Can your small business or startup afford to provide benefits?
Most start-up founders think they cannot afford to offer employee benefits during the early stages of the company. Heck – most can’t afford to pay employees market rate salaries.
As a company matures, though, it becomes increasingly important to offer a benefit package. Retaining key employees is essential, as is attracting new talent to help get to the next level.
Which benefits should you choose?
What benefits provide the most value for your employees? What benefits can your company most afford? How can you bring key benefits online for a low expense?
Employees all have unique situations, and each will value different benefits on a very personal level. There is no golden rule and there is no pleasing everyone. I believe that a company should begin to offer a nice benefit package early on, without breaking the bank, and then continue to mature the program as business results allow.
Many benefits can be offered in an introductory way while your company limits the cost. Here are my suggestions for the “big three” benefits:
Paid vacation – This is probably the most tangible benefit an employer can offer, and while not inexpensive, it does not require your company to come out of pocket for any additional costs. For example, increasing annual paid vacation from 10 days to 15 days after two years of employment is a great way to reward loyal service… and retain loyal employees.
Health insurance – Providing access to a company health plan is probably the most important benefit a company can provide. Setting up health insurance can be inexpensive, too. Your company can provide access to a group plan early on, and simply limit its contribution to the premium (the company could pay 25% of the premium and your employees would be responsible the remaining 75%). Employees will be able to pay for their premium pre-tax, so not only do they have access to a strong plan, but they also get some tax credit for it. As your business grows, the company can begin to pay for 50%, 75%, or even 100% of the premium. It is important to note that as a basic rule, all employees must have the same premium payment policy (so all employees will have the same percentage of their premium paid for by the company).
Retirement – A company can start up a simple 401k plan for only a few thousand dollars in fees, and most of these fees have a full tax credit for the company (so net cost is close to zero). Even without matching any contributions from the company a 401k is an excellent benefit for employees. The way the tax codes work, even without any matching funds, employees should be able to contribute 3% to their 401k without decreasing their take home pay at all. As your business grows, you can begin to match employee contributions and enhance this benefit.
Entrepreneurs get a lot of credit for their successes, and frankly many like to give themselves more credit than they deserve, but the truth is that a business and its founder(s) are only as good as their employees. Treat your employees well, even when money is tight, and as the business grows, grow your employee benefits with it.
And throw a fantastic holiday party too!