The Planner's Perspective: Employee Benefits for Your Small Business
By Paul Morrone CFP®, CPA, MSA
Owners of small business have the autonomy to run and grow a business that can potentially be their largest asset in a very short amount of time. Proactive benefits planning can help a business owner increase the value of an enterprise while also fostering a constructive and productive environment for the employees who keep the business running. Depending upon the business owner’s personal financial situation, tax bracket and long-term goals, a well-run benefits solution can help a business owner to exponentially grow their personal net worth in addition to providing a highly coveted service to their employees.
Even businesses with limited financial resources should consider reviewing their employee benefit package and benchmarking it against some of the industry leaders in an effort to remain competitive. Employing a more flexible or generous benefits solution may help to attract and retain the most valued employees and give a potential employer and edge beyond simply compensation. As more large companies gravitate away from defined benefit pension plans and fully paid health insurance, it is easier for small firms to stay competitive with the proliferation of Health Savings Accounts (HSAs), High Deductible Health Plans (HDHPs), and defined contribution retirement plans (401(k)’s and the like) that are now key benefits in both large and small businesses, alike.
Structured correctly, a business owner (or owners) can gain significant tax and retirement benefits from implementing a solution that also provides value to the enterprise’s entire employee population. When evaluating the feasibility of implementing a plan, the true cost of adding benefits can be offset in whole or in part by the tax advantages that an owner of the business may receive. Benefits can be used by business owners to enhance their personal financial life and proactive planning can help increase the value of the enterprise over time.
There are several factors that need to be considered when crafting a benefits package for your employees, including their demographics, years of service, quantity of employees, salary information, etc. all of which will have an impact on the cost of providing benefits and hence the business’s bottom line. This may be in the form of higher insurance premiums or administrative costs, larger retirement plan contributions or time investment to maintain the plans correctly.
As competition in the job market continues to increase and as quality talent becomes harder to find, compensation alone is no longer the driving force as potential candidates make decisions regarding their future employer. Large companies with name recognition and deep pockets tend to be the first choice for top quality graduates, whether they hail from an Ivy League institution or the local technical institute. In many industries, however, the competition for talent is most contentious between smaller firms in a similar geographic region. While there is a cost to employing a flexible and generous employee benefits solution, both the tangible and intangible benefits should not be overlooked and may provide your small business with the edge needed to remain competitive in today’s marketplace.