As a small business owner, you may feel like you can’t afford to offer benefits to your employees.
While this is a very real situation for many small employers, there’s a wide variety of benefits that you can offer - and some of them are free! Plus, keeping employee satisfaction high with benefits can actually save you money in the long run when you consider the costs of turnover.
At CSI Accounting & Payroll, we’ve helped small businesses keep their employees happy for over 50 years. We know that employee benefits also benefit your business, so here are some common questions about benefits that we’ve received from other small business owners:
- What are examples of employee benefits?
- How much should I spend on employee benefits?
- Why are employee benefits important?
What Are Employee Benefits?
Employee benefits can be a variety of things, but the general concept is that they are forms of compensation or advantages in addition to regular wages.
Some benefits are required by law, and some are offered at will. As an employer, you should give your employees a benefits statement that outlines all of the benefits that you provide them, plus the value of them. It can include things like:
- Dental, health, vision, accident, life, and disability insurance
- Paid time off
- Retirement plans, with or without an employer match and profit sharing
- HSA and FSA plans
- Commissions and bonuses
- FICA taxes for Social Security and Medicare benefits
- Unemployment and workers’ compensation insurance
- Various perks and lifestyle benefits that improve happiness and workplace fun, such as company outings, snack bars, casual Fridays, and flexible work schedules
How Much to Spend on Employee Benefits
Since you can choose which benefits you want to offer your employees, the amount you spend will vary quite a bit. However, a good rule of thumb is to plan to spend about 30-40% of each employee’s salary on benefits for them. That number is on top of what you pay them - not taken out of it.
Otherwise, on average, we’ve seen a lot of businesses spend about $2,000 per month per employee. Smaller businesses will generally spend less.
If money is a concern, you still have to offer the benefits that are mandatory by law, but then you can add as many free perks as possible. After that, you can add on as many extra paid benefits as you see fit.
There are also benefits that can grow over time, such as a 401(k) that starts with no employer match, but then you can add one down the line once you can afford it.
If you have other questions about what you can afford to spend overall or which benefits you should focus on, a payroll specialist can help you.
The Importance of Employee Benefits
Here are three reasons to offer employee benefits:
- Attract and retain talent. Offering benefits is a great way to gain the attention of applicants and to keep quality employees around. You can save the money and effort it takes to hire new employees or replace ones who leave.
- They’re probably expected. Employee benefits are expected in certain industries, especially if they require higher education. If you don’t offer benefits, your competitors who do will get better-quality applicants.
- You get benefits as well. This alone should show the value of offering benefits as a small business. You get to help your employees, and you also get to help yourself in the process.
- There are tax incentives. There are 401(k) plan tax credits for small businesses that incentivize you to offer these plans.
Ultimately, the choice is up to you. However, these reasons make offering employee benefits worth it for most small businesses.
Use Your Payroll Solution to Offer Employee Benefits
Remember, you should spend about 30-40% of each employee’s salary on benefits. If money is a concern, start with the mandatory benefits, then add as many free perks as possible, and then add as many extra paid benefits as you like. You can also add benefits that grow over time.
Now that you know about what employee benefits are, how much you should spend on them, and why they’re important to offer, are you ready to check out payroll services to guide you through your employees’ needs?
If so, please consider CSI Accounting & Payroll! A payroll specialist can look at your unique situation to determine what benefits you can and should offer. Plus, we offer some ourselves! Check out our employee retirement plans.
To see if we can be a good fit for your business, click the button below for a free consultation:
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