MPLOYEE BENEFIT PACKAGES
Hitting upon the right formula is growing ever more critical as health care costs continue to escalate and the economy continues to stall. Worse, most entrepreneurs don’t have the time or the expertise to untangle this messy calculation. To attract talent and compete effectively, entrepreneurs should offer health insurance, some life and disability insurance and probably a retirement savings plan. For specialty benefits–like vision and dental coverage–take time to understand what your current employees want and whether they’ll be willing to chip in.
HEALTH INSURANCE
This one’s a must. When picking a plan, small firms have a choice: traditional health insurance or what’s called “managed care.” Traditional plans typically come with high premiums and a wide selection of doctors and hospitals, while managed care plans carry lower premiums but offer a smaller menu of service providers. Both traditional insurance and managed care plans are sold by Aetna , Blue Cross Blue Shield, UnitedHealth Group and Humana , and most states mandate that employers cover at least 50% of the premiums. Most small businesses lean toward high-deductible plans, which carry lower premiums but force employees to shoulder more of the treatment costs up-front before the insurer kicks in. (Experiment with different premium/deductible ratios, depending on what your employees are looking for.) Health savings accounts are another option. These plans allow employees to deposit pretax dollars to cover health care costs not covered by high-deductible plans.
TO ATTRACT TALENT AND COMPLETE EFFECTIVELY, ENTREPRENEURS SHOULD OFFER HEALTH INSURANCE, SOME LIFE AND DISABILITY INSURANCE AND PROBABLY A RETIREMENT SAVINGS PLAN.
RETIREMENT
Those who join young or small companies may have a thirst for adventure, but that doesn’t mean they don’t want to sock away for retirement. To stay competitive, small firms should offer a retirement plan. Most companies choose a defined contribution plan, such as a 401(k), rather than a defined benefit plan–otherwise known as a pension. A middle-of-the-road offering would allow an employee to contribute up to 6% of his paycheck to his 401(k), to which the employer would add an additional 3%. In some cases entrepreneurs can reap significant tax savings from 401(k)s by putting themselves into the plan.
SPECIALTY BENEFITS
Next to health care and retirement plans, perks like disability insurance, life insurance, dental and vision coverage aren’t nearly as important when it comes to attracting and keeping talented employees. If you plan to offer disability insurance, pick a policy that covers at least 60% of an employee’s salary, says Friedrich. On the life insurance side, the policy should pay out at least $20,000 (or enough to handle funeral expenses).