Tips for Structuring an Effective Employee Benefits Package

Are you looking to create an employee benefits package that will help your organization attract and retain talent? A comprehensive benefits plan can make a huge difference in fostering an engaged, motivated, and productive workforce.

What goes into structuring an employee benefits package? How do you select your workers’ insurance policy? How much sick leave are you supposed to give your employees? Should you include a corporate gym membership?

These are all understandable questions if you’re an executive trying to navigate the human resources labyrinth. But you need proven answers, and with over a quarter of employees leaving their current job, or turning down job offers because of employee benefits, you need them fast.

Stop guessing what to give your employees and be confident in the benefits package you offer. At CulverServices, we give you the right advice for structuring your employee benefits.

PTO, Sick Days, and Vacation Days

Paid time off (PTO) policies combine vacation, sick time, and personal days into a single category of days employees can use at their choosing.

More and more, workers want work-life balance. They want to be able to enjoy the compensation they receive from their company. Project: Time Off research showed that employees who worked at companies who encouraged time off (68%) were happier than those who worked at companies who were either ambivalent or discouraging towards PTO.

USTravel.org also found the number one reason for travel in the US was avoiding burnout. When you take these numbers into account, it’s easy to see how small businesses that offer extensive PTO packages have an advantage over small businesses that are stingy about employees taking time off.

Don’t worry about a generous PTO benefits package hindering productivity. The key findings of a TravelEffect study show that workers need time off to regenerate their focus. The study also shows that, contrary to many US companies’ beliefs, larger PTO benefits packages increase productivity.

PTO promotes employees’ mental health and creates a workplace culture ripe for candidate recruitment and retention. Employees see a company that doesn’t care about their employees’ mental health as cold and insensitive to people’s needs.

The best and brightest don’t want to be chained to a desk; they want to be able to use their salary on things they enjoy.

But calculating the optimal PTO for a company can be difficult. You don’t want to shell out so much paid time and sick leave that no one can cover the required labor, and finding the right balance can be difficult. While it varies by industry, the national average is 10 PTO days per year for workers who have been with you for under 1 year, plus holidays. If you offer 11-15 days per year, you’ll position yourself as a place that employees want to work at. PTO should also increase with each year that an employee has been with you.

It’s also important to make sure that employees are available during your busiest times. For example, a company that does most of its work in a particular season might have mostly part-time workers and a few full-time staffers. While there will likely be work for the full-time staffers in the offseason, it may be wise to place restrictions on when employees can use their paid vacation.

Health Insurance and Wellness Benefits

As the political debate rages over federally-run health care, employees everywhere still need health insurance. And if you own a business, it’s in your best interest to consider offering some sort of supplemental health insurance. According to a 2018 Aflac survey, 72% of the surveyed workers enrolled in supplemental insurance programs reported being happy or extremely happy compared to only 50% of the workers not enrolled in a supplemental insurance program.

There is a key benefit for employers providing their employees with more than minimal insurance benefits besides job satisfaction: it keeps employees coming to work.

Preventative Health Care

Data from the Rand Report also suggests companies almost always save by implementing a supplemental wellness program for their employees.

Overall, preventative health care solutions wind up saving money for employers on health insurance premiums. The CDC estimates that employers lose $1638 per year per employee due to absenteeism caused by health issues.

Preventative health care solutions can actually help reduce costs while improving your employees’ wellness. At CulverServices, we help companies to craft a Proactive Health Management Plan (PHMP). This preventative health care solution incentivizes employees to perform a small health-related task each month, such as having a phone call with a nurse. These incentives encourage employees to take more care of their health, reducing premiums and medical costs down the line. PHMP leads to an average 11-17% decrease in overall health care spend after two years in the program.

Because CulverServices’ PHMP program takes advantage of the tax code, it’s free to employers and gives employees more money each payday. With PHMP, the average increase in employee take-home pay is between 2-5%.

Life Insurance

Offering life insurance is not a standard component of an employee benefits package. The first decision when choosing whether to provide life insurance in your company is whom to cover.

If you can limit your costs by finding lower rates, you might want to offer life insurance to all of your full-time employees. But offering life insurance as part of an employee benefits package is usually an exclusive benefit.

Only offering life insurance to a select few employees prohibits you from deducting the premiums for federal tax purposes unless you meet the nondiscrimination requirements.

To meet the nondiscrimination requirements, you have to prove you aren’t only giving benefits to your business’s highest compensated employees. You also have to confirm that your life insurance benefits package doesn’t exclude lower compensation employees from participating due to the price.

