Plans
From time to time, I see in the news articles about government employees being underpaid. One might wonder why people are so eager to grab a government job which comes with less pay for the same skill set in a non-government job. Well, the government is great at supplementing wages with employee benefit plans. As a small business owner, you may not be in the position to compete with the awesome benefits one might find in a government job. However, that doesn’t mean you can’t sweeten the pot on a level that’s affordable to your company.
Paid Time Off
A fair wage isn’t the only way to compensate employees. It blew my mind the first time my husband said the small business he worked for didn’t offer paid time off (PTO), at least not in the first year. Spending most of my time in the corporate/government world, I’ve always accrued PTO, vacation time, and/or sick time on a monthly or bi-monthly basis, ranging from 1-2.5 days a month.
Since marrying my husband, I’ve come to realize that not offering paid vacation or sick time is a common occurrence amongst small businesses. Then even when it is offered after the first year, it may be capped at 5 days PTO for the year. According to the Bureau of Labor Statistics, the average weekly wage is $830. For a 40 hour week, that comes to $20.75/hour, if you’re trying to see where your employees fall. I mention this average to give you an idea of what it’ll cost you in salary to give your employees 5 days off a year.
Keep in mind, employees taking time off aren’t working. As such, you’ll want to be sure your projects are based upon what your employees can do with the time allocated for work. That is, if you’re giving your employees 5 days (a week) vacation, their salary/wages are based upon 51 weeks rather than 52. Likewise, you’ll want to base your profits on the time employees are working. So when you do your projections, be sure to exclude non-working hours from your profit.
Flex/comp-time and/or telecommuting
Flextime refers to allowing employees to work non-traditional hours or hours outside the normal workday. For example, one might work 4 10-hour shifts with three day off, start or finish earlier normal, or other unconventional schedules. Flextime is a great way to allow employees to balance work around their personal life.
Comp-time is time off given to employees outside of the normal work schedule. For example, if an employee’s normal shift is a 9-5 Monday-Friday schedule, but the employee required 2-day training over the weekend, you might consider giving the employee a couple of comp days within the week. Comp-time can also be used in lieu of overtime for exempt employees.
Telecommuting can also be a great way to offer flexibility. Telecommuting allows the employee to work from a location other than at the company. Depending on the employee and situation, telecommuting may lead to more productivity. It also provides an opportunity for a company to continue functioning in unusual situations, such as bad weather.
Where and when an employee works as long as the job gets done may not matter so much to you as a business owner. However, having flexibility in a work schedule can prove to be a huge boost in morale, productivity, and cost-efficient on the side of the employee.
With the Affordable Care Act (ACA) in effect, most Americans are required to have health insurance in place or face fines. For those employers who decide to offer healthcare insurance through the SHOP Healthcare Marketplace, may find the tax benefits make paying for healthcare insurance an affordable benefit. For examples, employers who offer healthcare through the SHOP Marketplace may receive up to 50% in the premiums they pay.
Though health insurance is the big one, other types of group insurance can be attractive to employees also. For example, life, dental, and vision insurance can be added bonuses. Keep in mind, offering insurance benefits doesn’t mean you, as the employer, has to foot the entire cost. Group insurance usually provides cost saving advantages over individual insurance. As such, simply offering a group plan can save employees who want to participate in plans, even if it’s not supplemented by your company.
With the uncertainty of social security these days, many are skeptical of being able to rely on social security income when they retire. Even if they can depend on social security, the income may not be enough to allow them to live comfortable. As such, retirement plans can be act as a huge benefit. I won’t go into too many details, but I will say you (as the employer) have quite a bit of flexibility when it comes to setting up a retirement plan. Your company can be solely responsible for all the contribution, match employee contributions, or even have the contributions come entirely from the employee.
As I mentioned earlier, offering benefits doesn’t mean they have to be a huge expense for your company. Of course, it’s a boon if you do cover some of the costs. However, simply making benefits available… creating opportunities, are important also.
Paid Training/Tuition Reimbursement
As I mentioned in the last post, can act as a retention strategy. As much as you’d like an employee to stay as long as you want them to stay, that’s not always the case. We live in a world where every job an employee takes is seen as temporary. As such, employees are looking to continually advance their skills. If they can get you to pay for that training, the more better for them, as it makes them more marketable.
Don’t let the idea of your employers being more marketable to other companies if you train them well. Investing in your employees provides increased benefits to your company by having highly trained and skilled people to do the job. Plus, you’ll be increasing your pool of candidates for internal promotions.
Tuition reimbursement is another benefit you might consider offering employees. And like with many benefits, you can also deduct tuition reimbursement as an expense… up to $5,250 in a calendar year per employee. If you’re looking to beef up your company with highly educated individuals, you might even put stipulations on the tuition, such as courses or majors in a related field.
Before you go hog wild with exchanging salary for benefits, make sure you understand your employees’ needs. Whereas some employees may jump at the idea of tuition reimbursement or other alternative form of compensation, others might have no desire to take advantage of the benefit and would much rather have the money.
Also, don’t keep it a secret of the financial costs of offering benefits to your employees. I started out by talking about the attractiveness of government jobs due to the benefits. Typically, small businesses aren’t known for great benefits. As such, you’ll need to do your own boasting. Lay it out on paper, so your employees understand their full compensation package, not just their take home pay.
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