April 7, 2020 |
Offering a competitive compensation package will go a long way towards convincing job candidates to come work at your company. In fact, the better your compensation offer is, the more likely you are to attract highly coveted candidates instead of losing them to your competition. However, a competitive compensation package doesn’t just refer to the salary. The health benefits that you offer are just as important to most candidates, especially when you take into account that around 49 percent of Americans get their health insurance through an employer-sponsored healthcare insurance plan. On top of that, job candidates are also looking for flexible paid time off policies and beneficial retirement plans.
Put together a comprehensive benefits package that includes not just a fair and competitive salary, but that also provides the employee with the healthcare benefits, paid time off, and retirement plan options that they need.
Putting together a competitive benefits package can be the difference between a qualified candidate choosing to accept your offer or that of a competitor. However, competing with other businesses for job candidates isn’t the only reason to offer a comprehensive benefits package. Some companies may try to offer a larger salary with worse benefits, hoping that the number of the salary will distract candidates from the fact that their benefits are poor. Others may offer decent benefits, but low salaries. In fact, candidates with fewer offers on the table may be more likely to accept lowball salary offers if they’re in need of a job. Even if this is the case, you should think twice about trying to save money on your benefits package if you really don’t need to.
If you don’t give your employees a solid benefits package, they’ll eventually realize it if they didn’t already when they accepted your offer. Either way, they will be much more likely to leave your company the moment a new opportunity comes along that provides them with a better benefits package. Replacing employees that leave typically costs you a lot more than it would have cost you to just provide them with a competitive benefits package in the first place. Providing your employees with a suitable benefits package from the beginning gives you a better chance that they will remain loyal to your company.
Now that you have an understanding of why it’s so important to provide a comprehensive benefits package to your employees, decide what to include in that package. It should address an employee’s salary, health benefits, paid time off, and retirement plan, and the more options you provide, the more they will appreciate the ability to tailor their benefits package to their needs.
Consider including these elements in your benefits package when putting together a competitive offer that will not only attract highly qualified candidates, but that will help you retain your employees over the long term.
To offer a competitive salary, you need to have a good understanding of how much the market salary is for certain positions. This may require you to do a bit of research depending on the position you’re trying to fill. Identify the salary range for jobs in your geographic location that are relevant to the position you’re trying to fill. If you want to offer a competitive salary, make an offer near the high end of the salary range that you defined during your research.
You may also need to improve your offer based on what a candidate’s specific skill sets or experience consists of. If they are one of the more experienced candidates available for the position, you may need to increase your salary offer to be competitive. If budgetary restraints prevent you from providing a competitive salary offer, you could make up for it by improving your other benefits. For example, by offering generous insurance benefits or by offering potentially lucrative bonuses and commissions.
As everyone knows, out-of-pocket health insurance in the U.S. is incredibly expensive. Most people cannot afford to pay for it on their own, which is why they depend on the health insurance provided by their employer. This makes health insurance arguably the most important benefit of your benefits package (besides the salary, of course). Unfortunately, health insurance is also quite expensive for employers. It’s why smaller businesses do not always offer health insurance, and if they do, it’s not always the best.
If you can offer a good health insurance option to your employees, then your benefits package will be a lot more appealing to the job candidates that you’re trying to attract. In fact, many candidates deciding between job offers will choose the offer with a better healthcare plan even if their salary will be lower.
Although there are five main types of plans of health insurance available, there are many options to consider for each one. For example, will you offer to cover 100 percent of your employees’ premiums or just a percentage of those premiums? Will you cover only the employee or will you offer to provide coverage to their family members as well? Remember, the more expansive your health insurance benefit is, the more appealing it will be to job candidates. This makes striking a balance between providing an attractive health insurance benefit and offering what you can afford very important.
