Every company needs strong employees to succeed. And strong employees are drawn to companies with the best benefits. Since benefits cost money, it’s important to consider all your costs, both tangible and intangible.
Employee benefit coverage requirements
One of the factors that job seekers consider when they choose a company to work for is the benefits package. Whether your company only offers standard benefits like health insurance or includes voluntary benefits like an employee wellness program, your employee benefit plan can give you a competitive advantage in the job market.
You have options when designing your benefit plan. Some benefits are required by federal regulations while others are determined by the state in which you do business. Many companies also choose to offer fringe benefits to keep their employees happy.
In order to stay compliant with local and federal requirements, make sure that your plan administrator is current on all laws and regulations.
Related Read: 10 Best Employee Wellness Platforms For Employee Health & Well-Being
What types of benefits are employers legally required to offer?
The employee benefit plan that employers are legally required to offer depends on a few factors, the two main ones being the type of employee and your geographical location.
In general, employers are legally required to offer more benefits to full-time employees than part-time employees. For instance, you might have to offer health benefits, paid sick leave, and a retirement plan to every full-time employee. But you might only be required to offer a part-time employee an optional retirement plan.
Each state has its own benefit laws. Your location really does matter! Be sure to review both the federal and state requirements before you design your employee benefit plan.
What types of employees are entitled to benefits from employers?
Full-time employees are usually entitled to more benefits than part-timers and, although federal law doesn’t require employers to offer a benefit plan to part-time staff, some companies choose to offer benefits like health coverage to all employees.
Remember to check your state’s laws in addition to the federal Department of Labor regulations. This will help your company stay compliant and keep your employees happy.
What fringe benefits do employers typically offer employees?
In addition to standard benefits like health insurance, paid sick leave, and a retirement plan, you might choose to offer your employees some fringe benefits. Bonuses, an employee wellness program, and tuition reimbursement are some examples.
How much do employee benefits cost a company?
Most businesses offer their employees some sort of benefits package and, because the employee benefits cost can add up quickly, it’s important for both large and small employers to keep a close eye on how much money goes into the employee benefits package.
How can you calculate the costs of employee benefits?
There are multiple factors to consider when you calculate the costs of employee benefits. The first factor is the type of employee. Most full-time employees are entitled to benefits, but you can likely spend less on benefits for part-time employees and independent contractors.
Additional factors that affect the cost of benefits for employers:
- Number of employees
- Percentage of coverage that the employer versus employee pays
- Whether you offer a retirement plan matching program.
How can companies forecast the costs of employee benefits?
It’s important for employers to forecast their costs when researching what benefits to offer. In addition to required benefits like health insurance and a retirement plan, you’ll also need to consider any voluntary benefits that your company offers.
You’ll also need to pay other fees like payroll tax and social security tax for your employees. When you forecast your total cost for each staff member, add these taxes to their total compensation so that you know how much the employee actually costs you.
Related Read: 6 Tips For Effective Employee Compensation Discussions
What types of employee benefits typically cost companies the most?
Every employee benefit costs money. It’s just the cost of doing business. But you can regulate some costs, like how much of their retirement savings you’ll match or whether you offer fringe benefits.
Health insurance is often one of the biggest costs for every employer. Since you’ll likely cover a certain percentage of each employee’s health benefits package, it’s difficult to pin down a particular dollar amount. For instance, if you have a pregnant employee or a staff member who needs surgery, you’ll pay more for their benefits than a staff member who doesn’t need medical attention.
How much employees contribute to their benefits
Employers are normally required to contribute to their employee benefits package. But each employee is responsible for a portion of the coverage too! The employee contribution varies based on a few factors. And your human capital management strategy should include tracking how much the company and each employee contribute to the overall benefit plan.
How much are employees required to contribute to their benefits?
Many states require that employers cover about 50 percent of their employees’ benefits. That means that employees are required to contribute the other half. In some instances, employees can elect to contribute more than the minimum requirement. For instance, an employee might increase what they contribute to their retirement plan.
How should companies determine employees’ contributions to their benefits?
Benefits are a large cost for every company. Here are a few factors to keep in mind as you consider what to include in your benefits package:
- Each employee’s total compensation, including salary and bonuses
- The cost of any fringe benefits, such as tuition reimbursement or child care assistance
- Whether you’ll offer benefits to independent contractors and part-time employees
It’s also helpful to calculate the ratio to determine your company’s benefit-cost. Add up the total costs of your employer contribution for all benefits, and divide it by your total annual payroll. This ratio can help keep your costs stable even if you make changes to the benefits down the road.
Why are employees required to contribute to their benefits?
A strong benefits package is an incentive for good employees to join your team—and stay on your team! But your employees need to contribute to their benefits just like your company does.
Employee contribution helps your entire staff as well as the company itself. Just like all employees in the United States pay income tax and social security tax, employee contribution to your benefit plan helps spread out the cost among your entire business. This prevents the company or an individual employee from taking on too much financial burden.
Intangible costs associated with employee benefits
As a business owner or benefits plan administrator, you’re aware of the direct costs of employee benefits. But there are also intangible costs of every benefit plan that you might not be aware of. These intangible assets increase employee satisfaction and reduce employee turnover. So even if they don’t directly affect your bottom line, these costs are important.
What are the intangible costs associated with employee benefits?
Good benefits attract and keep good employees and a key element in understanding employee benefits is understanding the intangible costs associated with these benefits. If you don’t offer a competitive benefits package you may find it harder to attract and retain employees. Also, taking care of employees through additional benefits such as financial literacy programs will generally mean employees are happier and more productive.
Of course, the administrative costs of processing employee benefits also add up, but this is where employee benefits administration software can ease the burden.
What are the intangible costs of employee turnover?
Employee turnover costs every business a lot of money. When a good employee leaves your team, you lose their talents and productivity. You must spend time and money recruiting new candidates. And when you onboard a new hire, someone in your company must train them. These intangible costs can add up quickly. So create a strong benefits plan, and keep your employees happy!
What are the intangible costs of vacation time and sick leave?
Many companies struggle with the cost of vacation time and sick leave. When an eligible employee takes time off, you still incur their labor cost. Their work isn’t getting done, and your other employees need to pick up the slack.
Paid time off is a big draw for many employees. Although it might cost you some money, you’re also increasing your employee satisfaction (leading to higher levels of employee engagement) and giving employees time to recharge.
Find out how you can do even better by your people:
- The Much-Needed Rise Of People Ops
- What Is Employee Benefits Liability Coverage?
- 20 Types Of Employee Benefits You Should Know
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