THEultimateemployee benefits guide

contentsOverviewpg 1Part 1 - Why Are Employee Benefits Important?pg 2-6Part 2 - Types of Employee Benefitspg 7-17Part 3 - HRAs, FSAs, and HSAspg 18-24Part 4 - Employee Benefits Solutionspg 25-27

The OverviewWhy are benefits important? What’s the differencebetween perks and benefits? How can I bring in andkeep the best employees to my business?If you’re a business owner who wants to learn more aboutbenefits, you’re in the right place. We’ll answer all thesequestions and more in the ultimate employee benefits guide forsmall business employers.Think of your business as a tree. Your roots dig deep into the groundto provide your trunk, branches, and leaves strong and stablefoundation. Roots protect your tree from falling over and help youabsorb water and nutrients needed to survive. Your business needsstrong roots to bring in talented employees and keep them happy.Your roots will keep these talented employees from fleeing to thenext best opportunity. Think of your roots as your benefits package.Stable and supportive benefits will attract and keep the bestemployees.“32% of U.S. employers are finding itmore and more difficult to fill jobs attheir companies.”- Manpower Groupwww.employersresource.com1

Part OneWhy Are Employee Benefits Important?What’s your ‘big draw’ when trying to recruit and retain talent?Do you have one outstanding selling point? Not all businesses areable to offer things like a pet friendly office, work from homeflexibility, yearly retreats, unlimited time off, or a high-endsalary. Building a benefits package that’s competitive is possiblythe best way to compete for talent.Employers are finding it more and more difficult to hire and keepquality employees. Maybe it has something to do with theeconomy or a surge of younger workers eager to jump ship. Callit what you will, the stakes are higher than ever. You need to finda way to attract the employees you need.You want to hold onto your high quality employees. Qualityemployees miss less work days, and are generally happier. Toaccomplish this, we recommend giving them the benefits theyneed and maybe a little of the perks they want.Employee benefits are often viewed as difficult and expensive tooffer as a small business. So why bother? Why are employeebenefits important? Here are the top 5 reasons:1. Attract better employeesListing employee benefits on that job description makes a bigimpact on the quality of candidates that apply. Differentgenerations will care about different benefits. So, consider thepeople you’re trying to attract and what benefits will appeal tothem. Read more about this here.2

This entrepreneur article sites a2011 Harvard Business ReviewAnalytic Services survey ofhuman resource leaders. Itfound 60 percent said anattractive benefits package is"very important" in recruitingand retaining qualityemployees. Contrast this withonly 38 percent who said a highbase salary is very important.3

2. Keep great employeesIf you rely on a high wage to attract new employees, it will beharder to convince these same employees to stay for the long run.What will you do when that employee gets offered a higher wageat another company?In its most recent annual trends survey, MetLife found thataround 49 percent of employees said benefits were an importantreason they came to work for a company. Meanwhile, 60 percentsaid benefits are an important reason for staying.Employee benefits can help you hold onto thoseemployees after they help you attract them.Instead of using a cookie cutter approach, allow employees to pickand choose which benefits they take advantage of.Which benefits do job seekers really care about? What arepotential employees focusing on while considering a move to anew job? According to this Monster survey, the averageimportance by benefit looked something like this:Healthcare Plan: 32%Vacation Time: 25%Pay Raise: 15%Employee Benefit: 10%Performance Bonus: 9%Retirement Plan: 8%Notice, Healthcare and vacation time is rated above a pay raise.Then, right after pay you see employee benefits are listed again.This means employee benefits make up 67% of the most commonreasons employees choose to stay.4

3. Increase morale and promote betterwork/life balanceA competitive benefit package for your employees will boostmorale company wide. When morale is up and employees feelvalued in this way it can make them more productive.Many lump something called employee perks into the samecategory as employee benefits. We’ll talk more about thedifference between employee benefits and perks later in thisguide. But, there are some perks you can offer your employeesthat help them maintain a healthy work/life balance. You guessedit. This means more smiling faces, which translates to moredollars for your business.An Employee Assistance Program (EAP) is also a commonemployee benefit that employers can offer. These programs areoffered to help employees who deal with issues such asdepression, family crisis (divorce, death, etc.), alcoholism, drugaddiction, teen problems, suicide prevention and much more.4. Promote health among your employeesWellness programs are a group of benefits designed to lower thenumber of healthcare claims and claim costs. They promotebetter health among employees. These programs might includethings like health screenings, blood tests, flu shots, smokingcessation groups, and discounts on exercise classes and dietplans.Employees who have health related insurance are more likely toseek preventative care and treatment when issues arise. Thiskeeps your workforce healthier and happier.5

