for Creating an Employee Benefits Program
Your total compensation
plan must serve to attract, retain and motivate your employees. While
wages will be the largest component, other parts of the plan are important.
Together with the work environment, your benefit program may be the difference
between having an effective, steady work force or a group of dissatisfied
employees that you are constantly replacing.
Why do employees
choose to work for your business?
Financial rewards are an important part of the total benefits an employee
receives. Yet, an employee's decision to work for your company is probably
based on additional factors, many of which you can control. In addition,
there are some things that can increase the satisfaction an employee enjoys
that do not cost additional money. The key is to make sure the total compensation
an employee receives is adequate, known and appreciated.
Benefits that cost
Along with wages, company contributions to a retirement plan and company
paid insurance are usually the most expensive parts of "total compensation."
If your company has a qualified retirement plan, make sure the type you
offer is economically effective. By that, make sure your employees are
fully aware of it and recognize that your contributions to it are part
of what they get for working. You may also want to review other types
of plans, such as SEPs, SIMPLE IRAs and 401(k) options.
If you offer company
paid insurance plans, again make sure employees recognize that you are
paying for some or all of it. If insurance costs rise, you may want to
consider having employees pay some portion of the cost. This can be effective
if there are choices of health insurance plan options (deductibles and
co-pays) that have varying costs.
The right retirement plan should take into account the business's needs
as well as the employees' concerns. Costs and ease of administration must
also be carefully evaluated. Here are very brief descriptions of several
choices. Be sure to investigate them thoroughly before deciding which
one is right for your business.
- These plans are ideal for small organizations or self-employed individuals.
They are easy to establish and have no special governmental filing requirements.
Only the employer makes contributions and the limit is up to 25% of compensation,
up to $53,000 for 2015.
2. SIMPLE-IRA - These plans are for companies with up to
100 employees and allow for employees to defer wages into the plan and
for the company to also make contribution. Employees can defer up to 100%
of their wages with a limit of $12,500 (2015) and up to $15,500 if age
50 or over. The employer can elect a matching feature or a simple percentage
of wages contribution. There is some administration needed.
3. 401(k) Plans - These plans have become popular because
of their flexibility and the higher limits for employee and employer contributions.
There can be significant administration needed and annual filings are
Employee benefit consulting
firms, trust departments or some investment firms usually have the expertise
to help you evaluate your options. However, be sure to understand all
the costs for administration and investing the funds.
If your company has many employees, a group medical plan may be attractive.
Health insurance has become expensive so you will want to consider your
plan carefully, shop for the best plan and perhaps use a health insurance
consultant. Your cost will be based on the size and make-up of your group.
It will also change based on actual results. You may want to consider
sharing the cost with your employees and providing different options for
them to choose.
supplemental life insurance
Many insurance companies offer relatively inexpensive plans that can be
established so the employees share in the cost.
This type of program is relatively new and offers some tax advantages
for the employees with little or no additional costs for the employer.
Employees direct a portion of their wages into the accounts to provide
for the reimbursement of dependent care or unreimbursed medical costs.
Employees pay lower income taxes and the company will pay less in payroll
These are "use
it or lose it" arrangements. Employees decide how much to defer for
each type of expense and that decision is irrevocable. Many insurance
companies offer these types of arrangements and some will handle all the
Many employees are interested in furthering their education. If your business
requires ongoing training in certain fields, it may be prudent to provide
partial or total reimbursement for certain types of classes. The employees
enhance their skills and you have a better-trained employee group.
Vacation and days-off
Employees need time off occasionally for personal business or just for
rest and relaxation. Having a policy that employees understand and that
provides some flexibility will be greatly appreciated.
Benefits that cost
little or no money
The work environment and the personal satisfaction an employee gets are
also important parts of the total compensation employee receives. No one
likes to spend time in an environment that is emotionally uncomfortable.
There are also the federal and state laws that protect workers from harassment
and discrimination in the workplace.
Here are some ideas
that can help boost employee satisfaction:
1. Make sure the work
is meaningful. Even if it is boring and repetitive, make sure the employees
know that their efforts are needed and appreciated. No one likes to think
they just spent eight hours doing something useless that no one cares
2. Provide ways for
employees to learn. This doesn't have to be paying for a class. Perhaps,
there are tasks that can be switched with other employees. Such a switch
will give two people the opportunity to learn something, and you will
have some backup of one of the two is sick or quits.
3. Empower employees
to make decisions. Most individuals will make the right decisions if they
have an understanding of the issues and have some guidelines. Also, by
letting employees make decisions, managers' time is available for other
4. Let employees know
what is expected of them and how they are doing. Performance reviews are
essential. Every employee should receive a formal review at least annually.
5. Make it a point
to recognize employees when they have done an especially good job. Bonuses
are nice, but compliments are meaningful. Have you ever noticed plaques
for "Employees of the Month" in many businesses? Some businesses
even provide special parking spots for "Employees of the Month."
6. Provide some flexibility.
Everyone is busy and unexpected things do arise. If you can go a little
extra ways to allow employees to tend to important personal matters, it
may come back to you many times over when you need something extra from
and direct deposit
Many employees are interested in accumulating funds and yet have a very
difficult time actually saving money on a month-to-month basis. You may
be able to help them without any cost. Most payroll services offer employees
the ability to direct a portion of their wages into an account at their
financial institution. Be sure your employees are aware of this option
and also direct deposit. These conveniences make it easier for employees
to handle their finances and the company may save some of the costs of
Employee benefits are important. Creating a program doesn't have to be
difficult or expensive. The trend is for more flexibility for employees
to choose what is important to them and for employees to share in the
total cost. While most recruiting conversations center on salary levels,
ongoing employee satisfaction is greatly influenced by what comes with