When you hire your first employees, you will need to start administering employee benefits. While some benefits are legally required, others can help you attract and retain the best employees. With the unemployment rate falling and many employees carefully evaluating job openings based on company culture, compensation and benefits management, having a comprehensive set of benefits with affordable rates.
It is often difficult for small businesses to afford and provide a wide range of benefits. However, with strategic benefits management, even the smallest companies can create an attractive benefits plan.
We’ve outlined five steps that will have you delivering benefits to your team in no time.
Step 1: Determine your benefits administration budget.
Benefits are expensive, typically making up about a third of an employee’s total compensation, plus wages and salaries. According to the Bureau of Labor Statistics, the average employer spends about $12.06 an hour on employee benefits, including $3.09 on health insurance benefits. (These numbers are based on a civilian employee who earns an average total compensation of $38.91 per hour.)
While costs vary by industry, type of employee, and the benefits you offer, here’s a good place to start: identify your total benefits management budget, then divide it by the number of employees to determine how much you will spend per employee.
You will then be able to identify the benefits that you can reasonably afford. Keep in mind that the most valuable benefits, such as health insurance and pension plans, are often the most expensive.
In addition to the costs of benefits, you will need to consider the cost of administering them. Benefit administration options are internal or external source. If you have an in-house employee who manages your benefits administration process, make sure they are up to date on labor and employment laws. Because it can be expensive and complicated, many companies outsource benefits administration functions.
Step 2: Decide what benefits to offer.
After determining your benefits administration budget, you can begin creating your benefits package. Aim to develop a plan that includes the benefits needed to keep your employees healthy and additional benefits that match their specific needs.
For example, if you have a mostly young, single workforce full of recent graduates, tuition reimbursement or assistance may be a top priority. On the other hand, a workforce made up of families with young children will likely appreciate childcare assistance.
Here is an overview of some of the most important benefits to consider.
Services required by law
You will base any benefits package on the benefits you are legally required to provide, such as these:
Benefits for health and well-being
Employees and employers prioritize physical and mental health. Here are some popular health and wellness benefits you can offer to keep your employees healthy:
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Although you should offer a competitive salary, you can also invest in the financial well-being of your employees by offering these other financial benefits:
- Retirement plans, including company contribution or matching – for example, 401(k), 403(b), and 457(b) plans
- stock options
- Incentive plans
- Financial planning services
- Charity match
Benefits for work-life balance
During the pandemic, employees quickly realized that flexible benefits were a top priority for improving their work-life balance. For example, remote and hybrid working are now almost expected by some employees. Here are some popular benefits of work-life balance:
- Remote and hybrid working arrangements
- Flexible hours
- Benefits for transit or commuters
- Unlimited paid leave
- Paid parental leave
Professional Development Benefits
According to the Work Institute, lack of career development opportunities is the number one reason many employees quit. Providing professional development opportunities is a great way to retain employees and create leaders within your team. Here are some examples:
- Training and development courses (online or in person)
- Career path
- Education aid
- Tuition reimbursement or student loan contributions
End of contract benefits
When you terminate an employee, you must also terminate their benefits. However, depending on the reason, you may want to offer severance benefits, such as these:
Step 3: Choose a benefits provider to administer the benefits.
Choosing a benefit provider is just as important as the benefits you wish to administer. You will need to decide whether you want to administer the benefits yourself or partner with an organization to outsource the administration of the benefits.
If you want to go it alone, you can contact various healthcare providers to find the best plan for your team. If you want to partner with an organization, you can choose an HR outsourcing service (HRO) or a professional employers’ organization (PEO).
Here is some additional information about each type of outsourcing partner.
HR outsourcing service
The best HR outsourcing services can help you administer benefits while taking care of HR administrative tasks, payroll processing, and talent management. HROs are also a great option if you need help maintaining legal compliance.
Here are some of our favorite HROs:
Another option is to partner with one of the best PEO service providers to completely outsource your benefits administration. With this option, however, you must enter a co-employment pattern.
If you’re partnering with a PEO, you’re often signing up for a feature set, not just benefit administration. Some of the companies that offer HR outsourcing also offer a PEO model, so it depends on which one is best for you.
Here are some of our favorite PEOs:
Step 4: Open benefits enrollment for your employees.
After you finalize your benefits plan, extend it to your employees. Now is the time to clearly explain your plan options with your team and encourage employees to ask questions. Unless an employee enrolls for benefits when hired, standard open enrollment typically occurs between November and January for the following year.
Some plans, such as 401(k)s, allow employees to change their plans throughout the year. Other types — such as health insurance — only allow enrollment outside of the open enrollment period if an employee is new or is experiencing a qualifying life event. Qualifying life events include childbirth or adoption, marriage or divorce, death, loss of medical coverage, and changes in residence or citizenship.
It is critical that employees understand their options and time frame for making benefits choices.
Step 5: Monitor and modify benefits as needed.
Review your benefits package at least once a year. Tracking attendance to see which perks are being used can be a great way to see your team’s most valuable perks. You can also survey employees to see if they would like any other perks. As your business grows and the needs of your employees change, it is crucial to modify your benefits plan to adapt to these changes.