Creating a truly competitive and compelling employee benefits package can be a struggle — especially for smaller companies. As an employer, you are required to offer certain benefits, like social security taxes, unemployment insurance, and worker’s compensation, plus some others based upon the size of your company, not the least of which is medical insurance per the ACA's "employer mandate".
Providing employee benefits can get expensive fast, but you can only do what you can afford to do. The goal is to remain competitive in the marketplace, not to become a total outlier. And remember, cost-sharing with employees is normal these days and employees expect to pay a portion of insurance costs.
In addition, there are plenty of low cost (and even no cost) benefit options at your disposal to help sweeten the deal. But where to start? Here is a list of typical benefits packages offered by American businesses.
This one is a no-brainer. Applicants view medical coverage as one of the most important factors in an employee benefits package and as a result, the majority of employers offer it. According to the Bureau of Labor Statistics (BLS), 70 percent of civilian companies (and 67 percent of private firms) offered medical insurance to employees in March of 2016 in their company benefits packages.
If you’re wondering how much of the premium cost you should cover, you’ll need to chat with your finance department, as well as your medical carrier, who sometimes mandates a certain percentage of employer subsidization (typically at least 50%). Keep in mind that if you are an employer with over 49 FTEs, the maximum premium you can charge an employee is dictated by the ACA through its “affordability” provision.
For a rough benchmark, the Kaiser Family Foundation reported in their 2016 Employer Health Benefits Survey that employers covered an average of 82 percent of premium costs (for individual coverage). Depending on your quoted price, this number may give your CFO some sticker shock, so remember that this isn’t a required ratio. You can choose to contribute whatever is affordable and appropriate for your business (so long as you don’t run afoul of your carrier obligations and ACA regulations).
If this sounds complicated, your broker can help you sort it out. A great broker will help you benchmark your health coverage, not only against your competitors, but also across similar sized companies in your area competing for the same talent pool. The objective should be to identify a company benefits plan that helps you remain competitive in the marketplace while staying compliant with new regulations.
Life insurance is common, though not as common as health insurance. As per the BLS, 59 percent of civilian companies and 55 percent of private firms offered such policies in March of 2016.
Many employers offer life insurance in the amount of the employee’s salary at no charge to the employee. If that price tag seems a bit too hefty for you, you can offer to pay for part of the policy and require that the employee chip in the rest if they choose to participate.
Dental insurance is another common employee benefit, though not as common as health insurance. The good news here is that dental is far cheaper than medical for both you and your employees.
A common ratio is an 80/20 split between the employer and employee, but you can certainly adjust that to find a better fit for your business.
The most common types of employer-offered retirement accounts are 401(k)s and 403(b)s. Which program you are able to offer is based upon whether you're a for-profit or not-for-profit business.
As for the logistics, your options are wide and varying. Some employers choose to contribute to their employees’ retirement accounts through a matching program, which incentivizes reluctant savers. In a typical matching situation, the employer matches 50% of employee contributions for the first 6 percent of salary that an employee contributes. In this scenario, the company caps its match at 3% of the employee's salary.
Other companies will provide a straight 100% match, up to a certain limit. Still others, who may not qualify for Safe Harbor, will simply make an outright contribution to a 401k.
On the opposite end of the spectrum, some for-profit companies choose to only contribute to retirement through profit sharing. At the end of each quarter (or perhaps every 6 months), employees enrolled in the profit sharing program receive a letter indicating a contribution amount to their account. Depending on the share amount, this could end up being more or less valuable to an employee than a matching program — but again, how these programs are structured is entirely up to you.
Flexible spending accounts (FSAs) are similar to health savings accounts (HSAs) in their allowed use, but each account type comes with pros and cons. For example, FSAs are available with nearly any health insurance plan, however they come with a “use it or lose it” clause. This means that if you claim $1,500 for the calendar year, but you only use $1,300, you lose $200.
HSAs, on the other hand, never expire. They are more like a real savings account in that money accumulates over time and you are allowed to use it forever, even after you switch health plans. The restriction here is that the contributions you make are only tax-free while you’re enrolled in a HDHP.
These days, it’s basically unheard of for a company to not offer at least some paid time off (PTO) in their employee benefits package. Two weeks (10 days) is a common time period granted to full-time employees and some companies allow employees to accrue additional PTO if they stay with the company for a good chunk of time (ex: an additional week after 5 years).
Some companies choose to wrap up their PTO into one collective pile, while others keep it separated into vacation, sick, and personal. There are pros and cons to both ways of structuring these benefits and you’ll just have to decide what makes the most sense for your business.
Different companies choose different paid holidays. In general, Labor Day and Memorial Day are accepted days off, but beyond that, working days are at the discretion of the employer. Government employees and teachers typically get lots of paid days off (President’s Day, Martin Luther King, Jr. Day, Veteran’s Day), while private sector companies may work through them. As with any other employee benefit, you must weigh your options and make this decision based upon what is best for you and your staff.
If your company has 50 or more full-time equivalents, you are required to offer medical leave through the Family Medical Leave Act. This includes maternity leave, time off work for employees to recover from surgery, and time off work to care for ailing family members. FMLA requires that you keep the person’s job open for 12 weeks, but does not require that you pay your employees for their time away. However, many companies (especially large ones) offer at least some compensation in these situations.
In the case of maternity leave, specifically, it is recommended by doctors that women take at least six weeks off work after the birth of a child, so most companies use this as a guide. It’s common for employers to offer six weeks paid leave (oftentimes, in full) and then let the employee use vacation or sick time if they wish to take additional weeks. Others offer the six weeks in full and then another six weeks at half-pay.
Flexible working schedules are a cost effective employee benefit in many ways. First of all, it doesn’t cost you any money to let your employees move their hours around to make their lives easier. Second, happy employees work harder, so if you allow them to work 10-hour days so their week is only four days long, you might just find that they’re more productive.
Companies like Home Depot and Starbucks offer tuition assistance to employees looking to earn a degree. From a tax perspective, there are some advantages to doing so, but more importantly, employees that feel as though their company has invested in them are more likely to invest back into a company.
Sometimes, business owners get nervous that employees will leave the company when their education is complete and they will not get to reap the educational rewards. In order to avoid these situations, some businesses require that an employee stay with the company for a certain amount of time after the completion of a degree.
This list of common employee benefits is by no means exhaustive. There are many others which remain very popular, including vision coverage, long term and short term disability, long term care, accident, critical illness, and hospital indemnity insurance. These more traditional benefits now share the stage with others that are trending in popularity, such as pet insurance, financial wellness programs, online identity protection and prepaid professional legal services, just to name a few.
Assembling a robust benefits portfolio while still keeping an eye on the bottom line is both a science and an art form. Some benefits, in fact, are designed to work in tandem with others, so employee education is a critical step in the employee benefits process that shouldn’t be overlooked.
Did we leave something off this list that your company offers? Do you have questions about any of the common employee benefits on this list? Leave us a comment below or contact us. We’re happy to provide answers!