Even before an employee begins her first day of work, she has already cost your company some money. Recruiting expenses including newspaper and on-line ads, agency fees and background checks must be included in employee upfront costs. While salary is a huge expense for companies, it averages 69.6 percent of total compensation with the remaining 30.4 percent set aside for employee benefits according to the Bureau of Labor Statistics. Some benefits are mandated by law while others are optional. Identifying and controlling these costs are critical to ensuring the success of your enterprise.
Employment Taxes — Your employees may contend that employment taxes are not a benefit, but they are. A delayed one for the most part, covering social security, workers compensation, disability, unemployment and Medicare. Social Security and Medicare are taxed at 6.2 and 1.45 percent of salary respectively, a cost you must match though there are limits for your high net worth employees.
Wellness Care — Health, dental and vision insurance are among the benefits employees expect to receive. Your costs can vary tremendously depending on the type of insurance plan procured, the age of your workforce, number of employees and your location. Writing for Entrepreneur, corporate strategy expert Burton Goldfield advises companies to adopt a “robust health benefits package” so that they can “attract, retain and motivate talented people” the sort of staff you want on hand to help your company to grow. That may mean offering full health benefits to family members, a much costlier expense than providing funding to employees alone.
Time Off — Although you are not necessarily adding an expense when taking into consideration paid time off including vacation pay, holidays and sick days, the loss of worker production for those days must be taken into account. Unless your other employees can pick up the slack, you may need to hire temporary help to cover worker absences.
Retirement Plans — Small business operators may not believe that they can afford to offer a retirement plan, but can you afford not to offer one? IRS publication #3998, Choosing a Retirement Plan, outlines options for small businesses including IRA, SEP, 401(k) and profit sharing plans. Certain tax advantages can help defray some of your costs including employer contributions which are deductible from your business income. Consult with a tax accountant to find the best plan for your small business.
Other Benefits — What other benefits can you afford? Or more accurately said, what other benefits do you need to offer in order to recruit and keep top workers? Life insurance, long term disability, dependent care and tuition reimbursement are self funded plans where your company’s contribution pays directly for this benefit. This means that you’ll need to count these benefits as a full expense without the benefit of an insurance group picking up a portion of your costs.
In order to attract and retain qualified workers, you need to provide comparable benefits to what your competition has to offer. Without that you risk harming your business.
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