Using Benefits to Attract and Keep the Best
You’ve launched your business, lined up some customers and are now ready to start building your staff. Before you start interviewing, however, you may want to think about employee benefits. The benefits package you offer can make a big difference in both who you attract and whether you’ll be able to hold on to them in the future.
Indeed, many employees these days judge the strength of a company by the quality of the benefits they provide. Often the first perk offered by fledgling businesses is health insurance, followed shortly by some kind of retirement plan. As companies grow, however, a sweetened benefits package can be a particularly effective way of keeping people happy with their jobs and loyal to the company.
At University Medical Imaging—a 20-year-old company that provides MRIs, CAT scans, x-rays and ultrasound procedures—benefits planning gets a lot of attention these days. “We look at it constantly,” says Michael Lechner, practice administrator, noting that the company needs the right staff in order to provide quality patient care.
Finding good workers, however, is never easy, even with today’s high unemployment. And once the staff is trained and in place, Lechner says, it’s important to keep competitors from poaching the talent. “So we need to make sure that the grass always looks greener on our side,” he says.
The good news: Many of the most valued perks are relatively inexpensive for employers. Moreover, companies are allowed to create small classes of employees that qualify for enhanced benefits. That means a group of highly-valued executives might, for example, get improved life insurance coverage or an upgraded disability policy. Such offerings—while extremely meaningful to the employee—are both tax deductible and significantly less expensive than an increase in pay.
At the executive level, special benefits packages can be an important way to attract key employees and keep them on board. Aimed at the highly-compensated employee, these arrangements can often involve some kind of executive bonus or deferred compensation, often funded with permanent life insurance.
Companies can be very creative in designing these top-tier plans. Often, they come with a vesting schedule to keep the employee tied to the company. A deferred-compensation plan, for example, might offer key personnel an additional $40,000 a year for 10 years, requiring those executives to stay on the job for a decade in order to collect the full amount.
But these arrangements can offer more than golden handcuffs. A supplemental employee retirement plan or SERP, for example, can be designed to not only provide the executive with additional retirement income, but also to pay the company a death benefit if that employee should die. In some cases, this may even allow the company to recoup the cost of premium payments in the event of a death.
When it comes to benefits planning, however, one size does not fit all. Company perks tend to change as the business gets bigger, and offerings vary from industry to industry and from region to region. The employees themselves are a critical part of the planning equation. Older employees, for example, may be primarily interested in health and retirement benefits, but studies show Gen Xers consider paid time-off an exceptional value.
That means companies can’t simply offer a richer benefits package and expect good results. Instead, companies need to make sure they are offering the right benefits—the ones that make a difference to their employees.
Finally, employers need to make sure they not only put together a good package, but also communicate the value to employees. After all, what good are the benefits if the employees have no idea they exist?
Provided by Miriam Zettlemoyer, a financial representative with MassMutual Eastern Pennsylvania, a MassMutual Agency; courtesy of Massachusetts Mutual Life Insurance Company (MassMutual)The information provided is not written or intended as specific tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. MassMutual, its employees and representatives are not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel. © 2014 Massachusetts Mutual Life Insurance Company, Springfield, MA 01111-0001 CRN201504-170817