THE
ultimate
employee benefits guide
contents
Overview
pg 1
Part 1 - Why Are Employee Benefits Important?
pg 2-6
Part 2 - Types of Employee Benefits
pg 7-17
Part 3 - HRAs, FSAs, and HSAs
pg 18-24
Part 4 - Employee Benefits Solutions
pg 25-27
The Overview
Why are benefits important? What’s the difference
between perks and benefits? How can I bring in and
keep the best employees to my business?
If you’re a business owner who wants to learn more about
benefits, you’re in the right place. We’ll answer all these
questions and more in the ultimate employee benefits guide for
small business employers.
Think of your business as a tree. Your roots dig deep into the ground
to provide your trunk, branches, and leaves strong and stable
foundation. Roots protect your tree from falling over and help you
absorb water and nutrients needed to survive. Your business needs
strong roots to bring in talented employees and keep them happy.
Your roots will keep these talented employees from fleeing to the
next best opportunity. Think of your roots as your benefits package.
Stable and supportive benefits will attract and keep the best
employees.
“32% of U.S. employers are finding it
more and more difficult to fill jobs at
their companies.”
- Manpower Group
www.employersresource.com
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Part One
Why Are Employee Benefits Important?
What’s your ‘big draw’ when trying to recruit and retain talent?
Do you have one outstanding selling point? Not all businesses are
able to offer things like a pet friendly office, work from home
flexibility, yearly retreats, unlimited time off, or a high-end
salary. Building a benefits package that’s competitive is possibly
the best way to compete for talent.
Employers are finding it more and more difficult to hire and keep
quality employees. Maybe it has something to do with the
economy or a surge of younger workers eager to jump ship. Call
it what you will, the stakes are higher than ever. You need to find
a way to attract the employees you need.
You want to hold onto your high quality employees. Quality
employees miss less work days, and are generally happier. To
accomplish this, we recommend giving them the benefits they
need and maybe a little of the perks they want.
Employee benefits are often viewed as difficult and expensive to
offer as a small business. So why bother? Why are employee
benefits important? Here are the top 5 reasons:
1. Attract better employees
Listing employee benefits on that job description makes a big
impact on the quality of candidates that apply. Different
generations will care about different benefits. So, consider the
people you’re trying to attract and what benefits will appeal to
them. Read more about this here.
2
This entrepreneur article sites a
2011 Harvard Business Review
Analytic Services survey of
human resource leaders. It
found 60 percent said an
attractive benefits package is
"very important" in recruiting
and retaining quality
employees. Contrast this with
only 38 percent who said a high
base salary is very important.
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2. Keep great employees
If you rely on a high wage to attract new employees, it will be
harder to convince these same employees to stay for the long run.
What will you do when that employee gets offered a higher wage
at another company?
In its most recent annual trends survey, MetLife found that
around 49 percent of employees said benefits were an important
reason they came to work for a company. Meanwhile, 60 percent
said benefits are an important reason for staying.
Employee benefits can help you hold onto those
employees after they help you attract them.
Instead of using a cookie cutter approach, allow employees to pick
and choose which benefits they take advantage of.
Which benefits do job seekers really care about? What are
potential employees focusing on while considering a move to a
new job? According to this Monster survey, the average
importance by benefit looked something like this:
Healthcare Plan: 32%
Vacation Time: 25%
Pay Raise: 15%
Employee Benefit: 10%
Performance Bonus: 9%
Retirement Plan: 8%
Notice, Healthcare and vacation time is rated above a pay raise.
Then, right after pay you see employee benefits are listed again.
This means employee benefits make up 67% of the most common
reasons employees choose to stay.
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3. Increase morale and promote better
work/life balance
A competitive benefit package for your employees will boost
morale company wide. When morale is up and employees feel
valued in this way it can make them more productive.
Many lump something called employee perks into the same
category as employee benefits. We’ll talk more about the
difference between employee benefits and perks later in this
guide. But, there are some perks you can offer your employees
that help them maintain a healthy work/life balance. You guessed
it. This means more smiling faces, which translates to more
dollars for your business.
An Employee Assistance Program (EAP) is also a common
employee benefit that employers can offer. These programs are
offered to help employees who deal with issues such as
depression, family crisis (divorce, death, etc.), alcoholism, drug
addiction, teen problems, suicide prevention and much more.
4. Promote health among your employees
Wellness programs are a group of benefits designed to lower the
number of healthcare claims and claim costs. They promote
better health among employees. These programs might include
things like health screenings, blood tests, flu shots, smokingcessation groups, and discounts on exercise classes and diet
plans.
