As a business owner, it is thrilling and exciting to be off on your own! I can't even explain it fully, but when I opened up my own financial planning firm without anyone "over" me, there was actually a huge sense of relief. I could finally do things my way and earn whatever I was capable of.
On the other hand though, that freedom comes with a lot of pressure. You thought I was going to say responsibility, didn't you?
All stages of the business are in your hands to start: Marketing, sales, accounting, all of it!
So much pressure!
One of the greatest joys as a business owner is to get to a point where you can hire other people to share the workload with and thrive in respective areas.
In the modern work era, one of the most essential parts of hiring good employees is having good benefits. I learned this the hard way as a recent hire quit after he was pressured by his parents to do what was best for him. He is 25 and desired group benefits that we just couldn't offer yet!
I wanted to talk about some things to consider as you think about hiring or offering group plans to employees.
1. Group Health Insurance
Health insurance is the biggest cost for most people coming from their wages besides taxes. Many workers desire that their employer offers a supplementation to offset the costs of health care.
As the owner, something to consider is if you'll offer high deductible health plans or not. This would allow for employees to have lower premiums each month, and potentially open an HSA. If you offer more of a premium plan with lower deductibles and co-pays that will cost you more as an owner to pay the other half of the higher premium plans.
2. Group Disability Insurance
One of the primary reasons for bankruptcy is medical expenses relating to a long-term injury or disability. As a business owner, I'd recommend that you get a group plan—not only for your employees, but also for yourself!
What if you can't perform your job anymore? How could you pay yourself? What about employees? There is another plan called Disability Overhead Insurance that will pay for your overhead if you can't work, so check that out too!
For your employees, I'd say to at least match what else is typically offered at many companies.
- You pay the group premiums, making it free to employees.
- The benefits are taxable.
- 60 percent coverage.
- 60 percent of employee income is replaced before taxes.
- Can do other plans like 50 percent (cheaper) or 75 percent (more expensive to you).
Max Per Month
- You can set a limit of coverage by saying 60 percent of salary up to $5,000 per month.
- The smaller the max benefit, the more affordable to you as the owner.
Ability to Buy-Up
- Many group plans will offer special underwriting for employees to get additional coverage to fill any gaps in their plans.
3. Group Life Insurance
Many clients that I work with have enough life insurance to cover their salary for a year or two in case they pass away. Typically their employer covers that life insurance as a complimentary benefit.
If you have any competition for hiring good talent, it's almost as needed as health insurance to offer life insurance. Don't just stop at good enough though. Offer your employees the chance to buy-up their coverage to three, four, or even up to seven times their salary. Most insurers that offer those plans offer it as an expense that the employee pays, so it's really just a matter of checking the box.
Some plans offer the ability to take the life insurance with you when you leave as an employee. If you can, consider this option for your team. It is really tough to see when someone changes jobs later in life and then has to apply for new life insurance at a much older age.
4. Group Retirement Plans
Let's be honest, most people won't save for their future unless it is systematic and automatic.
If you offer a group retirement plan, this will be a huge benefit for your employees and a push in the right direction for their financial future.
There are several different plans depending on if you want to be obligated to put in the same amount for each employee, or if you're a non-profit. This aren't all of the features, but a quick snapshot for the different types of group retirement plans.
- A 401(k) usually works best when an employer wants to offer a similar match for all employees, and also has a good number of people in the plan—100 or more.
- Simple IRA, or Savings Incentive Match Plan for Employees: Mandatory two percent contribution from employer; employee can put up to three percent or $12,500.
- SEP IRA, or Simplified Employee Pension: A lower cost plan with flexibility based on profits. Only employers can contribute.
- A 403(b) is like a 401(k) for a non-profit.
With all of these considerations as a business owner, there is a lot to weigh in with the business budget and financials. What I think is most important is to prioritize what you feel is important to attract and retain your team, and to make sure that you've done what you would care for if you were in their shoes.