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Does your benefits package benefit your strategic goals?

Updated: Jun 22, 2023

A robust benefits package helps keep your team at their best and shows appreciation for great work.

Photo by Miguel A Amutio on Unsplash

Your company’s greatest asset is your team. Recruit and retain top talent, and keep them at their best by offering a benefits package that maintains health and reduces distractions that impact productivity.


Your benefits package has a significant impact on your team’s quality of life, both at work and outside of work. Happy and healthy employees think more flexibly and get more done in less time, freeing up more time to have a life outside of work so they can come back refreshed each day. Your benefits package affects how much productivity your team loses to sick days, annoying phone calls, stress about financial burdens, and time spent caring for family members. The more you invest in your employees’ (and their families’) wellbeing outside of work, the more sweat equity they’ll invest back in your business.

Here are a few ways your employee benefits package affects your bottom line:

  • Recruit great people: A company’s benefits package often figures into a candidate’s decision whether to accept a job offer. Your benefits don’t just tell a prospective employee how you will subsidize their health and financial wellbeing, it also sends a strong signal about how you treat your team members’ priorities outside of work. While an early-stage startup may not have the deep pockets to match a large company’s salary, you can make up for the difference with a competitive and thoughtful benefits package. Once a candidate’s basic financial needs are met, many will choose to take a lower salary for a better quality of life and the ability to make more of an impact. Strong employee benefits programs are more cost-effective than absolute salary matches, and send the message that you value your team for more than just the work they do. Read more about recruiting great talent on a budget here. You can also contact me for ideas on how to leverage your benefits package to support your recruiting efforts.

  • Make your benefits inclusive: Members of many underrepresented groups have greater personal responsibilities and/or healthcare costs that prevent them from taking a risk on an exciting new opportunity. Thus, the less you invest in your employee benefits, the more you put your job opportunities out of reach to those who aren’t young males from privileged backgrounds. Women, people with disabilities, older workers, and people from disadvantaged backgrounds all have comparatively higher medical costs. Caregivers like parents and people from many traditional cultures are balancing greater demands on their time and income. If your benefits package includes strong health coverage, financial assistance for dependents, and flexible work hours that let your team work around personal responsibilities, you lower the barrier to entry for people from underrepresented backgrounds, and the diverse perspectives they bring with them. Read more about building inclusive benefits packages here. Contact me for ideas on how to make your benefits more inclusive to attract the talent you’re looking for.

  • Allow your people to bring their whole selves to work: A benefits package that excludes families sends a tacit message that you are intolerant of personal matters if they compete with work, but it does nothing to reduce those commitments. Therefore, many employees may feel pressure to hide any personal matters that interfere with work. At best, insufficient benefits encourage dishonesty and occasional disengagement as employees try to downplay the effect of factors like mental and physical health, caregiving, and financial stress. At worst, a struggling employee may be afraid to tell you when personal problems are interfering with their performance, preventing you from working together to find a solution and restore their productivity. I can help you assess whether your benefits are inadvertently sending a message that undermines your team’s productivity. Hit me up to learn more.

  • Retain your team: A great benefits package not only supports an employee’s current needs, it grows with them through various stages of life. The support that your benefits provide in the short term helps your key team members stay with you as their personal responsibilities grow. Reducing the cost of dependent benefits makes your company a source of stability as members of your team settle down with a partner and start a family. Generous parental leave and caregiver benefits incentivize them to stick with you as their family grows. And flexible schedules with thoughtful leave policies supports them as they age, and perhaps care for aging family members.


 

💸 Afraid that benefits are too expensive?

Consider these hypothetical examples of how a stacked benefits package can actually reduce your costs over time.

Example 1: Recruiting

A mid- to senior-level professional may command a salary of more than $200,000 at an established software company. After a few years of the corporate grind, the creative freedom and significance of a startup may be attractive enough for them to accept a pay cut, so long as they can maintain their quality of life and support their family. A series-A startup may only be able to match 75% of their previous salary, or $150,000, which still gives them a comfortable income. However, higher medical and childcare costs, can further eat into the compensation difference.

Below are the 2023 rates for a major nationwide medical provider:


Spending an additional 29% per month on a single employee’s premiums costs your company an additional $2,340 per year, but can save your employee more than that in lower deductible, copays, and coinsurance. Although the amount is small potatoes compared to their total salary, the emotional pain of spending their hard-earned money on unexpected medical bills makes the stability of a stronger health plan more attractive than the total dollar amount.


Similarly, taking care of your team’s families reduces the pressure on breadwinners in a way that counts for more than the absolute dollar amount. Increasing your subsidy on dependent premiums from 50% to 80% costs your company an additional $10,000 per year in the above example, but saves your company at least $765 per year in payroll taxes (with a greater tax savings for your employee). Therefore, although it comes with a high price tag, a thoughtfully-messaged health plan can still be more cost-effective than increasing base salary for primary breadwinners.


Offering a dependent care FSA costs your company less than $50 per year, but can help your employee save roughly $1,500 per year in taxes.


Takeaway: Explaining that you have set up your benefits package with these mutually-beneficial savings in mind makes a powerful statement about your values that may make a difference when convincing the candidate to accept your offer.


Example 2: Productivity

Weaker insurance plans indirectly reduce an employee’s productivity in a number of ways.

  • They may need to travel farther to find a provider that takes your insurance. That provider may make up for lower rates from the insurance company by packing more patients into a day, leading to longer wait times.

  • A worker may delay going to the doctor, slowing their recovery and reducing their productivity at work, or extending absences when they or their family is sick.

  • They may spend more time on the phone searching for a provider who takes their insurance, or resolving billing problems.

  • They may avoid “optional” treatment for conditions affecting their productivity such as mental healthcare or physical therapy.

  • They may be forced to use less flexible childcare arrangements that cut into the workday.

  • The stress of all of the above may distract them from doing their best work.

Many of these tasks can only be done during business hours, cutting into your workday. Although many employees will make an effort to make up any missed time, it is hard to do that when you’re ill, stressed, or caring for a sick family member. Even the stress of burning the candle at both ends to juggle personal and work responsibilities can further impact an employee’s health and productivity, so investing in your employees’ wellbeing just makes good business sense!


Takeaway: In the example above, $200 per month made a meaningful difference in an employee’s medical coverage. When you consider that a $100,000 per year salary works out to roughly $50 per hour, the difference in premiums works out to only half a day’s wages per month, but may cost significantly more in lost productivity.


Example 3: Churn

According to the Society for Human Resources Management, it costs the equivalent of approximately 6 to 9 months of an employee’s salary to replace them. That cost doesn’t just eat into your runway, it also comes at the cost of the whole team’s productivity. Every time someone leaves, your team must take time to cover the lost employee’s responsibilities, interview, and train a replacement. It will also take time before the new employee catches up to the competence of the one who left. Ouch! Small teams can hardly afford such a blow.


Many employees who left their jobs in 2021 during the Great Resignation did so because of inadequate benefits, according to the Pew Research Center. Those benefit shortfalls included:

  • Childcare issues - 24% (of parents)

  • Inflexible working hours - 24%

  • Lousy benefits package (including health insurance and PTO) - 23%

Increasing the cringe-factor is the fact that benefits like flexible work hours and extra PTO (which few employees max out anyway) come with no out-of-pocket cost and have been shown to improve productivity.


Takeaway: When you consider what cut-rate employee benefits can cost in employee turnover, investing in a more robust benefits package begins to look like a great strategic investment!


 

Want to learn more about creating a benefits package that wins loyal employees and keeps your team in top form? Check out these related articles:

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