Introduction To Employee Benefits
Whether you are an employer seeking to hire an employee or an employee searching for a job, a written employment contract specifying the terms of employment should be prepared and reviewed by an attorney. Gone are the days when deals were done on a handshake. Gone are the days when people honored their word. This article provides an overview on how to create a cost effective benefits plan to attract and keep qualified personnel. While salaries and performance incentives are key, employees also want perks.
Discover What Your Employees Expect
Its impossible to know what potential employees might be expecting, unless you know what your competitors are offering. You should begin by looking at compensation surveys and by seeking information from your business partners, mentors, suppliers, and vendors. Another good source of information can be your accountant and attorney. Often they will have some knowledge, and if they don't, they should be able to refer you to a human resources consultant. Once you have determined what employees expect, you then need to determine what you can afford. Once this has been done you should try to assemble a plan that is flexible. A local attorney should be utilized for this endeavor.
Employee Signing Bonuses
Depending on your industry, a signing bonus may be standard practice. Often this is key to potential employees who are considering leaving their present secured position, for another position. So what's in it for the employer -- well it's a one-time payment that will not affect future benefits or compensation.
Employee Referral Bonus
Although not as common as signing bonuses, referral bonuses can be helpful to the employer seeking additional employees. Good employees often know other good employees. So if you are planning on expanding your staff, offering your employees a referral bonus may be a cost-effective means to accomplish this goal.
Deferred Compensation Plans: Employee Stock Options and Profit Sharing
Although stock options are certainly less attractive now, than they were say in 2000, they can still be a powerful option. Use of stock options, however, should be considered carefully as you might create minority owners in your business, who will then have the ability to block mergers, amongst other things. Another option is to provide what lawyers call "phantom stock", each of which is worth a certain dollar amount based on the value of the company at any given time. Another common tool used by business owners is profit sharing. Your profit sharing plan can be designed to be "the same for all", or "based on performance."
Your deferred compensation plan(s) can be drafted in various forms. They can benefit some or all of your employees. You should consult with a local employment law attorney before determining which plan is right for you.
Employee Paid Time Off Policy
In simple terms, a paid-time-off or leave policy gives your employees some paid time off to rejuvenate. Why do this? Well, for one it is a simple inexpensive tool to show why working for your company is better than working for your competitors. In addition, during the paid time off period, you may discover performance deficiencies, process inefficiencies, and even employee fraud. Often these things go unnoticed until an employee has been absent for a period of time.
Household Support Services
A new wave of benefits has come to be called the Household Support Services. These perks range from sending a company car to pick up the kids at school, providing a daycare center, arranging for a dry cleaning pick-up service to providing oil changes and car washes in the company parking lot. In addition to these perks, a company can sometimes leverage its own products or services, or those of a partner's or affiliated company. For example, say your company builds computers, you may offer each employee a free computer or a computer at a greatly reduced cost. Alternatively, lets say your company utilizes the services of an accountant, lawyer, or bank. You may ask the company accountant to give an on-site seminar on investing, or the lawyer to give an onsite seminar on estate planning, or home buying. By providing these types of services, you give your employees an extra sense of well-being and loyalty. In addition, the lawyer, accountant, or estate-planner may provide this service for a very low fee in the hopes of acquiring some additional business or referrals.
Employee Medical, Heath and Dental Benefits
According to the Dun and Bradstreet Small Business Survey, 45% of small businesses with less than 5 employees, 81% with between 6 and 25 employees and 95% with between 26 and 100 employees offer healthcare benefits. In addition, a relatively new option for small businesses is the Medical Savings Account (MSA). The MSA allows either the employer or the employee to contribute pre-tax dollars to the MSA and there is no penalty, income tax, or payroll tax on monies withdrawn when used to pay medical expenses.
Employee Cafeteria Plans
Although the benefits that can be offered by a cafeteria plan can also be offered individually, there can be some tax advantages to using a Cafeteria Plan. Essentially a cafeteria plan allows certain benefits to be provided before tax, which in turn reduces various payroll taxes for the employer and income taxes for the employee. The following benefits may be offered under a cafeteria plan:
- Health Insurance (including accident and long-term care);
- Dependent care assistance
- Elective contributions to a 401(k) plan;
- Elective vacation days (time off in addition to regular vacation);
- Flexible spending accounts (e.g. healthcare or dependent care expense; reimbursement); and
- Group-term life insurance
A cafeteria plan need not offer all the benefits permitted by law; in fact the employer can choose which benefits will and will not be offered.
Other Less Expensive Benefits
Other less expensive benefits that require no administration, no governmental reporting, and are still tax deductible include offering your employees a relaxed dress code, flexible work schedules, telecommuting, a microwave and gourmet coffee and tea in the lunchroom, and an annual Christmas party.
To evaluate which, if any, of the above options are right for your company, seek the advice of a local attorney, accountant, or benefits pan advisor (without a vested interest). Regardless of which benefits you finally choose to offer, attach a dollar figure to each benefit and include the same in a letter customized for each employee. Annually review your benefits policy, and remind your employees of all the benefits your offer.