For a growing or small business, finding and retaining quality employees goes beyond compensation. Employers are able to offer benefits that employees can't access on their own, and so benefits provide value for employees at a relatively low cost to companies. The benefits package your company offers is often a deciding factor for candidates.
Learn which perks and benefits employees want the most.
When Should Your Small Business Offer Employee Benefits?
Corporations and better-funded companies may seem to have access to the best benefits. But startups and small companies can also offer employee benefits that are attractive to employees.
So when should you begin offering benefits to your team? The short answer is, offer as much as you can, as soon as you can. For additional guidance, consider these examples.
As Soon As You Want, If You Offer Equity
Companies just starting out may lack the ability to pay high salaries or offer traditional benefits like health insurance. But all companies have a mission and a goal. Offering equity to your employees allows everyone to share in that mission and goal.
If your small business or startup is just getting off the ground, consider leveraging this perk now, when you might not have the resources to offer more lucrative benefits. While equity doesn’t have the same immediate value of more traditional benefits, equity can certainly contribute to greater team morale and camaraderie.
The reality is, people are ultimately going to want health insurance, a 401(k), dental insurance, and other types of benefits. While some early employees may be willing to forsake that in place of equity to start, after a while it likely won’t be enough.
Before Attaining Talent Becomes a Challenge
Your company should never reach a day where you have a hard time hiring or retaining necessary talent because of your benefits offerings. If that day seems to be approaching, it’s probably time to start considering employee benefits.
Take a look at what kinds of employee benefits packages other similarly sized businesses in your industry are offering. Are they offering access to health insurance? Are they turning to perks instead of benefits? This can help you set a good benchmark around what prospective employees are looking for, and allow you to determine what you might offer to gain a competitive advantage.
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When Employee Benefits Are Financially Viable
Health insurance can be one of the bigger costs that a growing or small business needs to budget for. If the price is prohibitive, test the temperature of your employees. If your company's demographic is young, perhaps access to health insurance is not something employees desire all that much.
Bear in mind that benefits can be offered at nearly any budget, depending on what you want to offer. Consider benefits and perks outside of health insurance that will give value to your employees.
One such benefit is subsidized training. If your small business invests in educating employees — sending them to conferences, seminars, and even offering to cover some college classes for them — employees will appreciate your investment in their future.
Or, consider offering unlimited vacation, the option for employees to work remotely, or summer Fridays. The cost for you as an employer is relatively low, but the perk may attract candidates looking for a more flexible work environment.
When Health Insurance Is Mandatory
There comes a point when a small business isn’t so small anymore, and is legally required to offer access to health insurance benefits.
If your company has 50 or more full-time employees, the Affordable Care Act (ACA) mandates that you offer access to health insurance to your team. This law doesn’t mandate that you have to contribute the entire cost of this benefit, but you must offer access through your business.
The ACA defines full-time employees or full-time equivalent employees a bit differently than you might internally at your company. To calculate, aggregate the hours of service of your part-time employees for the month and divide by 120 hours. So for example, if you have 10 part-time employees that each work 24 hours a week, that’s a total of 960 hours worked for the month by your 10 part-time employees. When you divide that by 120 hours, you get 8. So by the ACA guidelines, your 10 part-time employees equal 8 full-time workers.
There are steep penalties for not offering coverage. The penalty is $2,000 per year for every employee that is uncovered. If you have 50 employees and don’t offer access to insurance, you could be facing a $100,000 fine. Isn’t it better to offer the insurance?
Even if you don’t have 50 or more full-time employees, there are perks to offering insurance earlier on. If you have less than 25 employees, contribute at least 50% of health insurance premiums for employees, and pay an average salary of less than $54,200, there may be a tax credit available to you.
Justworks Can Help
Realistically, the day you should start offering benefits is the day you decide it is right for you and your team. And when you do make that decision, make the process as simple as possible.
You don’t need to avoid offering benefits because it’s too expensive or confusing. By working with a PEO like Justworks, you can gain your team access to corporate-level benefits at prices you can afford. Since it’s all managed on one easy-to-use platform, Justworks eliminates much of the confusion for both you and your team.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.