Did you know that employers are not required by law to offer certain benefits? Paid vacation time, sick time, and even insurance coverage are considered to be optional. That’s why evaluating the pros and cons of employee benefits if you’re an employer may be a valuable exercise.
What Are the Pros of Employee Benefits?
1. Good benefit packages help to attract and retain good employees.
The most popular benefits are good health insurance coverage which includes vision and dental, along with a comprehensive vacation policy or flexible sick time options. When you can offer benefits that have value, you’re more likely to attract and keep valuable employees.
2. There may be tax deductions available.
Employers which offer benefits may gain an advantage by being able to deduct plan contributions from their taxes. This includes all insurance options, pension contributions, a 401k match, and other costs associated with the benefits.
3. A good benefits package can save you money on salaries.
Many employees are willing to accept a lower salary in exchange for a better benefits package. Considering salaries are often the top expense for most businesses, this can really help with a tight budget year.
4. Good benefits can reduce employee absenteeism.
This is especially true when there is a comprehensive heal insurance plan in place. Wellness initiatives that help employers save money and can potentially let employees expand their insurance options or earn rewards also help to reduce the number of sick days that may be taken.
5. A comprehensive benefits package can reduce turnover.
One of the biggest hidden costs every business has is the cost of training a new employee. High turnover rates can generate tens of thousands of dollars in costs per new employee that can be avoided by investing into a good set of employee benefits.
6. They create word-of-mouth recruiting opportunities.
If an employee gets 6 weeks of vacation time every year, then they’re going to tell their family and friends about that awesome benefit. This excitement creates a natural brand ambassador for the business to help them recruit more good employees without the costs of advertising an open position for a lengthy period of time.
What Are the Cons of Employee Benefits?
1. They cost money.
The average set of employee benefits today is nearly equal to the amount paid out in salary. This is a level of expense that must be effectively managed, especially since many employees don’t see a benefit as part of their income package.
2. There may be few choices available to certain employers.
Small businesses are especially limited in the type of employee benefits they may be able to offer. This is because better benefits, especially retirement or pension plans, typically have higher administrative costs that the small business may not be able to afford.
3. The costs of benefits are not static.
This is especially true for employers who are providing comprehensive health insurance benefits. The rise in cost of health insurance has been steady and rapid, which means benefits are either cut or more costs are paid for to maintain the current benefit package. Even with the Affordable Care Act in place, this still makes it difficult to budget costs on an annual basis.
4. There can be issues with legal compliance.
Certain benefits must be provided to employees in a specific way. In order to make sure a business is compliance with these stipulations, legal fees must be paid out to verify that everything is being provided legally. It’s another added cost that many employees don’t realize exists as a way to provide them with the benefits they need.
5. Mistakes in employee benefits can lead to litigation.
If a business makes a mistake in providing an employee with a promised benefit, then there is a good chance that they might sue. There might also be regulatory fines involved with such a mistake, plus there will be additional legal fees to pay in addition to the cost of the benefit which will still need to be provided.
6. Even great benefit packages can be seen as “not enough.”
There will always be some employees who feel like they are overworked and underpaid, no matter how good the benefit package happens to be.
In the pros and cons of employee benefits, the goal is often to attract and retain the best possible employees in the local job market. Good benefits are seen as a way to inspire higher levels of employee loyalty. If the costs of those benefits can be managed, then it can be a good thing to provide even if they are not legally mandated in every jurisdiction.