As you hire your first employees, you’ll need to begin administering employee benefits. While some benefits are legally required, others can help you attract and retain the best employees. With the unemployment rate falling and many employees carefully evaluating job offers based on company culture, compensation management, and employee benefits, it’s critical to have a comprehensive benefits package with affordable rates.
It’s often challenging for small businesses to afford and provide a wide range of benefits. However, with some strategic benefits management, even the smallest companies can create an attractive benefits plan.
We’ve outlined five steps that will have you offering employee benefits to your team in no time.
Employee benefits are expensive, typically accounting for roughly one-third of an employee’s total compensation, along with wages and salary. According to the Bureau of Labor Statistics, the average employer spends roughly $12.06 per hour on an employee’s benefits, with $3.09 of that going toward health insurance benefits. (These numbers are based on a civilian employee who makes an average total compensation of $38.91 per hour.)
While costs vary by industry, employee type, and the benefits you offer, here’s a good starting point: Identify your total benefits management budget, and then divide that by the number of employees to determine how much you’ll spend per employee.
You’ll then be able to identify the benefits you can reasonably afford. Keep in mind that the most valuable benefits – such as health insurance and retirement plans – are often the most expensive.
In addition to benefit costs, you’ll need to account for the cost of administering them. The options for administering benefits are an internal or external source. If you have an internal employee manage your benefits administration process, be sure they’re up to date on labor and employment laws. Since it can be costly and complicated, many businesses outsource benefits administration functions.
After determining your benefits administration budget, you can begin creating your benefits package. Aim to build a plan that includes the necessary benefits to keep your employees healthy and additional benefits that match their specific needs.
For example, if you have a primarily young, single workforce full of new grads, tuition reimbursement or assistance may be a top priority. On the other hand, a workforce made up of families with young children will likely appreciate child care assistance.
Here’s a look at some of the most important benefits to consider.
You’ll base any benefits package on benefits you’re legally required to offer, such as these:
Employees and employers alike are prioritizing physical and mental health. Here are some popular health and wellness benefits you can offer to keep your employees healthy:
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Although you should offer a competitive salary, you can also invest in your employees’ financial well being by offering these other financial benefits:
Over the course of the pandemic, employees quickly realized that flexible benefits are a top priority to improve their work-life balance. For instance, remote and hybrid work is now almost expected by some employees. Here are some popular work-life balance benefits:
According to Work Institute, the lack of career development opportunities is the top reason many employees resign. Offering professional development opportunities is a great way to retain employees and create leaders among your team. Here are some examples:
When you terminate an employee, you’ll also need to terminate their employee benefits. However, depending on the reason, you may want to offer termination benefits, such as these:
Adding popular employee benefits to your package is a great way to round out your offering. Some of these benefits cost more than others, so consider which ones are most valuable to your team.
Choosing a benefits provider is just as important as the benefits you want to administer. You’ll need to decide if you want to administer benefits on your own or partner with an organization to outsource benefits administration.
If you want to go it alone, you can contact various healthcare providers to find the best plan for your team. If you want to partner with an organization, you can choose an HR outsourcing (HRO) service or a professional employer organization (PEO).
Here’s some more information about each outsourcing partner type.
The best HR outsourcing services can help you administer employee benefits while also taking on administrative HR tasks, processing payroll and managing talent. HROs are also a great option if you need help maintaining legal compliance.
Here are some of our favorite HROs:
Another option is to partner with one of the best PEO service providers to completely outsource your benefits administration. With this option, however, you must enter a co-employment model.
If you partner with a PEO, you often sign on for a bundle of features, not just benefits administration. Some of the companies that offer HR outsourcing also offer a PEO model, so it just depends on which one works best for you.
These are some of our favorite PEOs:
After you finalize your benefits plan, roll it out to your employees. Now is the time to explain your plan options clearly with your team and encourage employees to ask questions. Unless an employee enrolls for benefits when they’re hired, standard open enrollment typically occurs between November and January for the following year.
Some plans – such as 401(k)s – allow employees to modify plans throughout the year. Other types – such as health insurance – only allow enrollment outside the open enrollment period if an employee is new or experiences a qualifying life event. Qualifying life events include childbirth or adoption, marriage or divorce, death, loss of health coverage, and changes in residence or citizenship.
It’s essential that employees understand their options and their timeframe to make benefits elections.
Include details about your benefits package in your employee handbook so everyone can reference the information at any time.
Review your employee benefits package at least once a year. Tracking participation to see which benefits are being utilized can be a great way to see your team’s most valuable benefits. You can also survey employees to see if they’d like any other benefits. As your company grows and your employees’ needs evolve, it’s crucial to modify your benefits plan to match such changes.