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Thinking of Skimping on Employee Benefits? Think Again

One day, out of the blue, one of your business’s star employees drops a bomb: They’re leaving.

You tried to pay them well, you had a good relationship, there was no animosity. But they were drawn away nonetheless. It’s not that the pay was better — it was, but only by a modest amount. No, the real draw was the benefits package. A better healthcare plan, a 401(k) and company match, tuition reimbursement, paid maternity and paternity leave, and more.

If it were just the pay, they might have asked for a raise so they could stay. But how, they thought, could they negotiate to get benefits your company doesn’t even offer?

While the exact details might differ, thousands of businesses go through similar scenarios each year. They bleed talent because they don’t offer the benefits employees want and need.

If that’s the case for your business, read on. We’ll talk about the danger of skimping on benefits, and discuss a number of ways that small businesses with limited resources can still step up their benefits to be more competitive.

Research: Improve Your Benefits or Risk Higher Turnover

Recent research from American asset manager Nuveen, a TIAA company, shows that companies risk both attracting and retaining talent if they fail to understand the importance of (and offer) comprehensive benefits.

Among some of the most noteworthy findings:

  • 7 in 10 full-time workers, and 8 in 10 Gen Zers, are willing to switch jobs for better benefits.
  • Roughly two-thirds of Gen Zers would consider taking a new job solely for the education or wellness benefits.
  • Only 32% of Gen X and Baby Boomers say their employers contribute to their retirement savings plan regardless of whether they contribute. That trails Millennials (38%) and is significantly behind Gen Zers (54%).
  • The majority of all workers say they either disagree or only somewhat agree that their employers decide which benefits to offer based on worker feedback. That number is highest in junior workers, at 75%.
  • Roughly two-thirds of workers think their organizations don’t effectively promote or explain their benefits, or innovate how they’re implemented. (And this often means these benefits go underused.)

What’s important in these findings isn’t just the general idea that workers want benefits. It’s also that different workers have different views on the benefits that are important to them — and thus one-size-fits-all benefits packages might be an ineffective solution — and that it’s also important to properly communicate your benefits to workers.

“Rather than viewing benefits as a cost, organizations can seize a competitive advantage by treating them as a strategic investment,” Nuveen writes. “Attractive packages are a magnet for talent and a motivator for that talent to stay longer and commit to an organization.”

There’s a cost trade-off to consider, too. When you lose an employee, you end up absorbing all kinds of costs, in both time and money. You have to spend time and resources recruiting, interviewing and training. Not to mention, you suffer from lost productivity during the time it takes to find and get a new hire up to speed, lost experience, and even a decline in morale, all of which can make themselves felt in the bottom line.

How Small Businesses Can Offer Competitive Benefits

We’ll start with some brutal honesty: It’s extremely difficult for small businesses to offer benefits packages that are on par with those offered by larger firms. Benefits can be costly to begin with, but they often also become more cost-efficient with scale — thus, small businesses have a natural handicap.

But that doesn’t mean small businesses should just throw in the towel when it comes to benefits. Instead, they should build a package of more affordable benefits, then expand to other benefits over time as their finances allow.

Among the more affordable benefits you can offer:

  • Paid time off (PTO): Paid time off is one of the most basic benefits, and thus something most employees expect. The good news for small businesses? It doesn’t cost any additional money (at least for salaried employees). However, you do lose productivity and it can cause scheduling issues, so small businesses need to carefully manage this benefit.
  • Flexible work: The ability to offer this benefit varies from business to business. If you run a retail store with set hours, you can’t exactly tell employees to come in whenever they want. But for many office-based businesses, not much is lost if you, say, let employees work from home three days a week, or let workers start and finish early on some days and later on others. Indeed, flexible work arrangements often let employees better manage their life responsibilities, resulting in happier and more productive workers.
  • Professional development opportunities: Investing in employee development benefits the business and employee alike. Small businesses can try to provide mentorship and even workshops for employees. As financial resources grow, they can also pay for online courses and even tuition reimbursement. Employers get more skilled and knowledgeable employees, while employees gain skills and experience that can help them advance within the company or elsewhere.
  • Recognition and rewards: Calling out good work, and occasionally rewarding it with financial incentives (money, gift cards, etc.), can provide a huge lift to employee morale and encourage high performance.
  • Pre-tax commuting assistance: Companies can set up systems that allow employees to set aside pre-tax money for transit passes, subsidized parking and other types of commuting assistance. Those tax savings equate to a salary bump for employees, and it can also reduce the amount of FICA taxes a company pays.
  • Financial wellness programs: Financial wellness programs provide employees with invaluable information and resources to help them manage their finances better. These programs can include budgeting tools, debt management assistance, even access to financial advisors.
  • SEP IRAs: The 401(k) is the gold standard of employer-sponsored retirement plan, but it’s not the only one. The Simplified Employee Pension IRA (SEP IRA) typically requires no setup fees. Employers contribute to the accounts, but they’re not required to contribute every year — an important buffer for difficult financial periods.

What Benefits Will Help Your Business the Most?

Evaluating, selecting and implementing employee benefits can be challenging for any business owner, but especially those with little experience with these programs. But McManamon & Co. can help. We provide custom services for small and midsize firms, including consulting on a wide array of topics – including employee benefits and other ways of attracting talent.

Want to learn more? Call us today at 440.892.8900 or contact us online.

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