Why Higher Employee Benefits Can Pay Dividends

Why Higher Employee Benefits Can Pay Dividends

Salaries and benefits are most companies’ largest expense. So it’s natural to want to hold down the cost of these items. An overly generous benefits package might seem like an extravagance that could squeeze profits. But investing in your people can translate into a workplace full of loyal and motivated employees.

What’s more, many business owners may not realize that giving employees a strong benefits package can be done in a cost-effective way. A generous benefits offering can help attract new recruits and keep the talent you already have.

Here are some tips when it comes to benefits:

Health Insurance

Health insurance is probably the most desired benefit for your employees, but it’s also the hardest to maintain because of rapidly rising costs, and small businesses have been dropping coverage for employees in recent years.

But you may not realize there are cost-effective options. High-deductible plans typically used with health savings accounts (HSAs) tend to be less expensive than traditional health plans. And some small businesses that meet certain eligibility requirements may qualify for a health care tax credit if they offer health coverage through the Small Business Health Options Program (SHOP).

What’s more, you may see additional savings if you also participate in a wellness program through your health insurance. In addition to promoting physical activity, better nutrition and an overall healthier workplace, wellness programs can also improve employee satisfaction and help reduce absenteeism.

Retirement Programs

Retirement preparedness has become increasingly important to employees, regardless of age. With questions about Social Security’s financial strength, workers rightly recognize the importance of financial savings.

Small businesses worry about the cost and complexity of starting a retirement plan. If you have 100 or fewer workers, keep it simple with a SIMPLE IRA, which stands for Savings Incentive Match Plan for Employees. Employers must either match up to 3 percent of workers’ salaries or contribute a flat 2 percent, even if the employee chooses not to participate in the plan. SIMPLE IRAs can cost as little as $400 and your company may qualify for a $200 tax credit for each of the first three years. You can also deduct contributions as a business expense.

Establishing a 401(k) plan is more involved, with higher costs and administrative duties, but may be an attractive benefit to consider as your firm grows.

Paid Sick Leave

No one wants to have to come to work when they’re sick, but some employees feel like they have no other choice. Paid sick leave makes good business sense since it prevents the spread of germs to other workers, limiting widespread absenteeism and a greater loss of productivity. It’s not as expensive as many employers think. Paid sick leave only costs employers 16 cents per hour worked, according to the Bureau of Labor Statistics. Several states have recently passed legislation mandating paid sick leave.

Professional Development

When you invest in your employees’ success, they are more likely to feel valued and stick around. Professional development is one of the least expensive benefits you can offer. Some types of programs to consider: mentoring, job shadowing and paying for outside classes.

Employee Assistance Programs

Employees who are dealing with a stressful situation in another part of their lives can have a hard time focusing on their jobs. Programs that help them with financial counseling, legal resources, stress management, substance abuse, mental health, or elder care help to reduce absenteeism and stay motivated. Though costs vary by program, EAPs typically run $15 to $25 per employee per year.

Offering an attractive benefits package not only enables your business to attract better employees, but it also helps it become more cost efficient. A little investment in benefits now can pay dividends down the road.

This blog does not provide legal, financial, accounting, or tax advice. This blog provides practical information on the subject matter. The content on this blog is “as is” and carries no warranties. ADP does not warrant or guarantee the accuracy, reliability, and completeness of the content on this blog.

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ADP® is one of the world’s largest HR organizations. We are leaders in HR outsourcing, systems and solutions – in everything from basic payroll, benefits and record keeping to complex tools for recruiting, compensation, succession planning and data analytics. We focus on what we do best – be it systems, process or compliance – so you can concentrate on what your business does the best – because thriving businesses succeed with motivated and empowered people. We know your purpose isn’t simply better process – it’s building a business on a better workforce.