Health insurance, paid leave, and retirement packages are among the common benefits
Why offer employee benefits?
Employee benefits are additional perks that employees receive on top of regular wages. But why should businesses consider offering them? Is pay alone no longer sufficient? While some benefits are legally required, voluntary benefits can help your business in several important ways.
Common employee benefits
The cost of benefits for private sector employees is $11.42 per hour per employee and accounts for nearly one-third of total employee compensation, according to the March 2022 Employer Costs for Employee Compensation report from the U.S. Bureau of Labor Statistics. Your benefit costs will vary based on several factors, including the type of benefit, location, industry, and the employees covered. Here are the most common types of voluntary benefits offered by private sector employers in the United States, the hourly cost to employers based on BLS 2022 data, and the percentage of employees who have access to them:
Health benefits and health insurance
Health insurance is one of the most common and costly benefits. If you have more than 50 employees, the Affordable Care Act requires you to provide certain coverages or face penalties. Employers typically purchase a group plan and share the costs of premiums with each employee. As a result, employees and their families can access more affordable healthcare. For private sector employers with fewer than 100 workers, here are the BLS 2021 statistics:
Paid leave benefits
Employees typically accrue paid leave while working their regular shifts. In each pay period, the accumulated time is recorded in their paid leave bank. Some employees accumulate a set number of days per year. Employees apply the accrued hours to take time off for holidays, sick leave, or other reasons. Among private sector workers, here’s how access is divided:
Retirement accounts
Employer-sponsored retirement accounts help employees save money for their golden years. Some employers match employee retirement contributions up to a certain percentage to accelerate savings growth. Defined contribution retirement plans accumulate tax-deferred savings in individual employee accounts established by the employer, like 401(k) plans. Defined benefit plans, also known as pension plans, are less common. Here’s the access that employees in small companies (fewer than 100 employees) had in 2021:
Required employee benefits
While there are many voluntary benefits you can offer employees, the following are typically legally required and impact your employee benefits according to BLS estimates of $2.91 per hour for private sector employers:
Other insurance benefits
Employers may purchase group life and disability insurance and share costs with employees who choose to enroll; life insurance is also one of the least costly employee benefits available, according to BLS data. Life insurance pays a death benefit to the person chosen by the employee upon their death. Life insurance costs $0.04 per hour for private sector employers and provides a benefit if the employee dies. Short-term disability insurance costs $0.08, while long-term disability insurance costs $0.05 per hour.
Other important employee benefits
All employers would like to consider benefits that their employees value the most. According to 2022 research from Hartford Insurance, employees express interest in critical illness insurance, health benefits, employee assistance programs, and other benefits.
How to
Setting Up an Employee Benefits Program
The steps to set up an employee benefits program include:
- Determining your budget
- Choosing the benefits you want to offer
- Finding appropriate benefits providers
- Establishing rules and requirements for each benefit
- Communicating the benefits plan to employees
- Reviewing the benefits plan periodically
You can manage each benefits plan separately or work with professional employer organizations (PEOs) or a benefits broker to manage your payroll and benefits. You will also need to consult a tax professional to understand all the tax implications (including tax credits) related to the benefits you will offer. Some benefits, such as employer-sponsored childcare, provide tax credits for employers.
Conclusion
Your company’s benefits package will depend on factors such as profitability, labor budget, and employee needs. For those with a limited budget, you are likely to want to look for employee benefits options that cost less. Benefits can also vary by industry – for example, BLS found that 63% of employees in administrative and waste services have paid vacation leave, while 93% of employees in professional and technical services can take paid vacation leave. To remain competitive, you may need to keep up with developments.
Frequently Asked Questions (FAQs)
How much equity should I give to employees?
The amount of equity you should reserve for employees typically depends on your company’s valuation, according to data from Carta (a platform for managing employee compensation). Companies valued between $1 million and $10 billion retain an average of 13% to 20% of fully diluted equity for employees, with larger companies retaining higher percentages.
What benefits do employees really want?
Try surveying your employees. Andy Kalmon, CEO of Benny, a company specializing in benefits, pointed out that many employees of small companies surveyed about desired benefits after the COVID-19 pandemic prioritized assistance with childcare. “If these companies offered a gym membership for free instead, they would have failed to keep their employees happy,” he said – and it’s also a waste of money.
Source: https://www.thebalancemoney.com/what-s-in-a-comprehensive-employee-benefits-package-1917860
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