When employers talk about their compensation packages, they don’t only mean salary.
To employers, compensation includes employee benefits like health insurance, paid time off (PTO), and retirement plans. While many employers see these benefits as “extra,” these perks are a part of the total package that can make or break their decision to work for you.
So if you want to attract and retain top talent, you need to set up a robust and dynamic employee benefits program ASAP.
The good news is several modern solutions on the market can make your life as a business owner easier. Gusto, for instance, can help you figure out the right benefits to create a desirable employee benefits package. We’ll also cover alternatives to Gusto to help you find the right fit for your organization.
A Step-by-Step Guide to Setting up Employee Benefits
Step 1: Consider Your Organizational Goals and Budget
You should know what you want from your employee benefits program, why you’re offering employee benefits, and how much you’re willing to spend. This will allow you to adopt a realistic approach when choosing which benefits to offer. Otherwise, it makes zero sense to have an employee benefits program.
For example, you may want to fully subsidize employee benefits to attract and retain top-level talent in the marketplace, stand out from your competitors, and comply with appropriate federal and state laws. But you can only sponsor what you can afford to pay, which is where knowing your budget becomes vital. Understanding your financial limitations will help you prioritize your options better.
Step 2: Know the Compulsory Employee Benefits
Since federal, state, and local laws have made specific employee benefits mandatory, likely, you’re already offering a few employee perks. Here’s a list of employee benefits made compulsory by law:
- Social Security
- Workers’ compensation
- Unemployment insurance
- Disability insurance if your business is based in California, Hawaii, New York, New Jersey, Porto Rico, or Rhode Island
- Leaves of absence
Find out how much does offering these obligatory benefits cost you. You’ll have to add this amount to your payroll budget and communicate them as part of your employee’s total compensation package later (Step 7).
Step 3: Conduct a Needs Assessment to Figure Out the ‘Right’ Employee Benefits
It’s crucial to understand your target employees’ unique needs and goals. The benefits you choose impact their lifestyles, precisely why a needs assessment to select the most desirable employer benefits can go a long way.
Your needs assessment can include your perception of these benefits, what your competitors offer, and tax laws and regulations. You can also talk to your employees to learn their views by holding personal interviews and giving out questionnaires.
Employee feedback is definitely preferable, but you have to be committed to using the feedback when selecting benefits and designing the package.
You can also analyze your existing workforce demographics to determine the needs of different employee categories. Think about whether they are millennials who‘ll likely be okay with basic health insurance coverage or GenX, who are currently raising families. Similarly, the main priority of older employees would be better retirement income plans.
You have to strike the right balance.
Be sure to consider all legal requirements regarding benefits offered in your state, if any. Gusto has a group of licensed advisers that can help you maintain compliance by filing paperwork with the appropriate government agencies, along with over 3500 plans from 100+ carriers in the network. You can use the tool to design a competitive plan by identifying desirable financial benefits and health benefits to support your bottom line.
Step 4: Select Your Optional Employee Benefits
At this stage, you have the research and knowledge about the plans most likely to appeal to your target employees. And since we‘ve already covered the mandatory section of the employee benefits program, all that’s left is selecting the optional benefits.
Choosing the benefits is totally up to you, but to help you get a better idea, here’s a list of some discretionary services that businesses tend to select first:
Healthcare is expensive, which is why many employees prioritize this benefit over others. While you can select a high-deductible plan to pay less in premiums, your employees will end up having to pay more out of pocket for medical needs—something not appealing to prospects and current employees.
A clever way is to offset this cost by contributing money to health savings accounts. Alternatively, you can join a Professional Employer Organization (PEO), giving employees health coverage under a PEO-sponsored health plan. This way, you won’t have to worry about the administrative costs of offering a health plan.
Life insurance protects the families of employees. The beneficiaries of an employee are paid a specified amount in the event of death. Generally, a good policy should at least cover the cost of funeral expenses, which can be over $20,000.
Retirement Savings Plans
A retirement plan, such as a 401(k), lets you stand apart from your competitors by encouraging employees to contribute their own money toward retirement every pay period.
Additionally, you can set up an employer matching program, where you invest the “matching” contribution (this is often designated as a percentage of the employees‘ contribution) into their retirement plan. While this will make you popular among employees, you must research every feature and shop your options to get the best today on these plans.
401(k) is a premium offering of Gusto, for which the company has partnered with Guideline to ensure low fees. Your employees will receive guided portfolio recommendations and have the option to adjust their contributions based on their requirements. There are no setup fees or participant minimums.
Disability insurance comes in handy for employees who are unable to work due to sickness or accident. In this case, you should try to offer a plan covering at least 60% of employees’ salaries.
Paid Time-Off (PTO)
Employees expect paid time off for national holidays, vacations, and sick leave (a good rule of thumb is at least three weeks a year). You can also provide additional PTO for social events like volunteer work as an added employee benefit.
Step 5: Design Your Employee Benefit Plan Program
Formulate your benefits offering in order of priority.
Determine the cost of providing the prioritized benefits (the options you selected in Step 4) and evaluate it against your benefits budget. These evaluations will help you determine whether to add, change, or eliminate benefit offerings.
Once you know exactly what you are able and willing to offer employees, it’s time to tell everyone.
