Employers and employees alike acknowledge the importance of benefits, especially when it comes to retention, loyalty, and morale. According to a study published by Willis Tower Watson, 78 percent of employees reported that they were more likely to stay with an employer that offered a great employee benefits program.
Small- and medium-sized businesses account for approximately 99.9 percent of companies in the US, according to the Small Business Administration (SBA). Unfortunately, many of these companies continue to struggle with high turnover rates. Staying competitive in a saturated job market requires modern businesses to reevaluate their benefits offerings.
Small- to Medium-Sized Businesses’ Insight on Benefits
Competition for talent remains high as labor shortages continue post-COVID-19. According to a monthly jobs report published by the National Federation of Independent Businesses, 49 percent of small company owners reported that they had job openings that they could not fill. Due to budget restraints, many small- and medium-sized businesses cannot compete with benefits packages offered by larger employers.
Despite financial challenges, companies throughout the country are making immediate changes to find and keep workers. A 2022 Small Business Index revealed that 37 percent of small businesses plan to increase staff this year and 60 percent said that they have already started to implement new changes to improve employee retention. Some of these changes include increasing wages, offering more work schedule flexibility, and providing employees with additional opportunities to learn and grow in their roles.
Benefits are one of the biggest motivators for employees and a priority for many job seekers. To keep up with the competition, many small- and medium-sized businesses are developing compensation strategies to help keep their workforce motivated, healthy, and productive. Offering a comprehensive employee benefits package is an important component of any employee retention strategy.
Here is a closer look at some of the latest insights on benefits from small- and medium-sized businesses:
Offering group medical insurance is becoming more expensive, causing many employers to worry about how they will sustain these benefits in future years. These concerns are particularly common among small company owners who have tighter financial restrictions and fewer resources at their disposal than larger corporations.
Annual group health insurance premiums have reached an average of $7,739 for single coverage and a whopping $22,221 for family coverage, according to the Kaiser Family Foundation (KFF). Premiums run even higher for certain types of health insurance plans, including health maintenance organization (HMO) plans and preferred provider organization (PPO) plans. In certain industries, such as communications, transportation, and utilities, as well as in certain parts of the country like the Northeast and Midwest, premiums are especially high.
While the cost of medical premiums across the board saw an overall decrease in 2021 due to the rate of inflation, there was also a 7 percent increase in the Consumer Price Index, according to a 2022 Ease SMB Benefits and Employee Insights Report. This increase is the highest it has been in more than 40 years. To help offset these growing medical insurance costs, many employers are looking toward alternative solutions like Health Reimbursement Arrangements (HRAs).
Health Plans Offered
While the cost of medical insurance premiums for small- and medium-sized businesses may be on the rise, many organizations have remained consistent in the types and number of health plans they offer. HMOs are one of the most prevalent types of health care offered by today’s employers. This type of plan remains popular due to its relatively low cost compared to traditional fee-for-service plans.
Fee-for-service health insurance plans also referred to as indemnity plans, provide employees with the freedom to choose their own physicians and medical facilities. However, there are some downsides to these plans. Insurance companies typically require patients to fulfill an annual deductible before they pay a specified coinsurance rate. Coinsurance rates are typically 80 percent/20 percent or 70 percent/30 percent. The insurance company is responsible for the higher percentage.
The cost of health insurance plans are also dependent on participation rates. According to the Ease Insights Report, participation in high-deductible health plans has increased since 2018 by more than 65 percent. In 2021, PPOs and HMOs accounted for over 85 percent of health plans. The report also revealed that almost 50 percent of small business employees choose to waive their coverage.
Voluntary Benefits Trends
While the physical and mental health of employees is of the utmost importance, many employers understand the value of offering certain nonmedical benefits. Offering voluntary benefits is an effective way to attract and retain workers, especially after the pandemic. There are many types of voluntary benefits that can be offered to workers without significantly impacting the company budget.
Certain “nontraditional” benefits like financial wellness, hospital indemnity, cancer insurance, pet insurance, and legal services are becoming more common in small- and medium-sized business benefits offerings. Other essential benefits like dental care and vision insurance coverage are also commonly found in benefits packages.
In 2018, just 36 percent of employees found voluntary benefits to be important to their talent and rewards strategy, according to a Willis Towers Watson Survey. This number has increased to 94 percent, meaning the majority of employers now see voluntary benefits as a critical component of their employee benefits package.
Another area in which voluntary benefits have changed is with remote health services. Since the start of the pandemic, remote health services have significantly expanded to address the rise of employee stress, anxiety, and depression rates. Employers are helping to combat these types of issues by making remote health services more affordable and accessible to their employees.
Employees are Expecting More for Their Benefits
Employers across the country are looking to fill more than 11 million job vacancies, according to the Bureau of Labor Statistics. While increasing wages is one way to attract talent, many employers are finding that benefits gain more attention. However, providing health insurance alone is not sufficient. Today’s workforce expects a more comprehensive employee benefits package.
While not all small- and medium-sized businesses are able to offer all the benefits that they would like to, many are expanding their benefits offerings to keep their employees happy, healthy, and productive. One of the most sought-after benefits is remote work opportunities. While COVID-19 made remote work necessary for many industries in 2020, most employees have since returned to the office.
However, employers that allow their employees to work at home either part of the time or all the time have seen positive results. Other highly sought-after employee benefits include healthcare, paid time off, flexible hours, paid family leave, and free food in the office. The idea of a four-day workweek is also gaining a lot of attention since Microsoft Japan recently allowed their employees to work just four days a week while still receiving their full five-day paycheck.
Work with New City to Give Employees the Best Benefits
Creating a great employee benefits package can help make a workforce feel more appreciated for their dedication to your company. Employee benefits can also help employees provide for their families, individual health, and their financial future.
New City Insurance is an experienced employee benefits consulting firm that specializes in benefits consulting, compliance, insurance, and tech services. To learn more about how small- and medium-sized businesses can provide their employees with the best benefits, request a consultation with a benefits professional at New City Insurance today.