A Guide to Employee Benefits

Building a competitive employee benefits plan is one way to not only retain employees, but to draw new and promising talent. Happy employees make for more productive businesses, and a business owner can positively affect workers’ lives by providing generous benefits packages. Though many business owners would love to be able to offer excellent benefits to all of their workers, many are taken aback by the costs involved. Most benefits packages have high costs that continue to grow as a company grows. Still, the high cost of providing great benefits can be worth the effort. Employees are more likely to stay with companies that offer great benefits, and higher quality candidates are more likely to apply to those companies. So what are some types of employee benefit plans? Here is an overview of the basics.

Health Insurance

Part of the health care reform impact on employers is that they are now required to offer health insurance to employees. Generally, there are five options. Most commonly, employers offer Health Maintenance Organizations or HMOs, under which employees choose a primary care physician who helps to manage health care by providing referrals to other doctors within the HMO network. Employees are responsible for copays, while the insurance company covers the rest. A slightly more expensive option are Preferred Provider Organizations or PPOs. PPOs give employees plenty of choices in terms of service providers and allow them to visit out of network specialists at some additional cost. Other options include point of service plans through which employees select a primary care physician who makes in and out of network referrals, high deductible plans that work well for young workers who are unlikely to require regular medical services, and self insurance through which companies cover their own costs and work with a self insuring company to set up highly customized coverage.

401K Retirement Savings Plans

When the section of the Internal Revenue Code that making 401K plans possible was enacted into law in 1978, it quickly became one of the most popular retirement plans around. Because many businesses are less inclined to offer 401K benefits to lower paid employees, there is an IRS rule limiting the maximum deferral by the company’s “highly compensated” employees, based on the average deferral by the company’s non highly compensated employees. 401K fees and expenses include those for administrative services, investment management services, and sometime outside consulting services. Businesses work with 401 K providers to provide a voluntary retirement savings plan into which employees can contribute a portion of their pre tax earnings. Employers administer and control the plan, and many match employee contributions on a tax deductible basis.

Mandatory Workers Compensation Coverage

Much like health insurance, workers compensation coverage is mandatory for employers to provide. Workers’ compensation coverage provides income, medical benefits and rehab for workers injured on the job or while performing work related duties. It guarantees that injured workers receive financial compensation for medical care and for the income lost during the time that they are unable to work. Workers compensation coverage also helps protect employers from lawsuits initiated by workers injured on the job.

Providing a solid benefits package, though expensive, is one of the best ways to reduce employee turnover rates and to foster employee satisfaction. There are many options, however, and what’s right for one company may not work for another. It is best to set up a meeting with an insurance service that can help you find what will work for your company and your employees.