Employees who have health related insurance are more likely to
seek preventative care and treatment when issues arise. This
keeps your workforce healthier and happier.
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5. You’ll sleep better at night.
Providing employee benefits like Short and Long Term Disability,
AD&D, or Life Insurance can help you rest easier at night. You
can rest easy because you’ll know that you are providing a safety
net for your employees in case something might happen to them.
It’s a way to provide for and help your employees’ families in
case of an emergency.
Insurance, after all, is for peace of mind. In this case, you will feel
better knowing that you’ve provided a great support system for
your employees through these benefits.
So, why are employee benefits important? Because they help you
attract and retain better employees, keep them healthy and
happy, and at the end of the day it helps you!
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Part Two
Types of Employee Benefits
Now that you see why benefits are so important,
you might be a little confused by the difference
of employee benefits and employee perks.
Turns out, there is a difference, and you should
know how that affects your employees. Keep
reading to learn more.
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EMPLOYEE PERKS
What's the Difference?
& BENEFITS
Do you understand the difference between employee perks and
benefits?
It hurts to see top talent walk out your door. You might not always
know why they left. But you can take action to prevent it from
happening again. You want to stay competitive and desirable in the
eye of the employee. Employee perks on top of a few necessary
benefits will help you do just that.
In this section, we’re going to explain the difference between
employee perks and employee benefits.
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What Drives Talent Away?
Start with communication. Bad communication can repel talent.
Communication is key to building a team that is engaged. It’s
important to practice quality communication before, not only after
problems come up. The best benefits package in the world cannot
make up for a terrible communication environment.
Millennials are often said to lack loyalty at their jobs and expect to
change jobs within the year. Being the largest population in the
workforce, this means higher turnover in the future for your
business.
What Makes Talent Stay?
Perks like paid vacation time, flexible work schedules, free food,
merchandise discounts, a company car, and even a standing work
desk can all be additional reasons to stick with a company. This is
true for any generation.
A research study by the U.S. Chamber of Commerce Foundation
states that 56% of millennials agreed that a quality benefits package
influences their choice of employers. 63% say benefits are an
important reason in staying with an employer.
Employee perks and benefits are powerful tools to help you keep your
team happy and dedicated. For your own benefit, we urge you to
follow business trends this year and focus on reducing employee
burnout and dissatisfaction. Focus on the things you already have and
make any necessary adjustments to improve.
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EMPLOYEE
Definition
PERKS
Perks have the potential to boost employee happiness and daily
performance. They can spark an emotional response as perks care for
the employee’s wants. If essential needs are met through benefits,
meeting your employee’s wants could be the extra mile it takes to bring
in the top talent that YOU want.
Perks can be pretty much anything and oftentimes won’t cost you
much at all:
Free food
Vacations gifted for reaching goals
Merchandise discounts
Rewards programs
Use of a company car
Expanded or unlimited paid time off
Paid time off for volunteering
Education assistance
Standing work desks
Flexible schedules
Gym memberships
Unique break room areas and features
Laundry service
Childcare
Pet friendliness
Work from home opportunities
Benefits Matter, but Perks Promote!
The difference between employee perks and benefits doesn’t mean
one is more effective than the other. They tend to be most effective
when working in tandem with each other. Granted, the outcome often
depends on your employee’s priorities and attitude. But providing
these items will set the stage for a strong, happy, and successful team.
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So far, we’ve covered why
employee benefits are
important and how different
kinds of benefits (and perks)
will affect your team. Next,
let’s look at the four major
types of employee benefits.
UP NEXT:
The Four Major
Types of Benefits
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THE FOUR
Major Types of
EMPLOYEE BENEFITS
Let’s take a look at the four major types of employee benefits that
your people are going to expect from the get-go.
1. Medical
The most common (and often most essential) type of benefit
employers can offer is medical coverage. The costs of health
insurance, doctors and hospital visits, dental work, vision care, and
prescriptions are rapidly increasing. Employers and their
employees are finding it more and more difficult to deal.
Unexpected medical expenses can cripple uninsured employees in
an instant and that is why most talented employees have come to
expect basic medical coverage.
To help with these medical expenses, some employers offer savings
plans like the Flexible Spending Account or Health
Reimbursement Account on top of health insurance. These
savings accounts will cover all kinds of eligible expenses like:
Copays and prescriptions
Eyeglasses and contacts
First aid kits
Daycare expenses
Click here for a free downloadable list of FSA eligible expenses.
We’ll take a closer look at these later in the guide.