5. You’ll sleep better at night.Providing employee benefits like Short and Long Term Disability,AD&D, or Life Insurance can help you rest easier at night. Youcan rest easy because you’ll know that you are providing a safetynet for your employees in case something might happen to them.It’s a way to provide for and help your employees’ families incase of an emergency.Insurance, after all, is for peace of mind. In this case, you will feelbetter knowing that you’ve provided a great support system foryour employees through these benefits.So, why are employee benefits important? Because they help youattract and retain better employees, keep them healthy andhappy, and at the end of the day it helps you!16

Part TwoTypes of Employee BenefitsNow that you see why benefits are so important,you might be a little confused by the differenceof employee benefits and employee perks.Turns out, there is a difference, and you shouldknow how that affects your employees. Keepreading to learn more.7

EMPLOYEE PERKSWhat's the Difference?& BENEFITSDo you understand the difference between employee perks andbenefits?It hurts to see top talent walk out your door. You might not alwaysknow why they left. But you can take action to prevent it fromhappening again. You want to stay competitive and desirable in theeye of the employee. Employee perks on top of a few necessarybenefits will help you do just that.In this section, we’re going to explain the difference betweenemployee perks and employee benefits.18

What Drives Talent Away?Start with communication. Bad communication can repel talent.Communication is key to building a team that is engaged. It’simportant to practice quality communication before, not only afterproblems come up. The best benefits package in the world cannotmake up for a terrible communication environment.Millennials are often said to lack loyalty at their jobs and expect tochange jobs within the year. Being the largest population in theworkforce, this means higher turnover in the future for yourbusiness.What Makes Talent Stay?Perks like paid vacation time, flexible work schedules, free food,merchandise discounts, a company car, and even a standing workdesk can all be additional reasons to stick with a company. This istrue for any generation.A research study by the U.S. Chamber of Commerce Foundationstates that 56% of millennials agreed that a quality benefits packageinfluences their choice of employers. 63% say benefits are animportant reason in staying with an employer.Employee perks and benefits are powerful tools to help you keep yourteam happy and dedicated. For your own benefit, we urge you tofollow business trends this year and focus on reducing employeeburnout and dissatisfaction. Focus on the things you already have andmake any necessary adjustments to improve.9

EMPLOYEEDefinitionPERKSPerks have the potential to boost employee happiness and dailyperformance. They can spark an emotional response as perks care forthe employee’s wants. If essential needs are met through benefits,meeting your employee’s wants could be the extra mile it takes to bringin the top talent that YOU want.Perks can be pretty much anything and oftentimes won’t cost youmuch at all:Free foodVacations gifted for reaching goalsMerchandise discountsRewards programsUse of a company carExpanded or unlimited paid time offPaid time off for volunteeringEducation assistanceStanding work desksFlexible schedulesGym membershipsUnique break room areas and featuresLaundry serviceChildcarePet friendlinessWork from home opportunitiesBenefits Matter, but Perks Promote!The difference between employee perks and benefits doesn’t meanone is more effective than the other. They tend to be most effectivewhen working in tandem with each other. Granted, the outcome oftendepends on your employee’s priorities and attitude. But providingthese items will set the stage for a strong, happy, and successful team.10

So far, we’ve covered whyemployee benefits areimportant and how differentkinds of benefits (and perks)will affect your team. Next,let’s look at the four majortypes of employee benefits.UP NEXT:The Four MajorTypes of Benefits11

THE FOURMajor Types ofEMPLOYEE BENEFITSLet’s take a look at the four major types of employee benefits thatyour people are going to expect from the get-go.1. MedicalThe most common (and often most essential) type of benefitemployers can offer is medical coverage. The costs of healthinsurance, doctors and hospital visits, dental work, vision care, andprescriptions are rapidly increasing. Employers and theiremployees are finding it more and more difficult to deal.Unexpected medical expenses can cripple uninsured employees inan instant and that is why most talented employees have come toexpect basic medical coverage.To help with these medical expenses, some employers offer savingsplans like the Flexible Spending Account or HealthReimbursement Account on top of health insurance. Thesesavings accounts will cover all kinds of eligible expenses like:Copays and prescriptionsEyeglasses and contactsFirst aid kitsDaycare expensesClick here for a free downloadable list of FSA eligible expenses.We’ll take a closer look at these later in the guide.12

