Whether you are the owner of a small business or an insurance company that provides products for one, it's valuable to understand at least a few basics when it comes to small business employee benefits. Let's dive into some of the most important considerations of benefits for small business employers and their staff.
What kind of small business benefits are there?
For small business owners, cost-effectiveness is often at the top of their priority list, but an employee benefit is usually a necessary component of running a company. The Affordable Care Act (ACA) has a specific provision that addresses employer-shared responsibility, including benefits.
According to the ACA, "employers with 50 or more full-time employees (or the equivalent in part-time employees) must provide health insurance to 95% of their full-time employees or pay a penalty to the IRS." During the last revision to the act in 2020, the penalty is about $3,860 per employee each year no health insurance is provided. Health benefits are valuable to every employee.
There are different kinds of health insurance plans that are created, and each small business can pick which one best suits its needs. Here are some examples:
When it comes to a voluntary employee benefit plan, many businesses offer paid time off (PTO), which is important to many employees. here are several different kinds of PTO, and a small business owner often has at least one version. Here are some examples of PTO, with the percentage of small businesses that offer them according to the U.S. Bureau of Labor Statistics:
In 2019, QuickBooks released its Time 2019 PTO Report, which found that 69% of employees at small businesses receive paid vacation, and 81% of employers offered paid sick leave. In the same report, 61% of employees didn't use all their PTO but said that it was still important for them to have.
Many small businesses offer retirement plan benefits if they can, despite the fact that it's not required by law for any private business to do so. According to the Department of Labor (DoL) there are tax advantages to offering retirement plans to your employees:
There are many different types of retirement plans that small business owners can pick, depending on the specific needs of each individual company. Some examples that the DoL reports are some of the most popular:
You can work with an actuary to help determine which is the best option for you and your employees.
Because of the Fair Labor Standards Act (FLSA), business owners have to provide employees who earn less than $684 per week or $35,568 per year with overtime pay. Overtime is considered any hours worked more than 40 hours per week. Small business owners need to keep in mind that the minimum rate for overtime is one-and-a-half times the employee's usual hourly wage.
There are many more benefits that business owners are required to offer or can voluntarily give to their employees.
Here are the mandatory benefits:
Here are some of the voluntary benefits:
Offering a variety of employee benefits is important because small businesses have many different specialized requirements.
In order to attract new employees and retain important current ones, it's important for small businesses to have benefits for their workforce. But the world is changing, and 48 million people quit their jobs in 2021 according to a study by EDsmart. As of March 2022, a total of 8.6 million people quit their jobs, and some employers are still struggling to keep their workers. So what do employees want? Here are the top things that the workforce wants, according to a survey by Gallup.
The survey found that 64% of their respondents said that "a significant increase in income or benefits" is very important to them. This means that if employers can't afford high wages, they should at least be able to offer great employee benefits.
Since the last time that the same survey was conducted by Gallup in 2015, more people reported valuing their work-life balance. 61% of today's workforce desires greater work-life balance and better personal well-being. This is why it's so important for small businesses to offer PTO of some kind.
Much of the workforce is unlikely to stick around if their job feels unreliable, and 53% of employees need their employer to provide them with stability in some form or another. According to Gallup, "stability and security are based on future expectations; as expectations for the future change, what job security means is likely to change too." Employee benefits like retirement plans can contribute to employee retention.
If employee benefits are so important, how much should a small business budget for these types of additions? Every circumstance is different, but a professional can help break down what's appropriate in each case. But here are some basics to consider, which can give a good idea of where to start.
The U.S. Department of Labor reports that an employee's total compensation benefits package normally costs a private employer about $28.89 per hour, but that can vary depending on their unique situation.
Because small businesses have variable needs and requirements when it comes to budget and employee benefits, it can be beneficial to seek assistance from professionals. Experts in the industry can offer advice on which products and services would work best. For example, Lewis & Ellis work with both public and private employers to help them discover a strategic and cost-effective approach to managing their risks.
If you're ready to get started, reach out to Lewis & Ellis today.
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