HMOs are the most popular option for employers. An HMO allows the employee to choose a primary care physician who will provide the employee with referrals to other doctors and healthcare professionals who are part of the same HMO network. Although employees will be responsible for paying a co-payment for every visit to their doctor, their insurance will pay the rest. HMOs do typically provide a large network of doctors to choose from; however, employees are still limited to doctors who are a part of their HMO network. Despite this, it remains a solid option due to the lower costs.
A PPO is the most expensive option available for employers. It’s a plan usually chosen by larger corporations since they can afford it. For employees, a PPO is an exceptional health plan to have since it provides them with more healthcare choices — they are even allowed to see certain specialists outside their network. However, in addition to being more expensive for the employer, employees will have to pay some additional out-of-pocket costs as well.
A point-of-service plan lies somewhere between an HMO and a PPO. It allows your employees to choose a primary care physician who can make referrals both in and out of the network.
A high-deductible health plan tends to make health care much more affordable when it comes to basic medical needs (such as a routine checkup with a primary care physician). However, if serious medical needs arise (such as the need for surgery), the employee will have to pay a high deductible before their insurance kicks in. Despite this, such a plan is often very popular with younger employees who don’t expect serious healthcare issues in the foreseeable future. Employers who choose to offer a high-deductible health plan will often combine it with a tax-advantaged Health Savings Account, which makes it easier for employees to pay for basic medical needs.
The last health plan option you can choose as an employer is self-insurance. By choosing self-insurance, you agree to cover your own costs while working with a self-insuring company to set up coverage. A self-insuring company is not quite the same as an insurance company. The major difference between the two is that a self-insuring company requires fewer fees and doesn’t charge premiums for risk. You’ll have more control over the design of your coverage so that you can create a health plan that better reflects your values. For example, you could limit the scope of the plan if you’re trying to save money. On the other hand, you could also choose to provide expansive coverage if you’re committed to providing your employees with comprehensive healthcare options, which could even include wellness or holistic medicine coverage.
If you do choose self-insurance, consider buying stop-loss insurance as well to limit exposure in case an employee experiences a catastrophic illness or tragedy.
If an employee is injured or falls ill and can no longer perform the functions of their job, disability insurance allows them to continue collecting a portion of their income. Disability insurance differs from worker’s compensation insurance in that it helps cover employees who fell ill or were injured outside of work (like if they were in a car accident).
Offering disability insurance helps provide your employees with protection against losing their income, especially if their paid sick days are not enough to cover the extent of the time they will miss as a result of their disability. There are two main types of disability insurance: short-term and long-term. You may want to consider offering both.
Eligibility for short-term disability insurance varies from company to company. Some plans indicate that employees must have been employed for a minimum amount of time at the company before they are eligible. Some employers require doctor’s notes as well to verify the disability. Most short-term disability insurance plans offer between 50 and 70 percent of an employee’s pre-disability salary and will provide benefits for between 10 and 26 weeks.
Companies often include eligibility requirements for long-term disability insurance as well. Like short-term disability insurance, these plans also typically cover between 50 and 70 percent of the affected employee’s salary. They will generally last for a defined period of time, often between two and 10 years or until the employee reaches the age of 65.
Dental insurance is considered separate from health insurance. Although it’s not required by law, many companies do offer a dental insurance plan to their employees. You can offer to cover 100 percent of your employees’ dental costs, a share of their costs (usually around 80 percent), or require employees to pay the entire cost of their dental benefits so that you only pay the administrative costs and payroll deductions. Obviously, a fully-funded or partially-funded employer plan is preferred by most job candidates.
While optional like dental insurance, vision insurance isn’t quite as commonly offered by employers. However, it can still be very attractive, especially to candidates who have existing vision issues. A vision insurance plan can pay for routine eye exams as well as pay for a percentage of the costs of corrective vision equipment (such as glasses).