2. LifeAnother common employee benefit is life insurance oraccidental death and dismemberment insurance. If one of youremployees dies, life insurance benefits will provide payments tothe employee’s family to cover funeral costs and ongoing livingexpenses. If you’ve been involved in this process then youunderstand the incredible financial burden it can place on afamily.Accidental death and dismemberment insurance, or AD&D,provides a lump sum payment if death or dismemberment of anemployee is the direct result of an accident. If the employee hasboth insurance benefits (life and AD&D) and they die due to anaccident, both coverages will be paid to the families orbeneficiaries.For more information on Life Insurance and the four major typesof employee benefits, see our full article here.13

3. DisabilityEmployers can offer short term and/or long term disabilityinsurance to their employees. If an insured employee is injured orhas a lengthy illness, the benefit pays them during the period oftime they are unable to work.Short term disability pays a portion of an employee’s salary if theybecome temporarily sick or are unable to work. For example: If anemployee is out with a hernia, they might receive short termdisability payments.More than one in four people in their 20s willbecome disabled at some point before retiring.- Council for Disability AwarenessYou can protect your employees from an unexpected financial crisiswith benefits like short term disability. You’ll also be giving yourselfa little peace of mind knowing that if one of your employees shouldbecome disabled they (and their families) are going to be taken careof.In the event of a more permanent illness or injury preventing aninsured employee from performing their duties, that employeewould receive long term disability payments.4. RetirementThe most common type of retirement benefits is the 401(k) plan.This allows employees to deduct a certain percentage of eachpaycheck to put towards retirement savings. Some businesseschoose to match the employee’s deduction or match a certainpercentage of the employee’s deduction.Related Article: 5 Reasons Employers Love OurSlavic 401(k) PlanRealistically, not every business is going to have the means to offerthe most competitive benefits. But that is your opportunity to getcreative. Here are some recent employee benefits trends you mightconsider.14

FOUR EMPLOYEEto Adopt This YearBENEFITS TRENDSWhen looking at the state of talent at your business, your benefitsofferings are the first place to start. We want to help make surethose high-quality employees are looking at your business.These are the top employee benefits trends (outside of competitivepay and basic benefits offerings) that you should be considering.1. Wellness ProgramsA study by SHRM shows that 70 percent of over 400 employerssurveyed currently offer wellness programs.Wellness programs include information, resources, and incentivesto improve the lives of your employees. They encourage employeesto be healthier and happier. They can also impact your health caresavings, and create a sense of community in your organization.Some ideas to get your own wellness program started are:Smoking cessation programsHealth and lifestyle coachingOn-site massage therapyIncentives or bonuses for employees who participate in fitnessprograms or complete health assessments15

2. Health Savings AssistanceHealth savings plans like Flexible Spending Accounts or HealthReimbursement Accounts are huge assets to your benefits arsenal.They allow you to round-out a weak or high deductible health plan.They are also a great way to lessen the burden of health care costsand dependent care costs for your employees. They even offer taxbenefits to your employees and your business.Over the recent years, the popularity of FSAs and HRAs has risen insync with high deductible plans and health care costs. We’ll take amuch closer look at these options in part 3.3. Financial ManagementFinancial wellness is something Millennials and Generation Zemployees will be looking for as they enter the workforce. Many ofthem are suffering from crippling student loans. Helping workers tobetter manage financial stress is a great way to improve the healthand happiness of your workforce. Benefits like these will bevaluable recruiting and retaining tools:Student-loan assistancePaid parental leaveRetirement planningAssistance with medical expenses (like savings accountsmentioned above)Financial education servicesEmployee discount programsEmployee savings clubs like Christmas or vacation clubs16

4. REAL AppreciationHigh-quality employees expect to beappreciated for the high-quality workthey produce. How your business showsappreciation is up to you. But, make sureit appropriately fits the actions thatwarranted recognition. Great leaders usethis “benefit” strategically and effectivelyto keep employees satisfied with theirwork.The top reason employees leavetheir current jobs is due to a lackof feeling valued by their directsupervisor, according to Gallup.A pat on the back only goes so far whenyour employees are struggling to pay forhealth insurance or worried about thepossibility of an unexpected accident.Employee benefits trends are great toconsider if you have the means toprovide them. Next, we’ll take a look atwhat health savings options you canchoose from.17

Part ThreeHRAs, FSAs, and HSAsWhat Is a HealthReimbursement Account?A Health Reimbursement Account is a great way to supplementhealth insurance benefits. Keep in mind, they can only be offered toemployees who have coverage by a health plan that meets the ACAminimum coverage requirements.Through the HRA, employers reimburse their employees after anapproved out-of-pocket medical expense is made in that plan year.Reimbursements can sometimes include qualified health insurancepremiums. There is no limit to the amount an employer cancontribute to the account.Don’t mistake this for reimbursing youremployees for health insurance premiumsdirectly, as talked about here.18

