Once an entrepreneur has grown from
working in his basement or garage to having employees the question
about benefits will ultimately rise. That leaves small business
owners in cross roads between spending money on benefits and spending
money on growth. Offering benefits may be a necessity if qualified
talent is going to be retained. An informal study conducted among
doctoral students at University of Phoenix found that there is an
inverse relationship between perceptions of benefits and likelihood
of leaving an organization. For example, when benefits are perceived
to be high there is less likelihood that the doctoral candidates
will leave their organization. When the benefits coverage is low
there is a higher chance employees will leave.
Doctoral students were asked to rank
their benefits such as life insurance, medical, dental and compensation
and then rank the likelihood that they will leave the organization
within the next six months. Doctoral students were used because
most of them were in management positions and had years of business
experience making their informed decisions more valid.
Benefits appear to be a main source
of retaining employees and represent a cost of around 38% of payroll.
This represents somewhere between $300 per individual plan to $850
family plan per employee. According to the Bureau of Labor Statistics'
2006 it was found that 60% of workers with less than 100 workers
offered health benefits, 47% set up retirement plans, 38% offered
life insurance 27% offered short-term disability benefits and 19%
provided long-term insurance.
We know that there are many types
of benefits a small business could offer if only it had the money
to do so. Thus, with financial restrictions it is often more important
to offer the right kind of benefits versus the whole array of possibilities.
The two most important benefit choices are medical and retirement.
The reason why medical and retirement
is so important is because most employees consider these items with
great care when deciding to stay at a company or move to a new one.
Life insurance, disability, dental and vision will often be overlooked
if the medical benefits coverage and retirement plan is correct.
HMO's are one of the most cost effective
benefit plans a company can offer. They restrict cost by encouraging
employees to visit in-network providers that have been prescreened
by the health insurance company. The medical professional is paid
each time a person visits their office regardless of whether they
are seeking treatment. Even though this may limit coverage to a
certain extent it does make it a viable program that allows companies
to control cost.
The other important benefit is retirement.
We know that pensions are now the minority in the business world.
People are living longer than ever expected and this is causing
companies to go bankrupt. Offering a 401 with or without contribution
is one of the most effective methods for keeping employees around.
Around 40% of all Americans put money into this type of retirement
fund. Those companies that do not offer it are likely to attract
people of less than standard quality.
Before calling your local health insurance
company and taking whatever they give you make sure you do your
shopping. Plans can change vary and there is lots of options available
for just about any business of any size. Compare the cost against
your recruitment strategy and employee turnover to determine if
implementing employee benefits will help your business grow.
