The Payroll Blog
News, tips, and advice for small business owners
Give The Gift Of Health Insurance
The end of the year is a time for giving – giving gifts, giving warm embraces, giving terrible advice over the holiday dinner table – but it’s also a time when small business owners should look at their previous year and see how to give back to employees. Instead of gifting your employees with trinkets and gift cards this season, consider employee benefits and health insurance coverage. While the Affordable Care Act only requires business owners with 50 employees or greater to provide health benefits to their employees, we’ve compiled some reasons why you should consider gifting the gift of health insurance for your small business employees.
Save Money with Group Health Plans
The largest concern small business owners have about offering a health care plan is typically cost. However, it’s important to keep in mind that on average, small business health insurance plans tend to have lower per-person costs than individual plans. According to a recent study done by eHealth, the average premium cost-per-person through a small business plan was 7% lower than an individual plan, and the average individual deductible in a small business plan was 31% lower than an individual plan. This means that by offering a group health plan for your employees, you’re likely not only saving them money, but you could save money insuring your family as well.
Additionally, there are numerous tax advantages employers are privy to when they offer a group health plan, including:
- With the Small Business Health Care Tax Credit, you may qualify for a tax credit that could be worth up to 50% of the costs you pay for your employees’ premiums.
- Offering coverage as part of a compensation package could also potentially mean that your business could benefit from reduced payroll taxes.
- You may also be able to deduct Health Saving Account (HSA) contributions from small business taxes.
Take a look at Small Business Health Options Program (SHOP) coverage, which is specially made for small businesses like yours. Their coverage options include lots of flexible medical plans that may qualify for tax breaks that may make offering this benefit more attractive to small business owners. Your employees may have different needs, so the plans offered to them should be flexible as well. Keeping health insurance premiums affordable to your employees is key too – it’s no use if they can't afford to buy into it. The bottom line is, do your research, and you may find that an affordable option is more accessible than you think.
Attract Key Talent
If you’re looking to hire new employees and expand your team, health insurance is a huge draw for job seekers. Companies with top-notch benefits are more likely to attract applicants, especially since offering health insurance has become more standard practice. The eHealth survey reported that nearly 66% of small business owners offer health insurance primarily to attract and retain the best workers. The job market is more competitive than it’s been in recent history, and if you want to attract the best talent to your business, you're going to have to offer them a competitive benefits package. If your potential new employee has the option to choose between higher pay at your business and taking a lower salary with a full benefits package somewhere else, studies show that many would rather have the benefits. In fact, nearly four out of five employees say that health insurance is the most important benefit they could receive in terms of job satisfaction, and 33% of employees have turned down a job due to a lack of benefits.
Improve Employee Retention
Retaining employees can be a struggle for small businesses. When you offer a health plan it shows your employees that you care about them even after they clock-out. When looking at it from a cost perspective, it’s also important to keep in mind the cost of turnover in your company.The Society of Human Resource Management states that it costs almost $4,000 to hire a new employee. Surely paying a little more to keep your current employees happy is more cost-effective, wouldn’t you agree?
It’s also important to note that healthy employees are more productive employees. According to a study by the Journal of Occupational and Environmental Medicine, having health insurance was significantly associated with fewer missed workdays. If your employees are healthier, they’re also less likely to pass on illnesses to other employees, which will make the whole office healthier. Fewer sick days for everyone!
The Ease of Pre-Tax Benefits
Pre-tax benefits are great. As an employer, when you offer a pre-tax benefit, you can automatically take the cost out of an employee’s paycheck, exempting them from federal and state taxes. This means that you lower the taxes that your employees have to pay by reducing their taxable income. While this means a smaller paycheck for the employee per pay period, it ensures less of your employee’s money goes towards taxes, and more towards things they need – like healthcare. By offering a pre-tax plan, you’re helping your employees make the choice easy by removing the temptation to put that money towards something more meaningful than a new outfit.
Here are a few types of pre-tax health benefit plans you could consider for your small business employees:
- Flexible Spending Accounts (FSAs) - A medical FSA is used to pay for eligible medical expenses. Think of it like a debit card that you fill up once a year and can use to pay for co-pays, prescriptions, or other health-related items like glasses. You can only contribute a certain amount per year and if you don't use the money by the end of the year, it's no longer accessible so it’s important to choose your amount wisely.
- Health Savings Accounts (HSAs) - Like FSAs, HSAs are like a bank account for your healthcare costs, only the money follows you throughout your life. If you don't use all the money you put away one year, it carries over, even if your employees were to switch jobs. That money is yours to use and can also be invested or earn interest on a tax-free basis. However, you can only sign up for an HSA if you have an HSA-compatible health care plan, which generally means you'll face a higher deductible.
- Health Reimbursement Accounts (HRAs) - HRAs are designed by employers and are solely funded by the employer. They generally need to be offered alongside a group health insurance plan but vary widely from business to business.
In this time of year where everyone is thinking about giving memorable gifts, health insurance is the gift that means more than any big-ticket Black Friday deal could. Sharing the gift of a group health plan will show your employees how much you care about their contributions and dedication to your business and will help you to keep those employees longer. At the end of the day, offering your employees a health insurance plan is just the right thing to do. It is the gift that keeps on giving and will help create a little love and joy this holiday season.
If you’re ready to give your employees the gift of health insurance, check out SurePayroll’s Health Insurance and Benefit Options, or call 877-266-6850.
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This website contains articles posted for informational and educational value. SurePayroll is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, SurePayroll. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant. If you require legal or accounting advice or need other professional assistance, you should always consult your licensed attorney, accountant or other tax professional to discuss your particular facts, circumstances and business needs.