Making the best of your benefits.
By Marty McGhie
One of the most challenging aspects of your business is managing your employee benefits. The cost of employee benefits seems to grow every year as a percentage of overall expenses and for any business trying to contain costs, employee-benefit expenses can be overwhelming.
The temptation is to simply do away with some benefits. But you should avoid this option. Today’s top employees are looking for much more than just a good wage or salary—they’re also shopping for excellent benefits. So instead of cutting back on employee benefits, focus on managing your benefit packages and creating cost controls.
Shop the healthcare market
Healthcare-insurance premiums are probably your biggest single benefit expense. And if your business is similar to mine, you dread the renewal date of your annual policy—knowing you will likely experience at least an 8- to 10-percent increase in premiums.
Be wary of accepting the increase without first discussing with your benefits broker how you might hold off premium increases or even reduce them. Sometimes, minor changes to different plans—such as deductible amounts, out-of-pocket maximums, amounts paid for an office visit, etc.—can have a surprising effect on premiums.
Also, when working with your benefits broker, make sure that company is not tied to one particular insurance carrier. Some brokers have tight relationships with one or two major carriers and become beholden to them. As a result, your insurance options become less and less competitive because the broker isn’t pursuing options in your best interest, only theirs. Ensure that when your policy is up for renewal you discuss several different plan options with various insurance carriers.
Retirement and time off
Another significant benefit expense for many small businesses is a retirement plan. Most companies choose a 401(k) or something similar. Regardless of plan type, there are costs involved. One way to cut costs is to get competitive bids on retirement-plan administration. Excellent companies are out there, eager for your business—just make sure they’re qualified to meet your needs.
Additionally, work with your plan administrator to determine if your company can administer portions of the plan, and ascertain how much that might reduce your administration fees. Also, if you’re currently paying 100 percent of your retirement-plan fees, consider sharing those fees with the plan participants.
Time off is also a benefit of substantial expense. Many companies offer employees both vacation pay and sick pay, which may not be the best approach. For example, sick pay is often set up as a “use it, or lose it” policy. Of course, there will be employees who abuse it. To hedge against this, some employers offer to buy back unused sick days. But this can have an adverse effect: employees refusing to stay home when they are actually sick so they don’t lose out on the cash. Instead, combine vacation time and sick time into one lump category, usually called “paid time off” (PTO). With PTO, you encourage employees to stay home and get well when they’re sick, and reward healthier employees with more vacation time.
In addition to the standard employee benefits, you can choose to offer some optional benefits for employees to purchase at their expense: policies such as short-term/long-term disability plans, supplemental insurance plans for specific diseases, or even a low-cost, term-life plan. Our company, for instance, offers employees free dental insurance, which is a relatively inexpensive single-person premium. Then, if they want to add family members to the plan, they pay the difference.
Marty McGhie is VP finance/operations of Ferrari Color, a digital-imaging center with Salt Lake City, San Francisco, and Sacramento locations. The company offers high-quality large- and grand-format photo, inkjet, fabric, and UV printing. firstname.lastname@example.org