Basic Benefits to Retain Employees
Price is likely the reason you don’t offer benefits to your employees. But not offering a basic benefits plan may cost you in other ways. A Paychex survey found that “lack of benefits” was one of the top ten reasons why people quit their jobs. That’s especially troublesome if the person leaving is one of your most valued employees. Discover how offering basic benefits can help retain your employees.
Besides keeping valued employees, basic benefits plans can fuel higher morale. That may increase productivity, which in turn can offset the cost. Basic benefits plans can also help widen your recruiting pool by attracting new employees. And there are potential tax advantages.
Basic Benefit Plan
But what constitutes a “basic plan?” In the Paychex survey , health care, paid time off (PTO), and a retirement plan made their list of top retention benefits.
Health care benefits
There are a couple of options for employers who want to provide health insurance to their employees. One is to offer small group coverage. The Small Business Health Options Program (SHOP) marketplace offers coverage to businesses with 50 or fewer employees. Look at their website to see what’s available in your area. If you have 25 or fewer employees, you might be eligible for a government tax credit that can lower your overall cost. Watch this video to see if you might be eligible.
Another option is to put money into a Health Reimbursement Arrangement (HRA), which employees can use to purchase their own individual coverage in the open market. There may be tax advantages available for this option too.
Consult your insurance and tax professionals to help you decide what is right for your business.
Paid time off (PTO)
Do you want a sick employee reporting to work and infecting your other staff members (and your customers)? Unless you offer paid time off, the employee is forced to either take a day off without pay or to come to work sick. Neither option is in their best interest, nor yours. That’s why paid time off is a valuable benefit to offer. It can also be used for emergencies and vacations.
Typically PTO is earned based on tenure. For example, an employee can earn one day of PTO time for every month they work for you after their first six months. The longer employees stay with you, the more time they can accrue. However, there’s often a maximum on that time.
Another way to retain employees is by offering a retirement plan. The idea is to offer a method for employees to save money for their retirement, often on a tax-advantaged basis. Over time, their savings can accumulate to create a significant nest egg for when they retire. That can be a powerful retention tool.
There are several options available:
- 401(k) plan – Employees set aside a percentage of their paycheck, up to a specified limit, on a tax-favored basis to fund a retirement account. Some employers match a portion of that contribution up to a certain percentage. There are options for employees to access their money prior to retirement but there is a sizable penalty to do so. They may have to work a certain number of years to access any employer’s contribution. This Department of Labor guide can provide additional insight.
- Simplified Employee Pension (SEP) – Only the employer contributes to this fund. Employees cannot contribute. And there’s no minimum time that an employee must work to take the money should they leave their employment.
- Savings Incentive Match Plan for Employees (SIMPLE IRA) – This plan lets employees contribute, but employers must match that amount. The employee can take their employer contribution even if they leave the employer.
There are tax advantages in many of these retirement options. All of them include government reporting requirements that the employer must complete. You may want to consult your benefits specialist to determine the requirements and which type is best for your business.
Consider investing in your employees by offering a basic benefits plan. The cost may be worth it to retain your most valuable asset—your staff.