The Ultimate Guide To Setting Up Employee Benefits


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In our last presentation we continued our series on how to hire and manage with a look at “How to Design an Employee Compensation Plan.” As we discussed in that video we believe you should develop a “total compensation philosophy” for your business that includes a dollar amount of pay, opportunities for professional development, and benefits. This presentation will help you understand what’s involved with offering benefits, health insurance and retirement benefits. So let’s get started!

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The Ultimate Guide To Setting Up Employee Benefits

  1. 1. The ultimate Guide to setting up employee benefits by
  2. 2. This presentation will help you understand the benefits portion of your compensation plan, and answer these three main questions: 1. What are typical benefits? 2. What are they going to cost your business? 3. Where can you get them?
  3. 3. Things you should keep in mind 1. Benefits are not one size fits all. The appeal of certain benefits will differ depending on the demographics of your company. 2. Let your employees to choose from different benefits options so they can tailor their benifits to their specific needs.
  4. 4. Things you should keep in mind 3. You won’t know what is most important to your employees if you don’t ask what they want. Ask them what their priorities are. This way, you won’t waste money by offering benefits that don’t appeal to your employees.
  5. 5. For the sake of simplicity, this guide is divided up into three core benefit categories: 1) Healthcare 2) Retirement benefits and 3) Specialty benefits.
  6. 6. Category 1: Healthcare
  7. 7. Health Insurance The most important, but also the most expensive benefit that you can offer your employees. Healthcare is not currently mandatory but offering it can help you attract and keep top quality talent.
  8. 8. You can purchase group health insurance from insurance providers, or you can shop through the new health care marketplaces created by Obamacare. Offering healthcare through the SHOP Exchanges may also qualify your business for a number of tax breaks. For more on this read our Take a look at out Ultimate Guide To Obamacare.
  9. 9. How Much Does Health Care Cost? In the past half of small business have spent 7.5% of payroll cost, and about a quarter more than 15%.
  10. 10. Where You Can Get Health Insurance? If you decided to purchase from an insurance provider, you can get a direct quote from their website or a broker. Some of the top providers are: •United Healthcare •Aetna •Cigna
  11. 11. Check this great guide for an overview of different types of plans available to employers. Also check this article on how to choose the best plan for you. Before you decide on a plan, you should look at the SHOP exchanges,which allow you to compare different plans online. You can access your state’s exchange here.
  12. 12. Category 2: Retirement benefits
  13. 13. Offering retirement benefits can help your company attract and retain top talent. Retirement benefits are broken down into two categories: •Defined Contribution Plans •Defined Benefit Plans
  14. 14. Defined Contribution Plan The basic concept is to encourage employees to set aside their own founds for retirement each pay period.
  15. 15. What will a defined contribution plan cost? This will depend on the size of your company, and how much they end up saving. For many small business, the SIMPLE IRA’s and SIMPLE 401 (k)s are a good option.
  16. 16. These only require 2 page IRS forms, and cost $350 plus $25 per participant. They both allow total combined contributions (which is employee contribution + employer matching) of up to $11,500 per year. A full 401 (k) is only a good idea once your payroll reaches about $500,000.
  17. 17. where can you get a defined contribution plan? Before setting up the right contribution plan with a professional, familiarize yourself with the different types of plans available for small business and the features and benefits of each using the following links: •Types of plans available for small businesses from •Comparison Chart of the features and benefits of each from •How to launch your company’s 401K plan from •Many more resources from
  18. 18. Category 3: Specialty benefits
  19. 19. “Specialty benefits” refer to benefits generally considered of secondary importance to healthcare and retirement benefits. Nevertheless, specialty benefits can help your company expand its range of benefit options and really distinguish itself from the competition.
  20. 20. Life Insurance Generally, life insurance policies should pay out the equivalent of what an employee makes in one year, and at the very least enough to handle funeral expenses. We don’t recommend going below $20,000 when selecting a plan.
  21. 21. What will life insurance cost? In general, life insurance policies cost about 5 cents for every $1,000 worth of coverage. The exact rates, however, are based on a number of factors that include the size of the group, the company claims history, the occupations of the group, the gender and age of employees, and salaries.
  22. 22. Most insurance companies offer group life insurance, so shop around until you find one that suites your needs and budget. Fidelity, Vanguard and ADP all offer life insurance services, and here are 3 other top providers. Prudential Allstate New York Life
  23. 23. Disability Insurance Disability insurance provides your employees with a source of income in the event that they are unable to work. There are certain states that require employers to provide disability insurance, so check here to determine your obligations.
  24. 24. There are two types of disability insurance coverage: short-term disability (STD)   and long-term disability (LTD). STD benefits typically pay out around $1,000 a week, while LTD benefits are usually $6,000 a month.
  25. 25. What will disability insurance cost? Regardless of your company’s size, the cost of offering disability insurance is generally between 0.25 and 0.5 percent of total compensation. For 0.5 to 1 percent of compensation, you can generally offer both STD and LTD benefits.
  26. 26. Where can you get disability insurance? Disability insurance is offered by most insurance companies like Prudential, Allstate, and New York Life. ADP also offers disability plans. For more on offering disability insurance to your employees see this article from the NFIB and this site.
  27. 27. Dental and Vision Coverage There are three options for offering dental and vision plans: Fully-Funded Employer Plans, Partially-Funded Employer Plans, and Fully-Funded Employee Plans, where employees pay the total cost of the plan, but the employer takes over administrative costs and payroll deductions.
  28. 28. What will dental and vision coverage cost? The costs of dental and vision benefits depend on different factors, including plan design, provider network, healthcare expense trends, group characteristics, funding mechanisms, and administrative expenses. It is best to contact your broker or provider directly.
  29. 29. Where can you get dental and vision coverage? Most health insurance companies, including United Healthcare, Cigna, and Aetna also offer dental and vision coverage. ADP also offers both vision and dental. For more on setting up a dental plan see this article from
  30. 30. Paid Time Off Paid time off refers to vacation time, family medical leave, maternity leave, and flextime. There are certain instances in which you are legally required to offer medical and maternity leave, so read this article to make sure you are aware of these.
  31. 31. How will paid time off cost? The cost of paid time off will depend on your individual payroll expenses, and the amount of time you decided to offer. Here are some additional resources for setting up your vacation and paid time off policies. •“How to Set a Workplace Vacation Policy,” from •“The ABCs of Offering Time Off,” from •“Sample Employee Leave or Time Off Policies,” from
  32. 32. Tuition Assistance Tuition assistance programs are a type of benefit in which an employer reimburses the costs of their employees’ continuing education. Offering tuition assistance can help your workforce expand its skill set and attract employees interested in personal career development.
  33. 33. What will tuition assistance cost? Tuition assistance can be costly so be sure to set clear guidelines when developing your benefit package. Despite these costs, adding tuition assistance may help you qualify for certain tax breaks.
  34. 34. Where can you get tuition assistance? Tuition assistance is largely an internal policy, so you can decide how to handle reimbursements. For additional information on tuition assistance programs go here and here.
  35. 35. Further reading You may find these links and articles helpful as you develop your benefit packages: •“Required Employee Benefits” •“How to Build a Competitive Employee Benefits Package” •“The Best Benefits Package for Small Businesses” •“8 Uncommon Benefits Your Employees Will Love”
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