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2. Life
Another common employee benefit is life insurance or
accidental death and dismemberment insurance. If one of your
employees dies, life insurance benefits will provide payments to
the employee’s family to cover funeral costs and ongoing living
expenses. If you’ve been involved in this process then you
understand the incredible financial burden it can place on a
family.
Accidental death and dismemberment insurance, or AD&D,
provides a lump sum payment if death or dismemberment of an
employee is the direct result of an accident. If the employee has
both insurance benefits (life and AD&D) and they die due to an
accident, both coverages will be paid to the families or
beneficiaries.
For more information on Life Insurance and the four major types
of employee benefits, see our full article here.
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3. Disability
Employers can offer short term and/or long term disability
insurance to their employees. If an insured employee is injured or
has a lengthy illness, the benefit pays them during the period of
time they are unable to work.
Short term disability pays a portion of an employee’s salary if they
become temporarily sick or are unable to work. For example: If an
employee is out with a hernia, they might receive short term
disability payments.
More than one in four people in their 20s will
become disabled at some point before retiring.
- Council for Disability Awareness
You can protect your employees from an unexpected financial crisis
with benefits like short term disability. You’ll also be giving yourself
a little peace of mind knowing that if one of your employees should
become disabled they (and their families) are going to be taken care
of.
In the event of a more permanent illness or injury preventing an
insured employee from performing their duties, that employee
would receive long term disability payments.
4. Retirement
The most common type of retirement benefits is the 401(k) plan.
This allows employees to deduct a certain percentage of each
paycheck to put towards retirement savings. Some businesses
choose to match the employee’s deduction or match a certain
percentage of the employee’s deduction.
Related Article: 5 Reasons Employers Love Our
Slavic 401(k) Plan
Realistically, not every business is going to have the means to offer
the most competitive benefits. But that is your opportunity to get
creative. Here are some recent employee benefits trends you might
consider.
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FOUR EMPLOYEE
to Adopt This Year
BENEFITS TRENDS
When looking at the state of talent at your business, your benefits
offerings are the first place to start. We want to help make sure
those high-quality employees are looking at your business.
These are the top employee benefits trends (outside of competitive
pay and basic benefits offerings) that you should be considering.
1. Wellness Programs
A study by SHRM shows that 70 percent of over 400 employers
surveyed currently offer wellness programs.
Wellness programs include information, resources, and incentives
to improve the lives of your employees. They encourage employees
to be healthier and happier. They can also impact your health care
savings, and create a sense of community in your organization.
Some ideas to get your own wellness program started are:
Smoking cessation programs
Health and lifestyle coaching
On-site massage therapy
Incentives or bonuses for employees who participate in fitness
programs or complete health assessments
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2. Health Savings Assistance
Health savings plans like Flexible Spending Accounts or Health
Reimbursement Accounts are huge assets to your benefits arsenal.
They allow you to round-out a weak or high deductible health plan.
They are also a great way to lessen the burden of health care costs
and dependent care costs for your employees. They even offer tax
benefits to your employees and your business.
Over the recent years, the popularity of FSAs and HRAs has risen in
sync with high deductible plans and health care costs. We’ll take a
much closer look at these options in part 3.
3. Financial Management
Financial wellness is something Millennials and Generation Z
employees will be looking for as they enter the workforce. Many of
them are suffering from crippling student loans. Helping workers to
better manage financial stress is a great way to improve the health
and happiness of your workforce. Benefits like these will be
valuable recruiting and retaining tools:
Student-loan assistance
Paid parental leave
Retirement planning
Assistance with medical expenses (like savings accounts
mentioned above)
Financial education services
Employee discount programs
Employee savings clubs like Christmas or vacation clubs
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4. REAL Appreciation
High-quality employees expect to be
appreciated for the high-quality work
they produce. How your business shows
appreciation is up to you. But, make sure
it appropriately fits the actions that
warranted recognition. Great leaders use
this “benefit” strategically and effectively
to keep employees satisfied with their
work.
The top reason employees leave
their current jobs is due to a lack
of feeling valued by their direct
supervisor, according to Gallup.
A pat on the back only goes so far when
your employees are struggling to pay for
health insurance or worried about the
possibility of an unexpected accident.
Employee benefits trends are great to
consider if you have the means to
provide them. Next, we’ll take a look at
what health savings options you can
choose from.
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Part Three
HRAs, FSAs, and HSAs
What Is a Health
Reimbursement Account?
A Health Reimbursement Account is a great way to supplement
health insurance benefits. Keep in mind, they can only be offered to
employees who have coverage by a health plan that meets the ACA
minimum coverage requirements.
Through the HRA, employers reimburse their employees after an
approved out-of-pocket medical expense is made in that plan year.