The Benefits and Drawbacks of HRAsOne of the greatest benefits the HRA givesemployers and businesses is the flexibilityit offers. Since the account is managed andfunded solely by the employer, you havethe ability to design the program to fit yourneeds.You get to decide exactly how much tocontribute to the allowances, you decidewhat types of qualified medical expenses toreimburse (as long as reimbursements arefor qualified medical expenses under IRSSection 213(d), and you decide what to dowith unused funds. As long as yourprogram remains in compliance, you cantake the lead with this flexible option.Employers can choose to allow HRA fundsto rollover year after year while theemployee remains actively employed.Unused funds do not follow employees tonew employment or beyond termination ofemployment (unless continuing medicalplan coverage during a COBRAcontinuation period).The GoodThe BadSome employers might consider the addedadministrative duties to be the downsideof offering benefits like the HRA. Although,more and more organizations are choosingto outsource these duties to companies likea Professional Employer Organization(PEO) so their in-house HR staff can focuson more strategic initiatives.19

The HRA Tax AdvantageUsing an HRA allows you to deduct HRAreimbursements as a business expensewhich lowers your cost of FICA andFUTA taxes. Your employees alsobenefit from the tax savings, they willsave 20-40% on medical expensesbecause they are essentially using pretax dollars to make these purchases.The use of benefits like the HealthReimbursement Account are a greatway to recruit and retain qualityemployees. Especially if you can’t offerthe kind of affordable health insuranceemployees might expect, an HRA canmake up for it.20

What Are Flexible SpendingAccounts?Employees can choose to regularly contribute a portion of their payto an FSA to use for qualified expenses, like medical or dependentcare. The funds are deducted from the employee’s pay before taxes,so it can significantly lower the employee’s overall annual taxburden.Employers can use FSAs as a benefit to their entire organization.Employees will appreciate the relief on their taxable income, andemployers enjoy reduced payroll taxes because funds set aside forthe FSA are not subject to FICA (social security and medicare) orFUTA (federal unemployment) taxes.Flex Spending Accounts are a great addition to your benefitsarsenal by helping you attract and retain the good employees youneed.There are two different types of FlexibleSpending Accounts:1. FSA - HealthThe most common type of FSA is the health account. Used to pay formedical and dental expenses not covered by insurance. Over thecounter medications are allowed, but they often require a doctor’sprescription, except for some cases like insulin.2. FSA - Dependent CareDependent care FSAs are used for daycare expenses of childrenunder 13, or over 13 and incapable of self-care, or aspouse/parent/grandparent needing day care while you work or goto school full-time. We’ll go further in depth on the benefits ofDependent Care FSA soon.21

How Do You and Your Employees Use theFSA Funds?Health accounts will be issued a debit card used to make eligiblepurchases.Dependent Care accounts are not issued debit cards. Employees willneed to be reimbursed for purchases. To be reimbursed for aqualifying purchase, they will need to fax an explanation of benefitsstatement or receipt for services. The reimbursement will be sentdirectly to the account.Check out our in-depth article: What Are FlexibleSpending Accounts? The Complete Employer’sGuideWhat Happens to Unused FSA Funds atthe End of the Year?Urge your employees to be very careful when calculating theirannual elections. Federal tax law requires that money left in FSAs atthe end of the year is forfeited.Make sure employees know who to ask questions to, and who toreport claims with. Also, cover eligible expenses with them andprovide a resource where they can check the eligibility of theirpurchases.Click here for our free PDF of FSA Eligible Expenses22

What are the risks?The main risk when offering FSAs to your employees is the abilityfor funds to be used up front.For example: An employee could elect to contribute 10 a week,equaling 520 yearly. At the beginning of the year, that employeecould use the total 520 amount even though they haven’t actuallycontributed those funds yet.The risk being that the employee could resign shortly after havingused the funds, but before they have deposited the funds. In thatcase, your business would be responsible for the full reimbursement.To offset this risk, the use-it-or-lose-it rule means that any unusedfunds are forfeited back to your business at the end of the plan year.Check out our Flexible Spending Account FAQ pagehere.Make sure you have a benefits representative in your company or atleast someone through the third party administrator who employeescan contact with questions. We’ll talk more about this in the nextsection.FSAs Benefit Your Employees and YourBusinessFlexible Spending Accounts benefits your employees by saving themmoney on taxes and out-of-pocket medical expenses. But they mightbenefit your business even more by:Reducing payroll taxes.Reducing FICA and federal unemployment taxes.“Filling-out” your benefits packages resulting in increasedemployee retention.23

