Employee Benefits

I hear from business owners around the country that they cannot afford employee health benefits.  I will challenge that mindset in this blog and argue that employee benefits are non-negotiable when it comes to employment packages.

Let’s start with the cold hard facts, employee benefits can be expensive.  The average cost for an individual is $456 and a family is $1152 per month (according to eahealthinsurance.com).  This is not cheap; however, these benefits play a huge factor in attracting and retaining employee’s.

Just look at these statistics:

80% of employees would choose additional benefits over a pay raise (Glassdoor)

Companies rated high on employee benefits saw a 56% lower attrition (LinkedIn)

72% Of employees said having more benefits would increase job satisfaction (Zoro)

86% of employee’s view Health Insurance as a must have (MetLife)

With these statistics it is very clear that employee benefits can play a huge part in the decision on which company the candidate will choose for employment.

Now that we have showed the obvious let’s take a closer look at the actual net cost of providing employee benefits.

Let’s start with the largest cost for benefits, health insurance.  Providing health insurance can cost on average $456 per month.  This cost can be lowered by changing from a traditional health plan to a high deductible HSA.  The HSA will provide additional benefits that I will cover in a minute.  To be considered for a group the employer must cover 50% of the cost of the premium.  This would be $228 per month or $114 per paycheck (paid bimonthly).  If the employer sets up a section 125 plan, then this premium is taken pre-taxed, and the employer will save roughly $210 per year in FICA tax.  The employee will save $210 per year in FICA tax and an additional $330 per year in income tax (12% federal Tax bracket) Total tax savings is $750 per year.  This can help offset the cost of the health insurance and make it a more viable option especially when you combine it with additional benefits.

Now that you have a section 125 set up you should offer additional benefits paid for by the employee.  If the employee adds Dental, Vision and HSA to their optional benefits, both the employee and employer save.

Average Dental cost per year is $500. The employer saves $38.25 on FICA and the employee also saves $38.25 in addition to $60 in Income Tax for at total tax savings of $136.50.

Average Vision cost per year is $150. The employer saves $11.47 and the employee also saves $11.47 plus $18 for a total tax savings of $40.94.

Adding an HSA for an individual and the employee full funds that HSA at $3650 throughout the year the employer will save $280, and the employee will save $280 plus $438 in income tax for a total savings of $998.

Total savings on taxes for offering employee benefits will be $1174.44 between the employer and employee.

The next benefit that we will tackle is PTO.  This is just a staffing issue in your business and if you can work with 1 less employee you should look at offering additional PTO because it is no cost to you.  You should have it budgeted to be paying your employee’s all year long so them taking a day off should not significantly impact your bottom line.  However, this benefit can pay huge dividends in employee morale.  Additional time off allows for the employee to be feel appreciated in the workplace.

In this unprecedented job market, adding the above employee benefits will not only save you money but will make your job more attractive to potential employees and put the golden handcuffs on your current employee’s.

For additional information on hiring and designing employee benefits please contact myself or Tasha at the information below.

Michael Hass – [email protected]

Tash Mills – [email protected]