Employee Benefits for Small Businesses
M3 Elevate Employee Benefits Lead
These basic reminders can prevent costly mistakes
If you’re a small business looking to recruit employees, you know as well as anyone how intense the competition is today for top talent. Offering a benefits package certainly has the potential to make you more attractive. However, if you’re heading up a small business, you may be handling the tasks of a CEO, CFO, and HR manager—all in a single day. That’s why you need to be aware of the responsibilities that come with employee benefits.
By no means exhaustive, the following reminders can help you initiate—and maintain—a viable employee benefits program. When you’re fighting for an edge in the current job-hiring market, the last thing you want to do is make costly mistakes as you implement that program.
- Offering benefits: first the why, then the what
It may seem obvious, but before you dive into offering employee benefits, you’ll want to know exactly why you want to offer them. If it’s really for your own personal need more than, say, attracting top-tier employees, that could influence the types of coverages you choose. You’ll also want to thoroughly understand those coverages—e.g., health, dental, vision, life, disability, worksite—and identify which ones make the most sense for your company. Then you’ll need to decide how to pay for the coverages you choose. Do you want to offer employer-paid, contributory, or voluntary benefits—and what are the differences between them?
- Administration: your ongoing insurance responsibilities
Once you have a carrier and the program is up and running, you can check insurance off your list and move on, right? Not quite. You now need to make sure you’re administering the program effectively. Yes, your insurance carrier and broker may have important roles in this—but so do you:
- Payroll deductions. If your employees are paying for a percentage of their insurance, which is usually the case today, you need to make sure deductions are being made from their pay. Imagine realizing that deductions have been missed for several years. It happens—and it’s not pretty.
- When an employee no longer works at your company. Let’s say an employee left eight months ago and you never got around to telling your carrier until now. The carrier might tell you they only go back 60 days. That means you’re out six months of premiums paid. The lesson? Let your carrier know when an employee leaves. If you forget, you’re going to lose money, plain and simple.
- When you hire a new employee. Make sure you offer a new employee health insurance in a timely manner—basically right away. You also want to document when you officially offered insurance and whether the employee accepted or declined. If the employee accepts, you need to allow time for the paperwork to be processed. Note that even though you’ll likely have a waiting period before coverage begins, for health insurance the current law says it cannot exceed 90 days after hire.
- Compliance: be consistent, have a handbook, avoid stiff penalties
The U.S. Department of Labor sets down rules and regulations regarding the implementation of benefits plans. Not following them could result in significant fines. Generally speaking, if you offer benefits, you have to do so in a consistent manner. For example, you can’t cherry-pick who does and doesn’t get health insurance. It needs to be offered to all eligible employees. On the other hand, coverages like disability insurance can be offered on a position basis, but you need to have that written down in an employee benefits handbook that you distribute to everyone.
Other potential compliance issues may involve Medicare, COBRA, and ERISA.
Designate a benefits person and get expert support
If you don’t have a formal HR department and your own plate of responsibilities is already overflowing, you may want to designate an employee to take on many of the tasks that come with offering benefits.
Also, a good insurance broker can help guide you through much of the employee benefits minutiae. Just note that fewer and fewer brokers today specialize in small businesses. Look for one that’s actually invested in working with small employers and is willing to provide the kind of education and support that can make a big difference in the success of your benefits program.
This information was featured in a BizInsights article, published on May 31, 2017.