Employee Benefits

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LFG - Employee benefits

Establishing a benefits plan for your workers accomplishes some very important objectives:

Offering benefits to your employees allows you to offer benefits to yourself.
Contributions made for benefit premiums are often tax-deductible for your business.
Attracting employees with special skills or talents is often easier with a benefits package and should increase your hiring potential.
Deciding which benefits to offer is a big and sometimes confusing decision. Consider the following and how each pertains to your business goals.

Required benefits

As an employer, you are required by law to allow employees time off to vote, serve on a jury or perform military service.

You also are required to:

Comply with all workers' compensation regulations. Every state has worker's compensation laws to protect employees against loss of income and to provide for medical payments due to a work-related injury, accident, illness or disease.
Withhold FICA (Federal Insurance Contribution Act) and FUTA (Federal Unemployment Tax Act) taxes.
Contribute to disability programs (if your business is in California, Hawaii, New Jersey, New York, Puerto Rico or Rhode Island).

Optional benefits

You may choose to provide these additional benefits to employees:

Retirement plans.
Life insurance plans.
Health plans (except in Hawaii).
Dental plans.
Vision plans.
Paid vacations.
Paid holidays.
Paid sick leaves.

Advantages and disadvantages of a benefits program

There are a number of great reasons to set up a benefits program for your business:

Tax advantages.
Recruiting advantages.
Personal gain.
Non-salary rewards for employees.

The biggest disadvantage of providing benefits is cost, especially if you're a small business with few employees. Owners of a small business will likely experience higher rates and administrative costs, limited plan choices and fewer fringe benefits.

Consider the size of your staff when creating a benefits program. If you have only a few employees, you'll want to consider the benefits that you and your employees will value most and that are the most cost-effective.

Benefits you might consider:

Time-off benefits ? Aside from the time-off benefits that you are required to offer (voting, jury duty leave and military leave), there are other types you may choose to offer — such as vacation, sick leave and personal time off. Some companies now combine these to eliminate the need for classifying the time off.
Health insurance ? This is often considered one of the most valuable benefits to offer to employees, but it can be expensive for small groups. A financial advisor can help you find vendors, understand your options, negotiate contracts and handle day-to-day administrative issues.
Flexible spending accounts ? This benefit offers a relatively low-cost way to help employees pay for their own health expenses as well as child care. A flexible spending account also may permit employees to contribute pre-tax pay to accounts that are later used to reimburse eligible expenses.
Disability insurance ? This protects an employee against the loss of income if the employee becomes disabled. A financial advisor can help you understand the disability insurance benefit plan options available to you.
Life insurance ? This is a great benefit to provide because it offers employees some financial security at a reasonably low cost. There are several different types of life insurance available.
Retirement plans ? These are highly rated as a valuable benefit for both employees and business owners. Some plans can be costly and time-consuming to manage, but there are many options to choose from that can be financially advantageous for you, your business and your employees. Our retirement planning section outlines a number of options.
Fringe benefits ? This includes all the other types of benefits that you might consider providing your employees (reimbursement for travel expenses, car allowances, etc.). In some cases, you can deduct the cost of providing the benefits and your employees will not have to pay tax on them.

Selecting and creating a benefits package can be time-consuming, but the advantages for you, your business and your employees can be tremendously rewarding. Consider consulting with a financial advisor as you set up benefit options for your business.

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