ProFinance Blog

New Business Owners: Save on Salaries by Offering Benefits

So, you’ve taken the plunge and started your own business as a way of getting some extra cash and giving yourself some personal financial freedom. And you know what? It’s going well – really well, in fact. After a year or so in action, you’ve been impressing clients and new customers with the products and services you supply, and all of a sudden you realize that you can’t cope with demand. For many business owners, it’s a sure sign that they need to start doing one particular thing – hire some employees.

By and large, these business owners are right. After all, you only have a single pair of hands, and there are only 24 hours in the day – you can’t physically do more than you can. Bringing in extra people could mean you double your productivity, and are capable of meeting all this new demand for your business.

Businesses

But let’s not beat around the bush. Hiring employees is one of the most expensive things you can do as a business owner. You’ll have to pay that salary every month, regardless whether or not your company continues to do well. And if for whatever reason, your growth and progress start to fall back again, you will have a large wage bill to meet without the sales or profits to match it. The solution? Outsourcing is certainly one idea – but if you do have to hire people, why not offer benefits instead of trying to match the going wage? Here are a few ideas on the very subject – so let’s get started with the basics.

The trouble with paying wages

When you are a small business, the simple truth is that you can’t afford to match the huge salaries of your large, corporate rivals. And if you do try to entice people with the same kind of wage offers that are available from the competition, it could prove disastrous. As we’ve mentioned already, there are no guarantees that a period of growth will sustain, and you might end up with a massive salary bill and not enough income to pay it. But more than that, unless you can identically match the ratio of cost per sale at the same level you were working before, even selling more ‘stuff’ can prove problematic. Ultimately, when you are in the early days of growing a business, cash flow is everything – and if you are writing paychecks that account for all your cash every month, you can see where problems will start to lie.

The value of offering benefits

Here’s the thing about offering benefits to your employees – they like them! Work-based benefits give employees a little safety net, reduces the costs of their lives in several different areas, and also tells them you are concerned with their welfare. It’s really as simple as that. Throw in a lot of tax benefits and the lower wage bill, and you can easily see why benefits are loved by employees and employers alike. But what sort of benefits should you offer your staff? Let’s take a closer look at some of the many and varied options out there.

Healthcare

OK, so the recent healthcare act doesn’t require you to provide health benefits for your employees. But that doesn’t mean you should just discount it as unnecessary. Far from it, in fact. Not only are health benefits entirely tax deductible for your firm, but they are also an invaluable asset. It’s a fact that employees with health coverage are likely to stick around for much longer than those without. They tend to take fewer days off sick in a year, too – meaning you won’t be suffering from fewer productivity issues than a company that doesn’t offer their staff any medical backing. Plus, the best workers looking for a long-term role and somewhere they can grow and become accomplished will always seek out somewhere with attractive health cover. Now, of course, we’re not saying you should throw your staff the most attractive package out there. You should always use due diligence and take the advice of medical bill review services to ensure you aren’t being taken for a ride. But ultimately, if you aren’t offering health benefits, you can bet your direct rivals are. And it’s probably the reason why they seem to attract the top talent while you struggle on with the rest.

Retirement plans

Again, not every company has to offer a retirement plan, and when it comes to 401(k)s, it might seem like the employee is getting all the benefits. But actually, there are big wins from getting involved in these schemes for employers, too. First of all, offering a 401(k) is an enticing offer to all the top talent. People want security, and nothing is safer than a solid retirement plan. You also get tax deductions, so if you take your matching contributions into account before setting a wage structure, you will actually save money rather than waste it. And finally, the simple truth is that when employees have a retirement plan with Company A, it makes Company B a lot less appealing.

Wellness and paid time off

Perhaps you could include paid time off in your contracts with full-time employees? We all need to attend to personal matters, recharge on vacation and recover properly from illness – even your employees! Sick and personal days are a sign of trust and are also easily tracked if you think that a particular staff member is taking you for a ride. But in the vast majority of cases, the truth is that most employees won’t abuse the system, will see it as a genuine benefit, and become more loyal to you as their boss. But most importantly, you will improve productivity in a multitude of ways. For example, someone who is stressed about a home situation simply isn’t going to perform well at work. And finally, as an employer, you have an ethical responsibility to your workers. It makes sense to provide them with a safety net of sorts, and they will be all the more productive when it counts as a result.

Tina Roth

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