The Hidden Costs of Hiring an Employee: What You Need to Know

So we have entered a new year, which means resolutions have been placed (and already broken for many), and optimistic goals are even higher than ever. You may set personal goals to get to the gym more, eat better and hang out with your family more. Then there’s those of us who set goals for our business. Perhaps this is the year that you are going on a hiring spree and finally growing your business. You are going to be raking in so much money that by the end of the year you’ll be on a yacht in the South of France.

Slow down there. Before you hand out that W-4, make sure you know the hidden costs of hiring an employee. If you think it’s as easy as paying the wage you agreed to, you’re dead wrong. Here’s what you need to know.

Think about your first job. What did you do? Work at a restaurant as a waiter? Maybe a bar or little retail shop? Or perhaps you worked as a professional assistant or secretary. Whatever it was, you started out somewhere. With that job probably came a benefits package. A lot of employers, especially years ago, offered a full Employee Benefits package, which included coverages such as group medical, dental, vision, life insurance and disability coverage. If you worked for a large employer, you may have even had all the expense covered by your boss.

Wow, have things changed. Now, if your employer offers you an Employee Benefits plan you are one lucky employee. The jobs that have a benefits package are considered “ultra coveted,” and therefore, people will fight for them. The shift, it seems, now lies in the favor of the employer.

  • If you offer benefits, they will come.

But at what cost? How can you be the rockstar employer and offer an Employee Benefits package, creating these coveted positions with a benefits package, and still make that trip to the South of France? Relax, you have options (https://www.entrepreneur.com/article/80158).

We have seen the Employee Benefits market change entirely since we started this business in 2008. Benefits back then were a third of the price, and the plans were amazing. You could get a $500 deductible health insurance plan for what a $7,150 deductible costs today. The rising costs have taken a huge toll on businesses, and employers have been forced to offer those high deductible, catastrophic plans.

The employers, however, who offer an Employee Benefits plan to their employees have a huge advantage over employers who don’t, and create a much more stable, long-term environment for their employees.

Wow, this means that on top of what I’m paying this employee, I’ll have to pay for an Employee Benefits package for them? How on Earth am I supposed to afford that?

Yes, that means you will be paying for an Employee Benefits package, but the good news is that you won’t have to pay all the costs of the plan (insert a big “YAY” now). The law doesn’t require employers to pay any part of an employee’s health plan premiums. However, many insurance companies require employers to pay at least 50 percent of their employees’ premiums (http://www.tdi.texas.gov/pubs/consumer/cb040.html). If you are a small business with fewer than 50 full time employees, you aren’t required to provide benefits at all (over 50 and you’re required, sorry).

  • So why on Earth would I provide an Employee Benefits package at all, then?

Do you want to be the employer with high turnover because you don’t have employees who are devoted to their job, or, do you want to be the big shot who offers an Employee Benefits package and has employees who not only love their job because you are so awesome to work with, but because they have great benefits and can take care of their family’s insurance expenses? Those employees who have coverage are definitely going to be the employees who are committed to their job long-term, versus the employees who only see this as a temporary position until they get the better job WITH BENEFITS.

Think about that employee you have who could use this. Maybe it’s your receptionist- the single mother with a small child who has an illness and practically lives at the doctor’s office. Or perhaps it’s your personal assistant, someone in her 50’s who was diagnosed with Breast Cancer and isn’t sure how she is going to pay for all the chemotherapy treatments because her employer doesn’t offer an Employee Benefits plan (nice job there).

So, as you see, creating an Employee Benefits package isn’t just about your pocketbook. Okay, yes it is. But remember those resolutions you made for this year? Your business was going to GROW. And how was this going to happen? By HIRING employees. What about employees who you hire, pay to train them (your time is worth something, I’m sure), then they leave? No job commitment. Wouldn’t it be an even better investment to hire, pay to train and RETAIN because you’ve created an environment that this employee sees as SECURE and LONG-TERM? JACKPOT!!! You’ve now figured out a way to grow your business effectively. Congratulations.

So, I’ll be the one to break it to you. The cost of an Employee Benefits package is expensive. It is. You will have sticker shock when you see the plan- the same way you did when your child decided they wanted to pursue a college education… at Harvard. It is expensive, but absolutely necessary if you want your business to grow effectively.

The good news is that not all your employees have to enroll (first good news you’ve read so far) and your part-time employees don’t even have to be considered eligible for coverage at all (I know what you’re thinking and the answer is NO, you cannot make all your employees part-time. Nice try.). So, the eligible employees who want the coverage can enroll (with a participation requirement, of course. You’ve got to love those laws).

The even better news is that there are so many Employee Benefit plan options available to groups that aren’t, unfortunately, available to individuals any more. The PPO and Open Access plans that everybody has always been used to are still available to businesses.

On top of standard Employee Benefits, there are voluntary plan options available to you and your employees. Yes, you guessed it. Voluntary means the way it sounds. The coverage election is completely voluntary to the employee, and if they want the coverage, they pay for all of it. Awesome times a million.

Now that you know about the Hidden Costs of Hiring an Employee, you have a lot to think about. Are you ready to really grow your business the right way and retain employees with an Employee Benefits package? If so, it’s probably time we talk about your options. We are experienced Employee Benefits advisors and know how to structure a plan that will be the best for your situation.

Contact us for more information today.