3 Pillars of a Robust Employee Benefits Package

The past year and a half has seen a surge in people looking for help with self-care, financial wellness and work-life balance. To face these challenges, employees have turned to their employers for support, and for the most part, companies are answering the call. A 2020 study by Darwin Technologies Ltd., which gathered responses from 542 HR and reward professionals across the globe, found that nearly three-quarters (73%) of employers spent at least 16% of overall wage bill on employee benefits, as compared to 56% the previous year. The diversity of offerings companies are now including is just as impressive—in addition to traditional health, dental and vision insurance, companies are offering paid parental leave, gym stipends, fertility benefits, student loan assistance and more.

While startups and small businesses don’t have the budgets to offer every perk under the sun, they know benefits drive workplace satisfaction and retention. That means it’s critical to provide robust benefits to your current employees and to lay the foundation for future growth. Your company's benefits package should include three pillars: health care, a retirement plan and paid time off. 

1. Health insurance gives employees a safety net.

Health insurance, including vision and dental, is a very desirable workplace benefit. And no wonder— health care can be costly and those costs can add up quickly. Health insurance not only provides financial protection for serious accidents or injuries, but it can also encourage better self-care practices and reduce mental stress by taking some of the financial considerations out of health decisions.

For larger companies, offering some form of health insurance is pretty universal. But for businesses with fewer than 100 employees, it’s much less of a given. If you’re a small business owner, that makes offering health insurance a compelling recruiting and retention differentiator.

There are also regulatory reasons to consider regarding health insurance. The Affordable Care Act (ACA) requires companies with 50 or more full-time employees to provide health insurance. For ACA purposes, the IRS defines “full-time” as working at least 30 hours per week. If you’re a fast-growing company under that threshold, making the upfront investment now could save you from having to scramble for coverage later on.

There’s another advantage to offering coverage before the 50-employee mark. Companies with 25 or fewer employees and average salaries of $56,000 or less may be entitled to a small-business health care tax credit if certain eligibility requirements are met. The tax credit could amount to as much as 50% of what your company pays for employee premiums, making it a powerful incentive for small businesses to start building a total rewards package that goes beyond compensation.

2. A retirement plan sets employees up for the future.

Health care is the keystone of your overall benefits package. But while offering health insurance eases your employees’ concerns about what could come today, retirement plans address their futures.

Worries that they won't be able to retire comfortably have long run deep for Americans. Today the global pandemic appears to have deepened these anxieties. More than half of Americans (51 percent) say that the COVID-19 pandemic has increased concerns about achieving financial security in retirement, according to a 2021 report from the National Institute on Retirement Security. 

As an employer, offering a retirement plan bolsters employees’ confidence in their future and your company. And compared to most other benefits, retirement plans are pretty customizable. Adding features like profit sharing and employer matching can make your 401(k) plan even more attractive. Perks like these also come with employer tax benefits, as matches are 100% tax-deductible—making them a great alternative to bonuses and other cash rewards. All of this makes offering a retirement plan a solid 2nd step for companies looking to expand their total rewards package.

3. Paid time off gives employees valuable time away. 

The third pillar in your benefits package is vacation time, or simply paid time off. This benefit can take many forms and is not required by the federal or state governments, but it can have a huge impact on employees’ mental health and job performance.

The most traditional method is to offer each employee a certain amount of vacation days, sick days and personal days. This tends to leave some unused days on the table, which is why some companies have decided to lump them all together under the umbrella term “paid time off.” This option gives employees a little more flexibility in how they spend their paid days away from the office. An increasingly popular variation of this is unlimited paid time off. This option can empower employees to manage their personal workload, and can be yet another recruitment and retention tool for employers.

No matter what type of PTO policy you implement, the most important thing is to encourage employees to use it. Leading by example, implementing company-wide breaks and incentivizing employees can all help people take much needed breaks. After all, if people aren’t taking time off to unplug and recharge, then neither your company or your employees are benefiting.

Offering all three is likely more affordable than you think.

Aside from health insurance, many of the benefits employees value most are relatively low cost to employers—such as flexible hours, more paid vacation time and work-from-home options. And thanks to the SECURE Act, offering a 401(k) plan is probably more affordable than you think, too.

The SECURE Act offers a series of tax incentives—as much as $16,500 in tax credits over three years—for eligible businesses looking to start offering a retirement plan. To qualify for these tax credits, your company needs to meet certain requirements, including but not limited to the following:

• You have 100 or fewer employees who made at least $5,000 in the prior year.
• At least one of your employees isn’t a highly-compensated employee.
• You didn’t sponsor a retirement plan for the same employees within the last three years.

There is no shortage of benefits you can add that will help your current employees’ well-being and make your company more desirable to top talent. And thankfully, you don’t have to add them all at once. Once you have health, retirement and paid time off covered, you can add other perks and benefits that matter to your employees. Consider things like mental health coverage, tuition reimbursement, student loan assistance or wellness stipends. As your business grows and evolves, use regular check-ins to gauge employees’ changing needs and see how your company can help them become their best selves—so they in turn can help your business thrive.

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