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Human Resources

How Much Do Benefits Cost?

If you're deciding whether or not to provide your employees with benefits, at some point you need to consider the actual cost of benefits. You might want the best for your employees, but if you simply can’t afford benefits they may not an option. Here's some advice on determining the cost:

Health Care

Health care costs are increasing every year, making this an incredibly difficult area to budget for, particularly for small businesses. The cost of the plan decreases as more people come into the group, making group health care plans more advantageous for companies with more employees. Further, the costs are generally shared between employer and employee, though some companies offer 100 percent employee health care payments as an attractive fringe benefit. As health insurance costs vary greatly from one person to another, it is hard to say exactly what the benefit will cost you specifically, especially since your contribution might be low or it might be high. One thing is certain, however: Health insurance is one of the most expensive benefits you can offer your employees.

The benefits of providing health care are lowered rates of absenteeism and more productive, appreciative, relaxed, healthy employees.

Retirement Plans

Retirement plans are much like health care costs in that the costs are lowered when more people are in the group. Like health care plans, you are not required to contribute anything to a retirement plan. Still, many employers find it prudent to contribute to a 401(k) or similar retirement plan as an attractive fringe benefit. Matching funds are always a good thing to put on the table when recruiting top talent. You might also qualify for tax deductions under the federal tax code for contributions to retirement plans. This can be as much as an additional $8 per hour for your company.

Vacation Pay and Sick Pay

These costs are very easy to calculate. Whatever you pay your employee in a day is what you are going to shell out for vacation pay and sick days, per day. For example, if you have an employee making $10 per hour working nine-hour days, this will cost you $90 per day or $450 per week of vacation time. The upside to providing your employees with vacation pay and sick pay isn’t just limited to recruiting talent. Your company and your employees are well served by allowing them to recharge once a year, and to take time off when they need it due to illness. The cost per hour is generally somewhere around $1 or $2.

Offsetting Costs

Remember that employee benefits can pay for themselves in a number of ways. First, you are able to attract better talent with a comprehensive benefits package. Your employees will be happier and less interested in bolting to the competition. If you provide health care benefits and sick days, you will have healthier employees who are more productive . The latter also leads to lowered rates of absenteeism, as people are comfortable taking a sick day off if they need it.

Photo courtesy of wallace_lan via Flickr

 
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