When I look at my income statement each month and see it creeping ever so slowly downward, I look for things I can cut and save on. It’s easy to go to basic cable in my dealership showroom and perhaps cut out a phone line or two or maybe even have two people share one job, but what about employee benefits?
To understand the importance of employee benefits, especially if you are an employer or HR manager, you only need to look as far as your own health and retirement concerns. What would you do if you had no retirement or a healthcare plan to pay for medical emergencies or even wellness care?
Beyond this, there is also employee morale and motivation to consider and if don’t understand how important benefits are to your employees, you soon will if you cut them.
Why to Keep Employee Benefits
Along with the basic morale reasons for keeping employee benefits, there are some other reasons that as a business owner, you should be aware of including:
- Tax Credits – If you offer healthcare plans including dental or company-paid premium life insurance plans, these are expenses that can help you at tax time. In addition, for your employees, most healthcare plans are pre-tax programs meaning the employee’s share of the premium is deducted and then federal and state taxes are deducted based on a subtotal.
- Retirement Credits – Depending upon your retirement plan, you can also reap tax credit rewards and so can your employees. Speak with a tax professional on the best retirement program to initiate.
- Employee Packages – When you hire employees, they may not be initially excited or pleased about their base wage. By keeping your employee benefits, you can throw the cost the company will be enduring into their total employee compensation package to show them how much the company is really investing on their behalf.
- Lower Turnover Rate – Ask most employees what is most the employee benefit they desire and the answer will be medical benefits. If you understand the importance of employee benefits and keep them, you will have less employee turnover and employees will stay where they are getting the best package.
If these reasons aren’t enough for you, consider if you did cut your employee benefit expenses.
If you don’t understand the importance of employee benefits and make it the first company expense on your list to cut, you can and will experience the following:
- Difficult Recruiting – As soon as potential employees find that you offer no benefits, they will skip your company as a possible job source and move on.
- Time Off – No employee wants to work at a company that offers no sick or personal days. As the owner, you can take the time you need to take care of emergencies or doctor visits. By seeing you take off when you need to and not allowing them to accrue personal or sick time, you will notice dissension and disrespect.
- Costs – Investigate what it really costs to cover your employees. For example, in my dealership, we pay 70% of employee benefit premiums and they are responsible for 30%. My monthly healthcare group plan cost me around $2,500 per month based on the number of employees I have. If I cut this benefit, I would still need to purchase a healthcare plan for the owners and officers of the business and might not reap the reward of lower group rate premiums. How much would you really be spending? Perhaps it’s more than you realize.
When it’s time to look at your company expenses, learn to understand the importance of employee benefits and don’t make them the first thing you cut. While most small businesses (usually fewer than 50 employees) may not be affected by the new laws on healthcare benefits for business owners, you still need to realize that your employees make your business run effectively, so don’t cut something that gives them a sense of security.