Download Our eGuide: 5 Ways to Improve Employee Benefits in 2021
Learn how to balance the need of your business while caring for your employees.
The cost of benefits for small businesses can create a burden on employers — namely, health insurance. Small businesses with fifty or more full-time employees are required to offer a healthcare option. But healthcare insurance costs continue to rise. According to the Bureau of Labor and Statistics, benefits account for roughly a third of employer costs.
As a result, only 30% of organizations with fewer than fifty people offer group health insurance, according to the NFIB research center. In many cases, the cost of healthcare insurance can be a small business owner’s number one problem.
Looking ahead, the rising costs of healthcare isn’t going to slow. A Kaiser employer health benefits survey reported that average single premiums increased by 4% and family premiums by 5% in 2019. Over longer periods of time, this adds up to a 22% increase in premiums over the last five years and 54% over the last ten years.
Regardless of your company size, offering some form of benefits is usually a must. Workers expect benefits and in many cases, they are more important than salary. Understanding the costs of benefits and how to lower them could provide you with a competitive advantage when it comes to hiring and retaining your employees.
Benefits are a complicated subject. While there can be many things that affect the cost of benefits, these three factors affect your costs the most.
Mandatory benefits such as social security, medicare, or unemployment and workers compensation insurance will set the baseline for an employer’s cost of benefits. But each additional benefit you offer adds up.
The most common benefits employers provide are health insurance, dental insurance, vision insurance, retirement planning, life insurance, tuition reimbursement, and student loan benefits. The most expensive of those — health insurance and retirement plans with matching contributions.
Depending on how many benefits you have, including perks, as you grow your team the cost of those benefits increase. But specific to healthcare, it can be the opposite. How many employees you have usually determines what plans you’ll have access to. For small businesses, this means the smaller you are the more expensive your healthcare costs can be.
Benefits require an ongoing process. Each year employers have to curate, select, enroll, and manage their employees’ benefits. You have to know how to set deductions in payroll, make sure forms are filled out correctly, facilitate updates for employee life changes, and conduct reconciliation each month. Often, this results in an additional hire whose salary adds to the total cost of your benefits.
The cost of providing benefits is steep, but so is the cost of not providing them. Competing for talent and retaining your employees has a lot to do with the benefits you provide. Not providing competitive benefits could make it harder to hire or increase your turnover — just as costly an expense to your organization.
A lot can factor into the cost of your benefits. Even where you live or how healthy your employees are can make a difference. One way to offer more benefits but at a lower cost is through perks.
Perks are additional rewards, incentives, discounts, or activities that provide value for employees on top of their salary. They’re often non-wage compensation but can highlight that you care about your employees and their well-being just as much as traditional benefits.
More than anything, to lower your cost of benefits, it’ll come down to your company size and the economy of scale you can achieve.
If you can outsource your HR to a partner, you’ll get access to more options. For example, we use our buying power to team up with top healthcare providers to provide large group plans. And typically these benefits come with better customer service and perks — at better rates. Download our eGuide to learn more about how you can improve your benefits offering or reach out to us to learn more about how we can help with your benefits administration.