The Benefits of Dependent Care FSAMillions of Americans have children or dependents who need careduring the day while they work full-time. In most U.S. families, all ofthe adults work, putting a large financial burden on those families tofind day care. Offering a dependent care FSA option will help lessenthis burden on your employees.The Center for American Progress fact sheet onchild care says the annual cost of child care is higherthan a year’s tuition at the average four-year publiccollege in most states.Any way you can help lessen financial burdens for your employeeswill make them happier and possibly even more engaged with theirwork. Your employees will be less stressed and feel greater loyaltytoward your company when their needs are met.For a more in-depth look at Dependent Care FSAs,check out our recent article here.The Difference between HSA and FSABoth, HSAs and FSAs, allow employees with health insurance to setaside their own money for healthcare expenses includingdeductibles, copayments and coinsurance, and prescription costs.Your employees will usually receive a debit card for these accounts,which they will use to pay for eligible expenses throughout the year.But, not all of your employees will qualify for the Health SavingsAccount. Only employees who have high-deductible health plans(HDHPs) can select the HSA. HDHPs are health insurance plans withhigh deductibles.HSAs and FSAs share similar tax advantages to your employees andyour business. To learn more about the Health Savings Account seeour recent article, here.24

Part FourEmployee Benefits SolutionsNow that you understand the importance of offering employeebenefits and have an idea for what benefits you’d like to offer yourstaff, how do you get employee benefits? You have a few optionshere:Employee Benefits Services1. The Provider/Broker SolutionYou could choose to find an insurance broker that will help guideyou in the process of obtaining an employee benefits package. Thislooks different depending on what you’re looking for: healthinsurance, retirement benefits, etc.Look for someone with experience in your industry. But keep inmind that brokers receive a commission from insurance companies.Plans with lower premiums like high deductible healthcare planscould generate lower commissions for the broker, potentiallyguiding how they will advise you.This solution also means that the broker is trying to find a plan foryou and your group of employees. This usually means a group of 50or less employees. Without being part of a large group, you do nothave access to the bargaining power and discounts that large groupshave.When it comes to health Insurance plans you will typically bechoosing between one of these common options:A traditional indemnity planManaged care (HMO or PPO)Self-insurance25

2. Professional Employer OrganizationAnother option for your business to obtain employee benefits isthrough a Professional Employer Organization. A PEO can pool all oftheir client’s employees in order to obtain better benefits at a lowercost than each individual company would get on their own.Their unique co-employment service model makes this possible.This may allow your business to provide better health insurancecoverage and other benefits like dental, vision, 401(k) and FSAs.You won’t have as much control over your insurance policies sincethe PEO can choose to change coverage at any time. PEOs aren’trequired to give warning to policy changes which could be viewed asan advantage or a disadvantage, depending on how you look at it.3. SHOP MarketplaceThe SHOP Marketplace or small business health options programwas created for small businesses with 50 or fewer full-timeequivalent employees (although some states may have differentmaximums) who want to provide health and dental coverage toemployees.The SHOP Marketplace only offers health coverage, dental coverage,or a combination of the two but does not offer other benefits.4. On Your OwnThat’s right. Many of the perks we discussed in this ebook are simpleand easy for you to set up and start on your own without the help ofany third party. Get creative. Starting a perk program for youremployees can be as simple as saying, “every Tuesday I will begrabbing sub-sandwiches for the office.” It’s amazing what this cando for boosting morale.26

5. Don’t Offer Benefits to Your EmployeesAre you legally required to offer benefits to your employees? Not ifyou have under 50 employees. But -- keep in mind that because ofthe recent changes in our healthcare law, all employees are requiredto obtain health insurance.Employees look to their employer as the first and preferred solutionfor this. For this reason, and for all the other reasons we haveoutlined in this guide, we strongly recommend you consider offeringa benefits package of some kind. The upside for your business is skyhigh.THANK YOU!However you choose to obtain your employee benefits, you can feelconfident knowing your employees needs are being met. Your retentionand recruitment will be improved through increased engagement andhappiness among your employees. Your overall productivity will beincreased as your employees are more motivated to succeed. With firmroots planted, your tree will be able to grow and thrive.Thanks for reading this guide. We hope you’ve learned something newand feel one step closer to an Employee Benefits solution for yourbusiness.Having employees has never been easier.www.EmployersResource.com1-800-574-466827

category as employee benefits. We'll talk more about the differencebetween employee benefits and perks later in this guide. But, there are some perks you can offer your employees that help them maintain a healthy work/life balance. You guessed it. This means more smiling faces, which translates to more dollars for your business.