You need to budget for benefits if you want to attract and retain quality employees
Many businesses think they can’t afford benefits. But the reality is you can’t afford not to offer benefits. Today’s labor force has a lot of choices, and they don’t choose employers based only on salary. Benefits play a huge part in a candidate’s decision when considering a job, and they may even take a position with a lower salary if the benefits align with their needs.
To attract and keep talent, your company needs to offer a robust benefits package, but that can be challenging when you’re worried about the bottom line. The important thing to remember is that offering the right benefits can help your bottom line. Better benefits can engender a happier and more loyal workforce, in turn boosting productivity and reducing employee turnover costs.
But first, you need to find the budget to offer benefits. As you develop your benefits package, keep these tips for better budgeting in mind.
1. Budget for the essentials
Start your benefits budget by carving out money for the essentials. For instance, you have to pay for both state and federal unemployment insurance and the rate varies based on your total payroll costs and claims against the policy. Additionally, in some states, you may need to cover mandatory time off, or if your business is a certain size, you may need to offer federal or state benefits.
Make sure you understand the rules and requirements in your area for your size of business, and budget accordingly. For instance, in California, you have to give employees one hour of sick leave for every 30 hours worked.
Under the Affordable Care Act, if you have more than 50 full-time employees or the part-time equivalent, you also must offer health insurance. Some benefits are both location and size-dependent. In New York state, for example, businesses with over 100 employees must give their employees 56 hours of paid time off.
Failing to provide mandatory benefits can lead to fines or penalties that are often more expensive than paying for the benefits. In a worst-case scenario, it could even put you out of business.
2. Expect to spend about 50% of hourly pay on benefits
The amount businesses spend on benefits varies, but as a rule of thumb, according to benefits data from the Bureau of Labor Statistics, you should expect to spend a little less than half as much per hour on benefits as you do on pay. For instance, if you pay someone $20 per hour, you should expect to spend a little less than $10 per hour on benefits.
The average employer spends $40.35 per hour per employee. About 69% of this number is for wages, and the remaining 31% is for benefits. In other words, the average employer spends about $27.93 per hour on wages and about $12.52 per hour on employee benefits.
3. Get ready to beat the competition.
To be competitive as an employer, your benefits package has to go beyond the basics such as health insurance, retirement accounts, and paid time off. Remember that you don’t just vie with the competition for customers or clients. You also compete with them for employees.
If you want to be competitive, your benefits packages need to meet or exceed the industry standard. Find out what the competition offers, research what employees value, and then create a leading benefits package that draws in and keeps employees.
The employee benefit space is extremely diverse. It includes emergency savings accounts, pet insurance, student loan repayment plans, gym memberships, discounts with local merchants, and countless other options. Remember, you don’t have to offer everything all at once. You can build your benefits package over time, based on the needs and desires of your employees.
4. Create a forecast
As you look at mandatory and optional benefits, create a forecast. Include the total cost of all of your benefits, and also figure out how much you need to spend per employee. Don’t forget to budget for price increases. Additionally, when you consider taking on new employees, ensure that you budget for both their salary and their benefits package.
A forecast ensures you know what to expect throughout the year as well as in coming years. When considering new benefits, you should also sketch out various cost scenarios so you can see how different benefits are going to affect your bottom line.
5. Track the value of benefits programs
When you start a benefits program, find ways to track its success. Unlike a traditional investment, you can’t easily measure the return on investment for benefits. However, you can assess how different types of benefits affect employee satisfaction and retention rates.
Ask for employee feedback. If employees love a certain benefit, it’s likely to be worth the cost. If they don’t use or don’t enjoy a benefit, it’s likely to be a wasted expense. But if you don’t ask, you won’t know or be able to track the value of a benefit.
6. Choose benefits that make sense for your team
People have different needs, and they want different benefits. Some people might never consider working for a company that doesn’t offer a 401(k), a defined benefit contribution plan, or another type of retirement savings account. Others may be too stressed worrying about today’s finances to even think about retirement. Some employees want free daycare; others need help paying for pet insurance.
Get to know your team. What do they enjoy? What are their plans for the future? What keeps them up at night? What distracts them while they are at work? Craft a benefits package that makes sense for their unique needs and desires.
By paying attention to your employees’ needs, you build value into your benefits program. Ultimately, increasing value helps drive engagement, boost productivity, and reduce churn rates. It saves money in the long run by improving the employee experience.
7. Look for high-value, low-cost benefit
There are all kinds of benefits available right now. You can stick with the tried-and-true basics like retirement plans and life insurance. But you can also get creative with free lunches, parking spots, discounts on gym memberships, and emergency savings accounts for employees.
When assessing different options, look for high value and low cost. For instance, small perks like free coffee or lunch can help build morale (and even improve attendance) without costing you much at all. Similarly, emergency savings accounts reduce financial stress and help your employees focus better at work, but they don’t stress your bottom line.
The majority of the country doesn't have adequate savings to cover short-term emergencies, and if your employees fall into this category, they may be stressed or unfocused at work. During the pandemic when many people lost their jobs or were furloughed, they began to place even greater importance on the need for emergency savings. This benefit doesn't cost a lot to administer, but it gives employees great peace of mind. It also improves their perception of and relationship with their employer.
If you want your business to be successful, you need to invest in your employees. They are one of your company’s greatest assets. Whether they’re behind the scenes making sure your website loads quickly or directly dealing with customer service questions, they play a significant role in your company’s success.
To keep them happy, you need to budget for benefits. Keep these better budgeting tips in mind as you develop a benefits package that helps both your employees and your company.
Contact SecureSave to improve your benefits package
At SecureSave, we believe in the importance of high-quality benefits, and we firmly believe it’s critical to understand the unique needs of your employees when building a benefits package.
Our employee emergency savings accounts speak directly to your employee’s need to feel secure. Our low-cost, high-engagement plan gives employees the tools to save for short-term emergencies. By implementing an emergency savings account, your business attracts employees who won’t be stressed about finances and can focus on work. To learn more, contact us today.