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What's inside an Employee Benefits Package for Small Business?

Posted by Alden Hui on September 12, 2019
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With limited resources, employers at small businesses can have trouble recruiting and retaining employees. Public companies and large corporations offer highly extensive benefits packages that are hard to beat. However, small business can offer equally enticing packages by picking benefits that matter to their employees. Let's look at the key factors of a successful small business employee benefits package. 


What is inside an employee benefits package for small business?

A comprehensive package consists of health and dental coverage, paid time off, disability insurance, a retirement plan, and sometimes, industry dependent benefits. Most employers recognize that a competitive hiring package helps to recruit top talent but find it difficult to justify the extra spending. It is not easy for smaller employers to create a hiring budget. However, small businesses do not have to struggle as there are several options available that are both affordable and cost-effective. 

Retirement Plan

A retirement plan is a necessity for any business that is looking to hire long term employees. In Canada, employers may provide defined benefit pension plans (DB) and defined contribution plans (DC). Within a defined contribution plan, some employers create variations by limiting employer matching contributions to only company shares.

While both plans have their own merit, defined benefit pension plans grow increasingly fruitful to employees the longer they stay with the company. These plans are often restricted to a certain retirement age but provide guaranteed yearly payout upon retirement. Defined benefit pension plans are rarely provided at non government employers due to the economic and financial instability of such institutions. 

A more common benefit for retirement planning is employer-matching RRSP contributions based on an employee's payroll deduction, up to a percentage. Depending on the employer, this number can range from 1-10%. Inside of this RRSP account, employees can make their own investment decisions to plan for their future. 

Health and Dental Plan

Health and dental coverage is included in almost any comprehensive employee benefit package because employee health is a top priority for both employees and employers alike. This does not mean the employer's budget has to suffer when it comes to providing coverage. 

While it is common for companies to buy an extensive health insurance plan, many smaller employers do not have the budget or need for this plan because of their small workforce. 

In Canada, small businesses have access to Health Spending Accounts. These plans are a cost-effective way to provide health and dental benefits to employees. In simple terms, health and dental benefits offered through this plan are fully tax deductible to the business and received 100% tax free by the employees. There are no premiums, hidden fees, deductibles, copay, or complex policies like a typical insurance plan. The best part of a Health Spending Account is cost control for the employer and freedom for employees to choose how, when, and where they spend their benefits. 

How do Health Spending Accounts work?

Health Spending Accounts provide flexibility because employees can choose how, when, and where to spend their 100% tax free dollars through the plan. Better yet, the employer gets to choose how much and to who they designate these benefits to. The plan transfers the value from the employer directly to the employee, instead of losing money to a premium or deductible. This saves the business money and retains loyal employees. 

  • This online plan is easy to implement and use:
    • The employer funds the plan with a custom monthly amount
    • Employees pay for their medical expense with a personal source of payment
    • Afterward, employees make a claim on aforementioned medical expense and get reimbursed tax free using funds from the employer funding account
    • The medical expenses are a tax deductible / business expense for the employer


Why is a Health Spending Account better for a small business?

  • Unused plan funds are returned to the employer. 
  • There are no expenses for the employer until a claim is made by the employee
  • Approved employee claims are reimbursed directly to their banking account and tax-free
  • Employees can claim up to their benefit limit
  • Employee can claim all their health and dental bills as needed

Download FREE Complete Guide to Health Spending Accounts for small business

Paid Time Off / Unlimited Unpaid Time Off

When employees take time off, be prepared with policies and a platform to book time off. This creates a mutual understanding for the employee and employer.  

In general, time off can be separated into four (4) categories:

  • Paid Holidays
  • Paid Personal/Vacation Time
  • Paid Sick Days
  • Unlimited Time Off (Paid or Unpaid)

Unlimited unpaid time off is fairly standard practice but unlimited paid time off is an offering created in recent years by some forward-thinking companies. With this policy in place, many employees still only book a standard 2-3 weeks off. Unlimited paid time off is heavily set by example, management style, and the workplace culture.

Disability Insurance

The rational behind offering disability insurance is to protect your number one asset, your employees. To avoid wasted resources, employers should consider insuring employees for short and long term disability.

Accidents can happen to anyone. Short term disability ensures that employees can still receive a percentage of income in the event that they cannot work due to an injury or sickness. Likewise, long term disability insurance helps employees recover and return to work faster in the event of an unfortunate circumstance by insuring loss of income. 

To sum it up, disability insurance is designed to replace an employee's income if they are to become disabled. The best policies cover the majority of your pay-cheque (after taxes) and will pay until your disability ends or until age 65, whichever comes first

Industry-dependent Benefits

These types of benefits are not necessary for a comprehensive benefits package but provide an incredible hiring incentive, promote the company and brand, and are highly cost effective. 

Many companies leverage their products offerings as an additional employee benefit by setting monthly allowances for employees to spend on their products. Inside the pre-packed food kits industry, companies create monthly allowances (on top of employee salaries) to use on their products. This is a highly cost effective transaction for every party.

  • Employees: receive free groceries and test out the products they sell
  • Employers: build the brand, low cost employee benefit, and create customers for years to come

These types of benefits are not limited to just the meal kit delivery industry. Insurance companies can offer a health and dental benefits package that is superior to other businesses outside of the insurance industry. West Jet (a Canadian airline) is known to provide considerable flight discounts for employees and their families. This practice of utilizing products as a benefit can be applied across any industry.  

Flexible Options

Where many large companies rely on rigid protocol, small business can out perform by offering flexible options. Traditional forms of employee benefits are no longer seen as competitive, but instead, a requirement.

Not long ago, employers have begun offering remote work options (such as working from home or at a different city), flexible hours, parking allowances, food allowances, and even unlimited time off.

The benefits world is moving toward flexible options. The modern day worker performs better with their own preferences. A smart employer will recognize this and capitalize on it. 

 

Learn more about a Health Spending Account:

Group Health Spending Account Canada Walkthrough 2018

 

Topics: small business employee benefits, employee benefits