3 Key Factors in Employee Benefit Programs for Small Businesses – How to stand out to attract and retain top talent

What are the types of employee benefits?

1. Benefits at work – work hours/flexibility; vacation; skills development; other onsite programs
2. Benefits for health – health, wellness, and healthcare (physical and mental)
3. Benefits for financial security – retirement plans; disability/life insurance; personal financial services
4. Lifestyle benefits – work-life balance; remote working potential2

Why are employees voluntarily leaving their jobs?

Which benefits are most important to and appreciated by each generation?

3 Key Factors in Employee Benefit Programs

What benefits are most IMPORTANT to each generation?

What benefits are APPRECIATED by each generation?

What are DIFFERENTIATOR benefits?

Conclusion5

FAQs6

Why employee benefits are critical to the survival of small businesses?

Small businesses have been disproportionately impacted by the rising costs of traditional employee benefit programs making it even harder to compete with larger companies in their markets.  While making more money used to be the number 1 reason to change jobs recent trends have shown that employee benefit programs and culture are a dominant force in attrition. Small businesses have always been disadvantaged in this area to some degree based on the cost of programs to compete with the Fortune 500 and larger companies. What does employee attrition cost?

• The average cost to (re)hire is $4,129 and takes an average of 42 days. (Society for Human Resource Management)
• Turnover can cost employers 33% of an employee’s annual salary. (Forbes Magazine)
• U.S. companies spend an average $1,096 to train a new employee. (2018 Training Industry Report)

Small business owners have always known, at least anecdotally, that employee loyalty is built through mutual respect and a more personal “family-like” environment of caring.  Small businesses likely unknowingly invented company culture that has been the model for larger companies to emulate. Well, based on the alarming numbers, 47 million U.S. employees, that voluntarily changed jobs in 2020 and 2021 shaping up to exceed that, it is absolutely critical that small businesses invest in employee benefits now or risk losing their most valuable resources.

 

What are the types of employee benefits?

Employee benefits programs are expensive, and that trend is only getting worse (Society for Human Resource Management).  Small businesses cannot compete with large companies when it comes to traditional employee benefits falling into 4 categories:

1. Medical insurance

2. Life insurance

3. Retirement plans

4. Disability plans

The good news for small businesses is that as a result of many factors, led by inflation of employer sponsored healthcare premiums, there has been a redefining of employee benefits programs. This has put implementing a world-class benefits package within reach of small business employers. According to Benify, an HR leader, in its 2019 Employee Happiness Index study they identified 4 new categories of employee benefits (listed in order of importance to employees):

1. Benefits at work – work hours/flexibility; vacation; skills development; other onsite programs

2. Benefits for health – health, wellness, and healthcare (physical and mental).

3. Benefits for financial security – retirement plans; disability/life insurance; personal financial services.

4. Lifestyle benefits – work-life balance; remote working potential.

 

Why are employees voluntarily leaving their jobs?

In 2020 47 million Americans voluntarily changed jobs and more are expected to in 2021. (Society for Human Resource Management).

 

Compensation and work balance have traditionally topped the list of reasons to change jobs; however, we are seeing a surge in the importance of benefits with 22% of employees surveyed (according to iHire) citing better benefits as the reason they left their jobs.  Another 18% cited safety concerns related to COVID-19.  Nearly a third of voluntary attrition can affordable and effectively be addressed with a BHS onsite nurse program (learn how).

 

The top 10 reasons employees will voluntarily change jobs this year (according to iHire’s 2020 Talent Retention Report).

1. Unsatisfactory salary or pay (15.8 percent)

2. Stress or an unmanageable workload (11.7 percent)

3. Few growth or advancement opportunities (11.5 percent)

4. Employer’s values not aligning with their own (7.0 percent).

5. Interest in a different industry or career path (6.7 percent)

6. Poor work/life balance (6.5 percent)

7. Unsatisfactory benefits (3.8 percent)

8. Lack of employee recognition (2.9 percent)

9. Concerns about their employer’s ability to address health and safety concerns in the wake of COVID-19 (2.3 percent)

10. No options for remote work (1.3 percent)

** The remaining 15.7% of respondents indicated “Other” reasons and listed COVID-19 concerns in general, and toxic work environment amongst their responses.

 

Those employees that changed jobs were also asked what their employer could do for them to reconsider staying.

1. Raise or bonus (50 percent)

2. Healthier work/life balance (25.7 percent)

3. Clear growth or advancement opportunities (25.4 percent)

4. Better benefits package (22 percent)

5. Meaningful employee recognition (19.8 percent)

6. Professional development opportunities (15.2 percent)

7. Promotion (12 percent)

8. Remote work (11.5 percent)

9. Regular performance feedback (8.1 percent)

10. Student loan repayment assistance (4.8 percent)

 

Which benefits are most important to and appreciated by each generation?