Depending on the health care option you’ve chosen, it might be helpful to implement an FSA. An FSA allows employees to put money from their paychecks into what is essentially a savings account. The money from this account can then be used to pay for out-of-pocket medical, dental, and vision expenses without that money being taxed. Employees can save a lot of money on tax this way; however, any money put into an FSA has to be used by a particular date with only a portion being allowed to carry over into the following year.
Life insurance is a huge benefit that highly qualified candidates often look for as the big difference maker between offers. This is especially true for older candidates (younger candidates often think that life insurance isn’t necessary at their stage in life) and candidates with families. If you’re trying to attract a highly sought after candidate and you want to hold on to them for the long run, life insurance can help make your benefits package stand out.
A comprehensive life insurance policy can be very expensive. One option is to offer employees an accidental death and dismemberment policy instead. Such a plan is essentially a limited life insurance policy that provides a payout to the beneficiary of the policy if the cause of death was an accident. It basically allows you to provide your employees with some life insurance at a more affordable cost.
Employees need time off. The more employee-friendly your paid time off benefits are, the better. It shows that you care about your employees and that you’re not a company focused solely on profits over the general well-being (both physical and emotional) of your employees. You should determine how many paid days that you allow employees to take off for various reasons, including the following:
Paid Vacation Days
Everyone needs a vacation eventually to avoid becoming overworked and stressed out, which will hurt their performance and productivity. The standard amount of vacation days offered by the typical employer is two weeks per year. Offering more paid vacation days can make your benefits package even more enticing; however, you should also make sure that employees have to provide a certain amount of notice ahead of time when taking vacation days. You should also decide whether employees can roll their paid vacation days over from one year to the next.
Paid Sick Days
Employees will get sick at some point. Paid sick days allow them to take time off to get better without sacrificing their pay or their vacation days. Although there’s no federal law mandating paid sick leave, most companies do provide paid sick leave. Additionally, California state law does require companies to provide one hour of paid sick leave for every 30 hours an employee works. The more generous you are with paid sick days, the more you show potential employees that you care about their wellbeing.
Flextime refers to the ability of an employee to choose more flexible work hours as long as they are able to complete their tasks in a timely manner. For example, you could offer the opportunity to work a four-day workweek instead of the typical five-day work week or you could let employees work remotely, either the entire week or for part of the week. This can make it a lot easier for older employees or employees who are new mothers to do their jobs effectively.
Dealing with the passing of a family member or loved one can not only be difficult mentally, it can require a lot of work (such as making funeral arrangements). As such, providing paid time off for bereavement is the compassionate thing to do. Many companies include different bereavement policies based on whether the person who passed was a friend or family member as well as any responsibilities the employee has handling the estate of the deceased.
Sabbaticals are rare, but they are a good way to reward loyalty. Companies who offer sabbaticals (whether paid or unpaid) essentially give employees who have been with the company for a specific amount of time (such as five years) the opportunity to take an extended amount of time off (such as two months).
401 (k) Plan Retirement Savings Plan
If you want to retain any employees you hire, then a retirement plan is a must. There are a lot of 401(k) plan options out there, so do some research to determine the best 401(k) plan for your employees that you can afford. For example, many employers will match employee contributions dollar for dollar up to a certain amount. Such a policy is hugely attractive to potential candidates.
Putting together a comprehensive benefits package can not only help attract more qualified candidates, but it can also help put your company into a stronger position to compete for candidates who are wanted by other companies as well. A candidate who has several offers will weigh those offers carefully by comparing salaries, health insurance benefits, paid time off, and retirement plans. In addition to being more competitive in the job market, you’ll be building a stronger relationship with employees that have good benefits packages. They are more likely to remain loyal to your company, which means that you will lower the risk of losing valuable employees because you didn’t take care of them from the outset.
Of course, few companies can offer candidates the world. You need to be able to afford the offer you make. Do your research and calculate your finances correctly. Factor in what it’s going to be like during a potential downturn in your business. Will you still be able to afford what you’re offering if business is slow? Keep this in mind as you put together an attractive benefits package.
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