Just one year after hiring their first employee, executives at online discount site FatWallet realised they needed more staffers to handle the company’s rapid growth. “We needed IT staff and programmers, and we knew that in our area, we’d have to take them from larger companies,” says April Kunzelman, human resources director for FatWallet.
Kunzelman also knew that to lure talent from more established companies, FatWallet would have to beef up its employee benefits package. “We knew we couldn’t compete if we didn’t offer, at the very least, health insurance. So we immediately began putting an employee benefits plan in place,” she says.
Today, FatWallet boasts a progressive benefits package that includes health, dental and disability insurance, paid time off and a host of other amenities, including free daily lunches for its nearly 60 employees.
As Kunzelman and her peers have found, a strong employee benefits package is a powerful tool for attracting and retaining the best workers. In a 2011 Harvard Business Review Analytic Services survey of human resource leaders, 60 percent said an attractive benefits package is “very important” in recruiting and retaining quality employees, against only 38 percent who said a high base salary is very important.
Benefits play an integral role in employee satisfaction. In its most recent annual trends survey, MetLife found that roughly 49 percent of employees polled said benefits were an important reason they came to work for a company, while 60 percent said benefits are an important reason for staying.
While the cost and compliance of crafting benefits packages may seem daunting for small-business owners, experts agree they pay dividends in terms of long-term success. There are no easy formulas, because each entrepreneur needs a program tailored to his or her company and employees. But there are some universal guidelines.
Christopher Delorey, senior vice president at employee benefits consultancy Bostonian Group, says employers typically start looking to round out a basic compensation package with benefits when they have six to 10 employees they wish to retain, as well as when they want to attract new ones. “You don’t necessarily have to have health insurance the minute you open your doors,” he says.
Medical insurance tops the list of employee demands. According to The Principal Financial Group’s benefits study, health insurance is deemed the most important benefit by 90 percent of employees.
Medical and retirement plans can take many shapes and sizes to meet the goals of any company.
Once the major benefits components are in place, it’s fairly easy and cost-effective to include other popular programmes such as vision insurance, life insurance and long- or short-term disability.
One benefit that’s growing in popularity, in part because it is so well-suited to small businesses and startups, is flexibility. “With so many personal demands on workers today, a flexible work schedule is a big plus in a benefits package,” Delorey says.
In fact, a study by the New York-based Families and Work Institute found that the majority of professional and nonprofessional employees, at 87 percent, say having the flexibility they need to manage their work and personal lives would be “extremely” or “very” important if they were looking for a new job.
FatWallet addresses that need with its so-called “no miss” guidelines, wherein employees are instructed to never miss important family or school events for work. “It doesn’t cost us any money, and people really appreciate it,” Kunzelman says. “Flexibility pays huge benefits for a small company like us.”
The options can be vastly different, so you’re often comparing apples and oranges. To make sure they find the best options and providers, employers should ask questions about each product’s cost, what it covers and how the benefit is delivered.
“You need to understand exactly what you’re getting and how it’s going to work,” she says. “How is the benefit delivered? What resources are available to help both the employer and the employees? How and how quickly are claims going to get paid? And what happens if there’s a claim dispute? It’s important to understand the entire process.”
It’s also important for employers to ask about the legal obligations they incur by offering those benefits. “When you set up these plans, there’s a set of laws you’re required to comply with that you must understand,” Michel says.
Of course, the most important questions to ask are the ones related to your specific business needs. For FatWallet, Kunzelman asked if she could speak to another client with the same health insurance provider to get a sense of its customer service. “The thing that drives employees insane is not being able to get their claims processed correctly,” she says. “My decision was based on customer service, because if it’s not good, the insurance is probably not going to work for us.”
To find the package that best fits your business, it’s important to survey employees about what they really want. Employee interests vary depending on company size, industry and demographics, and you don’t want to offer something that no one will take advantage of.
Remember there are laws that prohibit employers from asking about health conditions, family histories and other topics that may relate to insurance. Any survey of employees should have questions that are general and related only to benefits, and should be reviewed by a lawyer before being distributed.
Once a benefits package is created, it must be communicated effectively to employees. Employees at small companies say their HR departments communicate too little about employee benefits plans.
Employee benefits programmes are many and can be confusing. But key ones include:
Retirement security, High-deductible health plan (a health insurance plan that offers lower premiums); wellness programme (services or events designed to lower the number of claims and claim costs by promoting improved health among employees. Such programs may include health screenings, flu shots, smoking-cessation groups and discounts on exercise classes and diet plans).
While some benefits may be out of reach for small businesses, a little creativity can lead to similar, less expensive options that can have just as big an impact on employee morale and loyalty.
If you can’t offer: tuition reimbursement
Try: a compressed, four-day workweek that gives employees time to pursue a degree on their own
If you can’t offer: paid vacation
Try: job sharing, in which two part-time employees share the same full-time position, or wellness programmes that include sleep breaks and massages
If you can’t offer: on-site child care
Try: negotiating with a nearby child-care center for a discounted group rate
If you can’t offer: an on-site fitness facility
Try: a lunch-hour walking club or discounted local gym memberships
If you can’t offer: free parking or transportation reimbursement
Try: allowing regular telecommuting days
If you can’t offer: counseling services
Try: allowing employees to bring their pets to work, which has been shown to reduce stress.