Each generation in the workplace is at a different stage of their life and experience.  It is no surprise that each would value benefits differently.  Baby Boomers are as young as 55 years old and

Gen Z-ers are as old as 24 years old.

Now let’s look at what is the same across the generational gap.  This is potentially the most important factor in determining your benefits package priorities and investment. Unfortunately, what is most valued by employees when designing benefits plans is largely overlooked.  And that is because employers have resigned to thinking they know what employees want and that is likely based on assumptions of their own generation or at least dated information.

3 Key Factors in Employee Benefit Programs

In order to start designing a benefits program you must first understand your audience and how they define value.  This can be put into 3 factor categories:

1. Important benefits;

2. Appreciated benefits; and

3. Benefits that differentiate you from other employers.

Appreciated benefits are viewed as “nice to have”. Important benefits are perceived a necessity to employees. The difference is perspective.  An employee may deem a certain benefit, like work-life balance, both important and appreciated.  On the flip side, an employer may misconstrue an important benefit as appreciated by the employee and therefore misplace budget.  A small business needs to consider prioritizing their employee benefit budget on getting the most bang for their buck and that means to improve employee retention.  Let’s picture this as a pyramid whereas the important benefits are the foundation although frequently taken for granted and not appreciated.  The middle are the appreciated benefits that are the ones that are perceived as being valued by their employees, and the top is what differentiates you from your competition.  We are writing this article, because BioFunctional Health Solutions’ (BHS) part-time onsite nurse program was designed to satisfy the criteria to be in all three categories across all four generations (learn more).

1 – What benefits are most IMPORTANT to each generation?

What stands out here is that working hours and leave, and health and wellness is in the top two across all age groups; however, employers have placed emphasis on programs like pension and insurances that are not deemed as important to the largest groups of employees they intend to serve.

2 – What benefits are APPRECIATED by each generation?

Again, the top two appreciated benefits to employees are health & wellness and working hours and leave. Establishing a work-life balance that is attractive to employees is again something that small businesses likely invented and largely do well.  Health & wellness programs are a blind spot for most and the contrived wellness challenges and lunch and learns are not competitive anymore.  Let’s also mention that there is a large interdependency between health & wellness and healthcare costs that cannot be ignored.  Health & wellness is the low-lying fruit and number one priority for benefits packages in 2021. This has only been supercharged by the COVID-19 pandemic and employers of all sizes have never before been more aware of the importance of physical and mental health of their workforce.

3 – What are DIFFERENTIATOR benefits?

These are unique benefits that set your business apart.  Differentiator benefits are those that employees are not likely to find somewhere else and/or ones they would not otherwise be able to afford unless provided by their employer.  A differentiator benefit can do more for employee loyalty than increases in compensation and time off.  This is because such benefits show goodwill, caring, and a general mindfulness regarding employee welfare.

Conclusion

Employee’s today EXPECT benefit packages that address their health & wellness, financial security, work-life balance, and have some sort of “WOW” factor.  With the increasing cost of traditional employee benefits, like healthcare and disability insurance, small businesses will have to be more innovative in designing their employee benefit programs to attract and retain talent assuring their future survival and I hope, GROWTH.

FAQs

What is an employee benefit program?

Employee benefit programs are considered indirect pay (aka benefits) for your employees.  These are programs paid for in full or part by employers.  These are generally not taxable to either the employee or the employer.  Some examples include paid time off; insurance (healthcare, life, disability, vision, dental), retirement plans (employer pensions, 401K, etc.); and health & wellness (gym memberships, onsite gyms, onsite clinics, massage therapy, mental health services, etc.).

Can a small business afford an impactful employee benefit program?

Employee benefit programs do not need to be awfully expensive if you know the options and how to prioritize benefits that will be appreciated, important, and differentiators.  Healthcare insurance is the number one cost driver of employee benefit programs currently and premiums are expected to inflate 6% a year for the foreseeable future.  The great majority of employees prefer a defined pre-tax contribution to obtain their own insurance through a State-run Exchange.  Now add to that an HSA/FSA option to contribute their pre-tax wages to offset medical and childcare expenses.  This approach will free up budget to invest in programs that will set you apart from larger employers in health & wellness (learn more).

What are the top 3 key factors in designing a benefit program for small businesses?

The three key factors are related to an employee’s perspective of a benefit being:

1. Important – is it a must have?
2. Appreciated – is it a nice-to-have?
3. Different – can I get the same thing somewhere else?

What are the 4 major types of employee benefits?

1. Benefits at work – work hours/flexibility; vacation; skills development; other onsite programs
2. Benefits for health – health, wellness, and healthcare (physical and mental).
3. Benefits for financial security – retirement plans; disability/life insurance; personal financial services.
4. Lifestyle benefits – work-life balance; remote working potential.

Where can I find help with designing a benefit program for my small business?  

Contact BHS and speak to one of our experts by visiting us here (click here).

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