Over the past decade, the idea of providing benefits as a solution to small businesses’ retention woes has fallen slowly by the wayside. But now a confluence of factors in the wake of the pandemic — supply chain disruption, personal and familial challenges, and rampant inflation — are making recruiting even more difficult. As a result, your small-business owner clients will have to reconsider a recruitment tactic they have long taken for granted.
The numbers don’t lie; 6 in 10 small businesses say they are struggling to attract talent amid the “great resignation,” according to Alignable’s poll of more than 6,000 small businesses. Many companies have raised their wages in response — Forbes reported large companies expect to pay a 3.9% increase in wages this year. However, high turnover remains a challenge for employers two years into the pandemic, with a record high of 4.53 million resignations in March.
With these numbers in mind, it’s clear that small-business owners can — and should — look beyond salary to attract talent and improve retention. To stay competitive without breaking the bank, small-business owners must address the intangible aspects of work — such as job satisfaction and employee wellness — and offer employees a comprehensive set of benefits that helps them take care of themselves and their families.
How employee benefits can stem the worker shortage tide
Offering health care and other benefits can give small businesses a competitive edge over their peers. Although large corporations have been offering benefits for years, fewer than half of small businesses have offered retirement savings plans for employees, according to JPMorgan Chase.
In 2020, only 31% of private-sector establishments with fewer than 50 employees offered health insurance, according to KFF.
Benefits are also overwhelmingly popular with employees. Seventy percent of employees see dental and vision coverage as a must-have, according to a 2022 MetLife survey. Benefits packages are equally important for retaining employees. A 2022 report by Willis Towers Watson found that 6 in 10 employees cite their employer’s retirement benefits as an important reason they remain with their current employer.
Small businesses that already offer benefits shouldn’t assume they’re in the clear. A Ceridian poll found that 37% of employees who receive benefits would like to see their employers prioritize enhanced mental and physical benefits in 2022. Therefore, it’s critical for companies to reevaluate their own benefits with a fresh set of eyes and an understanding of their employees’ needs.
Here are some common misconceptions small-business owners may have regarding benefits.
• Employers must cover the cost of benefits.
A common complaint among small-business owners is that providing a benefits program is too costly. But by using a voluntary benefit program that provides services that are either fully or partially covered by the employee, employers can offer a wide range of benefits — such as disability, life insurance, dental, vision, hospital indemnity, critical illness coverage and more. Employees simply select what services they prefer and pay for them through deductions from their paycheck. Benefits providers handle administration and can provide educational materials for small businesses to distribute to their employees, leaving businesses with money to spare.
• Offering supplemental insurance isn’t that important.
Nobody wants to offer their employees a high-deductible health insurance plan, but some small-business owners have no other cost-effective option. In fact, 31% of employees were enrolled in an HDHP as recently as 2020, and that number has been on an upward trajectory, according to KFF.
However, HDHPs do mean that outside of preventive care, employees are left covering their medical bills until they have spent thousands of dollars out of pocket. So it’s wise for small-business owners to provide employees with a safety net.
That’s where supplemental insurance — such as for accident, critical illness and hospital indemnity — comes in. These insurance plans can help cover the gaps in major medical insurance, providing additional security for those who decide to invest in extra coverage.
• Benefits are too expensive to offer 1099 contract workers.
Many small businesses employ 1099 contract workers because they are quick to onboard and require minimal oversight. However, most small-business owners have been reluctant to offer benefits to these contractors because small-business owners don’t want to run the risk of misclassifying their contract workers, which can be costly.
As the public discourse about whether workers in the gig economy should qualify as independent contractors or should be employees with full benefits continues, small-business owners may find themselves competing with deep-pocketed corporations for scarce labor. One consideration for small businesses is to provide their employees with access to information about professional or trade associations, which often offer benefits to their members.
Another option a small-business owner might consider is joining a professional employer organization, which enables small to mid-sized businesses to provide their employees with access to better and more affordable benefits. PEOs also help streamline a lot of administrative human resources functions, like payroll, benefits, compliance and workers’ compensation. Although there are benefits to joining a PEO, there can be drawbacks, which is why it’s important that small-business owners understand all the pros and cons.
Offering or providing access to benefits to nontraditional workers is a long-term play for small-business owners aimed at improving company loyalty. Employers that decrease presenteeism — lost productivity due to illness — and reduce turnover among their workforce can recoup their initial investments. They won’t have to spend money finding and retraining employees, and they’ll experience productivity gains and improved morale as a result.
Designing a smart small-business benefits strategy
There are more ways to provide benefits than ever before. The excess of options means business leaders may end up feeling overwhelmed or encounter financial roadblocks.
Here’s how brokers can help small businesses with limited budgets and expertise overcome those challenges to deliver a smart benefits strategy that addresses the labor shortage without breaking the bank.
1] Assess the workforce demographics to ensure strategic benefits offerings.
For the first time in history, there are five generations in the workplace. Although everyone may need health and dental insurance, it’s crucial that small-business owners offer a combination of traditional employer-paid benefits alongside a large number of employee-paid options that can cater to both newcomers and those in the twilight of their careers.
2] Assess which benefits are tax deductible and eligible to use tax credits.
Small-business owners should work with a certified public accountant to identify which benefits will provide them the biggest tax breaks and credits. Often these include retirement plans, tuition reimbursement plans, health reimbursement arrangements and paid leave. For instance, employers with fewer than 100 employees may be eligible for an annual tax credit of up to $500 if they create a 401(k) or SIMPLE IRA plan with automatic enrollment.
3] Leverage voluntary benefits.
Small-business owners must be selective about which voluntary benefits they choose to offer.
That’s why benefits brokers are an excellent resource.
Brokers can assist small-business owners with paperwork, compliance and annual renewals, putting together a custom package that makes sense for their unique needs.
4] Develop a communication and engagement strategy.
A business owner’s work doesn’t stop once an employee benefits program is in place. Employers must promote the program and help employees understand the benefits they are offering. Insurance brokers and carriers can offer employers tools and resources to help educate their employees, integrating those resources with a small busines’s existing communication strategy.
Additionally, brokers and employers should ask employees for feedback on the program so they can constantly improve their benefits plan.
5] Adopt benefits administration technology.
In order to meet employees where they are, employers should adopt a digital platform that provides decision-making support, such as videos and education tools. Choosing a carrier that integrates well with these digital platforms will allow small-business owners to give employees an easy, intuitive and flexible user experience.
6] Supplement voluntary benefits with workplace perks.
Workplace perks are a great way to shore up recruitment efforts — but they must be the right kind of perks. Gone are the days of throwing up a Ping-Pong table and a beanbag chair as a concession for working long hours. A recent Glassdoor survey found 60% of workers now place more emphasis on perks related to physical and mental well-being.
For small businesses, that might mean providing access to mental health services, wellness and dependent care specialists, summer half-day Fridays, and more.
The great resignation may be here for the foreseeable future — the quit rate, for example, shows little sign of waning. But by following these six steps, brokers can help small-business owners rest easy knowing they are offering what employees want — the safety and security that come with a comprehensive benefits package.