Reimbursements can sometimes include qualified health insurance
premiums. There is no limit to the amount an employer can
contribute to the account.
Don’t mistake this for reimbursing your
employees for health insurance premiums
directly, as talked about here.
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The Benefits and Drawbacks of HRAs
One of the greatest benefits the HRA gives
employers and businesses is the flexibility
it offers. Since the account is managed and
funded solely by the employer, you have
the ability to design the program to fit your
needs.
You get to decide exactly how much to
contribute to the allowances, you decide
what types of qualified medical expenses to
reimburse (as long as reimbursements are
for qualified medical expenses under IRS
Section 213(d), and you decide what to do
with unused funds. As long as your
program remains in compliance, you can
take the lead with this flexible option.
Employers can choose to allow HRA funds
to rollover year after year while the
employee remains actively employed.
Unused funds do not follow employees to
new employment or beyond termination of
employment (unless continuing medical
plan coverage during a COBRA
continuation period).
The Good
The Bad
Some employers might consider the added
administrative duties to be the downside
of offering benefits like the HRA. Although,
more and more organizations are choosing
to outsource these duties to companies like
a Professional Employer Organization
(PEO) so their in-house HR staff can focus
on more strategic initiatives.
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The HRA Tax Advantage
Using an HRA allows you to deduct HRA
reimbursements as a business expense
which lowers your cost of FICA and
FUTA taxes. Your employees also
benefit from the tax savings, they will
save 20-40% on medical expenses
because they are essentially using pretax dollars to make these purchases.
The use of benefits like the Health
Reimbursement Account are a great
way to recruit and retain quality
employees. Especially if you can’t offer
the kind of affordable health insurance
employees might expect, an HRA can
make up for it.
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What Are Flexible Spending
Accounts?
Employees can choose to regularly contribute a portion of their pay
to an FSA to use for qualified expenses, like medical or dependent
care. The funds are deducted from the employee’s pay before taxes,
so it can significantly lower the employee’s overall annual tax
burden.
Employers can use FSAs as a benefit to their entire organization.
Employees will appreciate the relief on their taxable income, and
employers enjoy reduced payroll taxes because funds set aside for
the FSA are not subject to FICA (social security and medicare) or
FUTA (federal unemployment) taxes.
Flex Spending Accounts are a great addition to your benefits
arsenal by helping you attract and retain the good employees you
need.
There are two different types of Flexible
Spending Accounts:
1. FSA - Health
The most common type of FSA is the health account. Used to pay for
medical and dental expenses not covered by insurance. Over the
counter medications are allowed, but they often require a doctor’s
prescription, except for some cases like insulin.
2. FSA - Dependent Care
Dependent care FSAs are used for daycare expenses of children
under 13, or over 13 and incapable of self-care, or a
spouse/parent/grandparent needing day care while you work or go
to school full-time. We’ll go further in depth on the benefits of
Dependent Care FSA soon.
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How Do You and Your Employees Use the
FSA Funds?
Health accounts will be issued a debit card used to make eligible
purchases.
Dependent Care accounts are not issued debit cards. Employees will
need to be reimbursed for purchases. To be reimbursed for a
qualifying purchase, they will need to fax an explanation of benefits
statement or receipt for services. The reimbursement will be sent
directly to the account.
Check out our in-depth article: What Are Flexible
Spending Accounts? The Complete Employer’s
Guide
What Happens to Unused FSA Funds at
the End of the Year?
Urge your employees to be very careful when calculating their
annual elections. Federal tax law requires that money left in FSAs at
the end of the year is forfeited.
Make sure employees know who to ask questions to, and who to
report claims with. Also, cover eligible expenses with them and
provide a resource where they can check the eligibility of their
purchases.
Click here for our free PDF of FSA Eligible Expenses
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What are the risks?
The main risk when offering FSAs to your employees is the ability
for funds to be used up front.
For example: An employee could elect to contribute $10 a week,
equaling $520 yearly. At the beginning of the year, that employee
could use the total $520 amount even though they haven’t actually
contributed those funds yet.
The risk being that the employee could resign shortly after having
used the funds, but before they have deposited the funds. In that
case, your business would be responsible for the full reimbursement.
To offset this risk, the use-it-or-lose-it rule means that any unused
funds are forfeited back to your business at the end of the plan year.
Check out our Flexible Spending Account FAQ page
here.
Make sure you have a benefits representative in your company or at
least someone through the third party administrator who employees
can contact with questions. We’ll talk more about this in the next
section.
FSAs Benefit Your Employees and Your
Business
Flexible Spending Accounts benefits your employees by saving them
money on taxes and out-of-pocket medical expenses. But they might
benefit your business even more by:
Reducing payroll taxes.
