Popular benefits such as medical and life insurance, retirement plans, bonuses, stock options and profit sharing, are attractive ways that companies can lure the best and the brightest. However, for small businesses, those resources are often cost-prohibitive and/or have to be paired down considerably in order to stay profitable. Regardless of size, all companies must contend with the sometimes daunting challenges that providing employee benefits presents. Having fewer resources with which to manage employee benefit programs, ethically, in accordance with state and federal laws, and responsibly, is especially difficult for small companies.
Dealing with the Cost
Small businesses can attempt to manage employee benefits by employing staff or using outside agency to do it. Additional legal and financial accounting services are to be expected for any company that offers and manages benefits plans. Additionally, for those that offer leave benefits, the expense of hiring temporary or short-term staff to replace that employee (training, orientation, soft and hard costs) while compensating the permanent staff member, is a considerable additional expense.
Options for cutting these costs include:
- Offering fewer benefits
- Sharing more benefits costs with employees
- Excluding working spouses and hourly workers from coverage
- Instituting a probationary period of at least three months before coverage eligibility
- Joining a network of other small businesses to purchase at a group rate
Employee Cost
On the whole, employees at small companies tend to pay a larger portion of the cost of their benefits plans, even though they are often a skimpier version of what large companies can and do offer (fewer choices, less flexibility, and instability). Additionally, deferred eligibility means that newer employees are often without insurance - a gamble that doesn't always pay off. These challenges can make employee retention difficult, as employees may find it more attractive to seek employment somewhere that offers a better health benefits package.
ERISA Compliance
Employee Retirement Income Security Act of 1974 (ERISA) compliance is mandatory for businesses. This act established the standards for managing specific voluntary health, pension and severance plans, including how plan assets are controlled and the procedure for formal grievances and appeals. Failure to file required reports with the IRS or to provide employees with correct summary plan descriptions can result in fines.
COBRA and HIPAA
The Consolidated Omnibus Budget Reconciliation Act (COBRA) and the Health Insurance Portability and Accountability Act (HIPAA), are amendments to ERISA that affect employee benefits. COBRA gives employees a grace period of extended health insurance after they leave a job for a limited time. Notice must be given by companies to employees of their COBRA eligibility and they (the companies) must maintain proper records and perform mandated reporting throughout the coverage period.
Working closely with insurance providers and other employers is best to ensure that coverage continues for eligible and interested employees during employment changes.
Sources:
- Gail Sessoms, "Employee Benefits Issues," Chron.com, http://smallbusiness.chron.com/employee-benefit-issues-40620.html.Five Timely Employee Benefit Challenges
- "Benefits Solutions," BayPoint Benefits, http://baypointbenefits.com/index.php/solutions.