Life insurance employee benefits are not considered discriminatory if they meet the following requirements:

• The insurance plan benefits at least 70% of all employees
• You do not consider at least 85 percent of covered employees to be critical employees
• The life insurance plan covers employees whom the IRS classifies as nondiscriminatory

Group-term life insurance is the most common type of life insurance offered in employee benefits packages. This type of life insurance includes small sub-groups, and covers employees based on the following distinctions:

• Job duties
• Compensation
• Length of service
• Marital status
• Participation in pension, profit-sharing, stock bonus, or accident and health plan
• Other employment-related factors

Dental Insurance

You may see dental insurance as a nonessential part of your business’s benefits package. But before you write off dental insurance as excessive, consider that you can find plans with less than $1 costs per day for each of your employees.

Flexible coverages fit most budgets, and you can opt for a plan from basic to comprehensive. Dental insurance plans can also be voluntary, which requires your employee to pay for part of their premium.

In addition to voluntary premiums, if you own a small business, you may receive tax credits if you pay 50% or more of the dental insurance costs, and have fewer than 25 employees. 

The perks to including dental insurance in your benefits package:

• Much like health coverage, dental insurance keeps your employees from missing work due to severe complications. Annually, workers miss more than 92 million hours of work due to unplanned dental visits.
• Providing dental insurance for your employees places you at the top of the pecking order as far as employee benefits are concerned. A LIMRA study showed that 78% of all job seekers thought dental coverage was an essential benefit.

Vision Insurance

Vision insurance is very similar to dental insurance because employers don’t have to provide it by law. Only 23% of American employers offer vision insurance while 61% of the American population requires vision assistance.

With an increasing number of occupations being computer-based, vision is a critical component to overall employee health and productivity. Vision insurance also provides early identification of chronic diseases that frequently go unnoticed. A recent Population Health Management study found that routine eye exams identify high cholesterol 65% of the time and diabetes 20% of the time.

Retirement Benefits

Employer-sponsored retirement plans are an essential part of any employee benefits package. They provide security for the employee and can persuade recruits to join a business.

There are two main employer-sponsored retirement plans: defined benefit plans, and defined contribution plans. A defined benefit plan gives employees monthly benefits once they retire. The monthly amount can be fixed or variable depending on how the plan factors in components such as salary and tenure.

These types of plans are also known as pension plans. With pensions, the employer shoulders the risk, but has more control and can provide more incentive for potential candidates.

A defined-contribution plan like a 401k plan does not guarantee specific payments upon retirement. With defined contribution plans, either the employer or the employee decides what to contribute to the individual’s account. For example, an employee sets aside 5% of his/her annual salary to a defined contribution plan.

An example of a defined-contribution plan is CulverServices’ EBS program, which consists of deferred compensation plans and stock option plans for your most valuable employees.

Companies can also implement deferred compensation programs that withhold a portion of the employee’s income until a designated date, usually retirement. Deferred compensation plans are useful for companies who want to give their employees incentives to stay at the company.

Disability Insurance

The Consumer Federation commissioned a study examining employees’ understanding of disability insurance. The study found that 65% thought their employers offered disability insurance. But the Bureau of Labor Statistics found that only 32% of the workforce had access to disability coverage through their employers. 

The stats reflect the need for employers to be transparent with their employees about disability and workers’ compensation. Despite the surveyed employees’ lack of knowledge regarding disability and workers’ compensation, 88 percent of them still believed it was a valuable benefit for employers to offer.

Some of the issues with the job candidates’ lack of knowledge stem from not clearly separating disability from workers’ compensation. Whereas workers’ compensation only covers employees in the event they are injured at work, disability covers employees no matter where they experience their injury. It is also challenging to qualify for workers’ compensation and Social Security Disability Insurance (SSDI).

The difference between short-term disability and long-term disability is that long-term disability covers the employee for a longer duration and cuts down on costs. Short-term disability provides complimentary coverage, but it doesn’t fully compensate workers who can’t work for long durations.

Crafting Your Employee Benefits Package

As a small business owner, CEO, or human resources manager, it’s essential to understand what constitutes the best benefits package. Companies everywhere are competing for top talent.

Those who understand how to motivate and care for their employees will always land the most skilled employees. If you’re wondering how to climb a step above your competition, check out what CulverServices has to offer in terms of helping you choose employee benefits.