Reducing FICA and federal unemployment taxes.
“Filling-out” your benefits packages resulting in increased
employee retention.
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The Benefits of Dependent Care FSA
Millions of Americans have children or dependents who need care
during the day while they work full-time. In most U.S. families, all of
the adults work, putting a large financial burden on those families to
find day care. Offering a dependent care FSA option will help lessen
this burden on your employees.
The Center for American Progress fact sheet on
child care says the annual cost of child care is higher
than a year’s tuition at the average four-year public
college in most states.
Any way you can help lessen financial burdens for your employees
will make them happier and possibly even more engaged with their
work. Your employees will be less stressed and feel greater loyalty
toward your company when their needs are met.
For a more in-depth look at Dependent Care FSAs,
check out our recent article here.
The Difference between HSA and FSA
Both, HSAs and FSAs, allow employees with health insurance to set
aside their own money for healthcare expenses including
deductibles, copayments and coinsurance, and prescription costs.
Your employees will usually receive a debit card for these accounts,
which they will use to pay for eligible expenses throughout the year.
But, not all of your employees will qualify for the Health Savings
Account. Only employees who have high-deductible health plans
(HDHPs) can select the HSA. HDHPs are health insurance plans with
high deductibles.
HSAs and FSAs share similar tax advantages to your employees and
your business. To learn more about the Health Savings Account see
our recent article, here.
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Part Four
Employee Benefits Solutions
Now that you understand the importance of offering employee
benefits and have an idea for what benefits you’d like to offer your
staff, how do you get employee benefits? You have a few options
here:
Employee Benefits Services
1. The Provider/Broker Solution
You could choose to find an insurance broker that will help guide
you in the process of obtaining an employee benefits package. This
looks different depending on what you’re looking for: health
insurance, retirement benefits, etc.
Look for someone with experience in your industry. But keep in
mind that brokers receive a commission from insurance companies.
Plans with lower premiums like high deductible healthcare plans
could generate lower commissions for the broker, potentially
guiding how they will advise you.
This solution also means that the broker is trying to find a plan for
you and your group of employees. This usually means a group of 50
or less employees. Without being part of a large group, you do not
have access to the bargaining power and discounts that large groups
have.
When it comes to health Insurance plans you will typically be
choosing between one of these common options:
A traditional indemnity plan
Managed care (HMO or PPO)
Self-insurance
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2. Professional Employer Organization
Another option for your business to obtain employee benefits is
through a Professional Employer Organization. A PEO can pool all of
their client’s employees in order to obtain better benefits at a lower
cost than each individual company would get on their own.
Their unique co-employment service model makes this possible.
This may allow your business to provide better health insurance
coverage and other benefits like dental, vision, 401(k) and FSAs.
You won’t have as much control over your insurance policies since
the PEO can choose to change coverage at any time. PEOs aren’t
required to give warning to policy changes which could be viewed as
an advantage or a disadvantage, depending on how you look at it.
3. SHOP Marketplace
The SHOP Marketplace or small business health options program
was created for small businesses with 50 or fewer full-time
equivalent employees (although some states may have different
maximums) who want to provide health and dental coverage to
employees.
The SHOP Marketplace only offers health coverage, dental coverage,
or a combination of the two but does not offer other benefits.
4. On Your Own
That’s right. Many of the perks we discussed in this ebook are simple
and easy for you to set up and start on your own without the help of
any third party. Get creative. Starting a perk program for your
employees can be as simple as saying, “every Tuesday I will be
grabbing sub-sandwiches for the office.” It’s amazing what this can
do for boosting morale.
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5. Don’t Offer Benefits to Your Employees
Are you legally required to offer benefits to your employees? Not if
you have under 50 employees. But -- keep in mind that because of
the recent changes in our healthcare law, all employees are required
to obtain health insurance.
Employees look to their employer as the first and preferred solution
for this. For this reason, and for all the other reasons we have
outlined in this guide, we strongly recommend you consider offering
a benefits package of some kind. The upside for your business is sky
high.
THANK YOU!
However you choose to obtain your employee benefits, you can feel
confident knowing your employees needs are being met. Your retention
and recruitment will be improved through increased engagement and
happiness among your employees. Your overall productivity will be
increased as your employees are more motivated to succeed. With firm
roots planted, your tree will be able to grow and thrive.
Thanks for reading this guide. We hope you’ve learned something new
and feel one step closer to an Employee Benefits solution for your
business.
Having employees has never been easier.
www.EmployersResource.com
1-800-574-4668
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