Employee benefits can be one of a business's most significant expenses, sometimes costing as much as 30% to 50% of wages.
However, offering some kind of benefits package has become standard for most companies, and employees have come to expect it.
The question is not whether to offer benefits; rather, it is "what package can the company afford?"
With an aging population, the situation is unlikely to change any time soon; in fact, certain benefits like health insurance and retirement plans are extremely important to the large baby boomer group.
The following are some considerations to keep in mind when updating or adding employee benefits:
- If your employees are likely to leave your company for another in the same industry, learn as much as you can about what benefits are standard in your line of business. If you have trouble retaining employees, think about offering more or better benefits than your competitors. If employees in your local area tend to switch industries, for example, in a rural area where employees might switch between manufacturing and service industries, then compare what you offer to other companies across the board.
- If you are a new business, or just starting to hire, begin with a modest benefit package and build up as the company grows and stabilizes. Giving too many expensive benefits at first can backfire if you need to cut back later. For many employees, a reduction in benefits is equivalent to a cut in pay.
- Develop an employee handbook and have it reviewed by a lawyer who is well versed in employment law. Many guidebooks and outlines for developing an employee handbook are available. Use one to draft a plan and have the lawyer check that all legalities and key issues are covered.
- Use the procedures outlined in your handbook, especially the ones that have to do with handling employee complaints or problems.
- Make the reward structure and procedure crystal clear in the handbook and in practice. Avoid verbal promises of raises, etc. Having a boss 'forget' about a promised raise is a real morale killer.
- Have your employees review your draft handbook with an eye to uncovering unwritten rules that you've allowed to develop in the workplace. While you have the ultimate decision making power, it's helpful to include employees in developing workplace procedures and benefit structures, especially if you plan to make changes. Handing down decisions by fiat is also a morale killer, especially if they are perceived as unfavorable.
Article reprinted with permission from the NH SBDC. Written by Elizabeth Ward.
© 2002 NH SBDC