Step 6: Highlight Special Perks
The benefits of working at your company can also include intangible perks, such as flexible hours, remote work, and so on. You should know these perks and be sure to highlight them whenever possible, such as in job descriptions and within the employee handbook.
You can also give your employees exposure to certain parts of your business they wouldn’t usually get at a big company, like collaborating with the executive team. This will give the employee an impression that your company is a satisfying place to work and that they will have a significant impact there.
Step 7: Clearly Communicate Your Benefits to Employees and Candidates
Once your program is ready to be incorporated into your benefits package and the employee experience, you must clearly communicate what has been added, how it was developed, and why to all employees and candidates.
Send out emails and multiple reminders about the new benefits package or program to the staff. You can also conduct an all-hands meeting to explain their benefits package and how it works and serves them. Double-check that everyone understands the benefits, their coverages, and other necessary aspects such as enrollment periods.
As for communicating with prospective candidates, update your company’s Career page to mention your new employee benefit plan and add it to all your current and future job advertisements.
3 Top Advantages of Setting up Employee Benefits
A generous employee benefits package will not only help you recruit the cream of the crop but also keep the talent you already have. For more context, here are the three top advantages of setting up employee benefits:
Attracting the Most Talented Employees
If you have talented, motivated, and experienced employees, you have a better chance at long-term success.
Most businesses offer some employee benefits. One study found that 50% of businesses with fewer than 50 employees and 96% of companies with over 100 employees offer some kind of healthcare benefits. Therefore, if you want to appeal to promising candidates, you really need employee benefits. Otherwise, you’ll lose talented applicants to businesses that offer even a basic benefits package.
Setting up employee benefits can also work wonders to improve your reputation. When you offer benefits, it indicates you have strong enough finances to afford benefits and are willing to invest in your workforce. Providing benefits suggests you got what it takes to be a great employer, which you need to attract fantastic employees.
Improved Employee Productivity
A strong employee benefits package can get you talented workers that are likely to stay healthier and more motivated. The natural result of this combination? Better productivity.
Offering benefits also gives your employees the mental headspace to remain productive. They don’t have to be worried about affording healthcare, saving for retirement, taking care of the children, or other life concerns. As a result, they have more brainpower and motivation to give their best at work.
Minimized Employee Turnaround
Benefits can come in handy to keep your employees around.
A good package will not only keep your employees from getting swayed by other job offers and also give them a sense of stability and security, making them less likely to start putting out resumes. Because of this, you’ll have lower employee turnover and higher employee retention.
What’s more, you can save lots of money on hiring and training new employees. You can also build a knowledgeable team quickly to tackle all kinds of problems and finish projects faster to cultivate better client relationships.
3 Biggest Challenges With Employee Benefits and How to Troubleshoot Them
We covered the fun part of employee benefits. Now let’s focus on the not-so-fun bits.
Appealing to the Various Demographics
Zeroing on employee benefits that appeal to all ages and demographics can be arduous.
While health insurance, dental care, and a 401(k) plan are industry-standard, figuring out the right balance between discretionary employee benefits can be difficult. You have to recognize what different groups of people value, and while this isn’t easy, it isn’t impossible either.
The best way to strike the right balance between employee benefits is to ask for employee feedback to understand their priorities. Use their input to create a diverse benefits package that fits a variety of age ranges and includes options for a multigenerational workforce.
Helping Employees Understand Their Benefits
I bet you didn’t expect this could be a challenge! In reality, it’s probably one of the most common problems faced by organizations.
Employees often face difficulty navigating the countless number of benefits and packages being offered. To make sure they choose you to work with, you have to do your best to educate them on what benefits are available and what packages provide the best options for them and their families.
If you think you lack the expertise to help employees understand benefits, you can get a knowledgeable broker or an experienced HR professional to communicate the value and explain the benefits to employees.
Understanding Employee Healthcare Requirements
Forming a proper alignment between employee healthcare needs and the benefits packages offered can be incredibly challenging. If benefits plans are too rich, it can cause any wastage of business resources, and if it’s too restricted, employees will have to pay expenses from their pockets.
Your benefit offerings should hit the sweet spot combination of comprehensive coverage and well-scaled costs. An excellent way to do this is by analyzing employee healthcare user data, which should be available through your carrier.
Try to optimize your offerings based on the information you find from your research.
Other Options for Setting up Employee Benefits
We showed you how to set up employee benefits using Gusto, but that doesn’t mean you can’t explore other options.
If you’re a medium-sized business with nearly 1000 employees, Gusto may not be able to meet your requirements effectively. In this scenario, consider signing up with Namely, which was specifically created to cater to the requirements of mid-sized organizations.
TriNet could also be another excellent choice if you want to hand over the responsibility of managing investment options and retirement plans.
To make the right choice, make sure you check out our best employee benefit plans guide, which discusses the best tools to help you design an appealing benefits package.
- Zenefits – Best For Employee Self-Service Benefits
- Namely – Best Custom Benefit Plans For Mid-Sized Companies
- Gusto – Best For Compliance, Guidance, and Support
- TriNet – Best For Premium-Grade Employee Benefits
- OnPay – Best Employee Benefit Plans For Small Businesses