All businesses, from tech startups to small and midsize businesses, need great employees. Part of attracting and retaining top talent requires companies to offer a robust benefits package. But for many small tech companies and startups, navigating the world of benefits is a daunting task.
The law requires companies to offer certain benefits to employees. Other benefits are not required by law but are necessary to keep your employees happy. Selecting the right benefits is only part of the battle. Your company then needs to deal with administering those benefits. The following FAQs will provide you with guidance on selecting your company's benefits.
What are Employee Benefits?
Employee benefits are indirect compensation paid to an employee beyond their regular salary. Benefits can be cash, such as a bonus, or non-cash, like PTO and healthcare.
Which Benefits are Mandatory?
Some benefits provided to employees are mandatory. Every employer must pay into a state and federal unemployment insurance program. This program provides unemployment benefits to people out of work and is a benefit to your employees if they ever find themselves unemployed.
Workers' compensation insurance is another mandatory benefit. All eligible employers must carry workers' compensation coverage to help employees injured on the job cover their lost wages and medical bills.
Social Security and Medicare are also mandatory benefits all employers must provide. Companies pay a portion of the employee's Social Security and Medicare which, benefit your employees in retirement.
Which Benefits are Voluntary?
Voluntary benefits are a more broad category. Employers can get creative with the benefits they offer. As you decide what voluntary benefits you want to offer, think about what competitors are offering by conducting a market analysis. You want to offer a significant benefits package to help you attract and retain top talent in your industry. Without a substantial benefits package, many candidates will walk away and take a job elsewhere.
Some benefits could include:
- Life insurance
- Retirement accounts
- Disability insurance
- Tuition reimbursement
- Gym membership
- Wellness programs
- Telecommuting
- Free coffee and food
Let's focus on one benefit that straddles mandatory and voluntary — health insurance. Companies are not required to offer health coverage to employees unless they meet certain criteria, namely, by having more than 50 qualified employees. This is important to note because your company may not meet that criteria now, but you surely will soon.
What is benefits administration?
Benefits administration is the process of creating, managing, and updating your company's employee benefits. Your HR team usually manages the benefits administration process. They should have experience selecting and administering health plans, managing PTO, handling FMLA requests, and selecting and managing retirement account options.
When managed well, your employees will appreciate their benefits and not look elsewhere for work. But when mismanaged, it can create a cumbersome and frustrating experience for your team, which could lead them to leave your company.
How is the cost of benefits determined?
Price is the biggest factor for small tech companies and startups. Weigh the cost of the benefit against the return you get from your employees. Specifically, when you are looking for insurance options, it's hard to find a healthcare insurer who can provide you with quality coverage at a reasonable cost.
All insurance analyzes risk. If your company is small, you have a small amount that you pay each month in premiums, so if someone gets seriously ill, the insurance company may lose money on your account. When a company is larger, they have risk pools which allow the insurer to diversify the risk.
How does a Small Business Purchase Benefits?
Purchasing health coverage without guidance is a complex and convoluted process. You have to evaluate each plan, determine what it covers and what it does not cover, and weigh that against the monthly premium and how much your company will contribute.
A benefits broker can help you with this process. They look at the team you have and provide you with some options, based on their analysis and your criteria. But an outside benefits broker makes money by selling you a pricier plan.
Partnering with a Professional Employer Organization (PEO) is your best bet. You get the advantage of pooling resources with other companies to get better benefits at a lower cost. You get guidance about what plans make the most sense for your organization. And you have a trusted advisor who will work hard to make sure your company remains compliant.
How is a PEO Different?
Aligning with a PEO means your company can get better, more affordable benefits. When you partner with a PEO, you gain access to their benefits masterplan negotiated on behalf of thousands of worksite employees by experts.
Besides getting more affordable benefits, a PEO will handle your payroll, remit taxes, and manage your benefits administration. This means you do not need to have an in-house team of experts who do this for you. If you have a benefits broker you like and have developed a relationship with, you may keep working with that broker even while using a PEO.
Your ability to offer top-notch benefits can make the difference in your company's success. It's the best way for you to hire the best and keep the best employees. With a PEO, you access those benefits at a lower price than your similarly-sized competitors.
