According to LinkedIn, start-ups have an attrition rate of 25%, nearly double the industry rate of 13%. Also, the cost of replacing a salaried employee is about 6 to 9 month’s salary of that employee. And do not forget the time it takes the new employee to adapt and learn everything.
That is why investing in your employees offers a high ROI. You will gain high productivity, efficiency, more profits, morale, and retention.
When employees know they are valued through generous startup benefits and can grow in an organization, they will stay.
Let’s answer some popular questions asked by start-up founders and small business owners regarding employee benefits.
What are employee benefits?
Employee benefits are additional benefits to an employee’s salary or wage. Most benefit programs will include health insurance, retirement plan (401 (k) plan), commuter benefits, paid time off, parental leave, life insurance, dental insurance, and savings plan.
Offering employee benefits is the single most crucial compensation-based decision. Employees value benefit plans as much as they value their salaries. If you provide innovative perks, your staff will be productive, efficient, happy, and loyal, boosting retention as well as your bottom-line.
What’s the difference between fully-insured and self-funded plans?
The most common insurance plans are fully-insured ones. In this case, you pay a specific amount to the insurance carrier every month, depending on the number of employees. The amount is only fixed for a year.
Your staff members will cater to the deductibles, co-payments, and any premium share. This is the best health insurance option for a start-up.
In a self-funded insurance plan, companies, mostly big businesses, run their health plans. The company does not pay profit margins to the carrier, saving on cost. But there can be more claims than expected, in which case the business takes stop-loss insurance – it reimburses you for claims surpassing a certain amount.
What types of life insurance can I offer employees?
The most popular life insurance plan is term life insurance. It operates for the period the employee is employed. You will determine the amount to be covered by the policy.
While some small businesses will offer small amounts, such as $10,000, others will provide an annual salary.
Should I offer disability benefits to my staff?
Benefits programs that offer short-term and long-term disability benefits are great for employee morale. Either you or your employee can pay for the perk, but most businesses choose to have it in their start-up benefits package.
Health insurance is expensive. What are my options?
One of the most important employee benefits is health insurance. Most of the time, a health cover will have monthly premiums with co-pays and deductibles.
You can choose from five health plans that are suitable for small businesses. These include individual coverage HRA, the qualified small employer HRA (QSEHRA), group coverage HRAs, traditional group health insurance, and self-funded health insurance.
An excellent option for start-ups is QSEHRA since you can personalize your plan. You get to settle your budget, and your team gets to buy their preferred health services.
Do benefits have to start on an employee’s first day?
Yes and no. While some benefits like Social Security contributions and Medicare have to start immediately, others like health insurance plans and retirement benefits can begin later. Some employers will choose to offer a health cover after a month’s work or another specified period.
You can also choose to offer vacation time, health insurance, and retirement benefits to full-time staff only. So, part-time employees would not qualify.
Can I offer different benefits to different employees?
Again, yes and no. As discussed above, you can qualify your full-time employees for some benefits that you don’t offer part-time employees. However, you can’t deny a group member a perk that other group members get. For instance, it would be illegal to deny a full-time staff member vacation time if the others receive it.
Even more, you can have sub-groups within employee groups. For instance, you can give full-time employees who have stayed with the company for over two years three weeks of vacation time and those who have stayed with the business for less than two years two weeks.
Having rules will be helpful when it comes to educating employees and following the law.