Small and emerging companies offer many advantages that big companies don’t. A tremendously attractive benefits package generally isn’t one of them. Without the large numbers of employees required to negotiate favorable insurance deals and affordable financial services, small firms can’t compete head-to-head with large companies for benefits. But they should offer a package that meets employee needs and is competitive with what other small companies offer.
A standard benefits package usually includes varying degrees of health coverage, a 401(k) plan, and a few fringe benefits. One thing to keep in mind: to receive a competitive rate on all health plans and to be able to participate in a 401(k) plan, a company must have at least five employees.
Most small companies offer their employees the choice between an HMO (health maintenance organization) and a PPO (preferred provider organization). Typically, growing companies cover about 80 percent of the cost of medical insurance for employees and their dependents. Sometimes, depending on the age and marital status of their workforce, smaller companies cover 100 percent of the health insurance cost for employees and none for spouses or dependents.
HMO dental coverage is generally included as a health benefit and follows a similar 80-20 pattern.
Vision coverage is an added plus, but isn’t considered standard for a small-company benefits package. Vision plans vary, but most include free annual eye exams plus a yearly allowance for new glasses or contact lenses. HMOs and PPOs do include some kind of eye care coverage as part of their basic plans.
Long-term disability is a standard health benefit at growing companies; short-term disability is not. Whether a new company offers life insurance is often based on the age of the company’s founders. If the founders are older, life insurance will be a standard benefit. If the cofounders are in their 20s, life insurance may be available only to key employees.
401(k) and Savings Benefits
Most small companies try to put some kind of savings or 401(k) plan in place, but they rarely contribute money to them. An exception: when emerging companies are trying to sign on a choice employee. Even then, most growing companies do not contribute more than $2,500 a year to an employee’s saving plan. The majority of small company contributions max out at $1,000.
Extra Benefits and Perks
Some fast-growing companies — especially in high-tech — offer in-house massages, contributions toward health club memberships, meal reimbursement for employees working through dinner, and lunch delivered directly to employees’ desks.
Since no benefits plan is going to satisfy all employees, growing companies should strive for flexibility. When you select plans, change providers, add benefits, or make other alterations, be sensitive to your employees’ lifestyles and demographics (these factors make a big difference in preferences for health coverage and financial services). For example, older workers might care more about the cost of hospital stays or want greater flexibility in choosing their own doctor, whereas younger workers might be more worried about reducing their copayments and other out-of-pocket expenses. To find out exactly what’s important to your employees, it’s a good idea to survey opinions — formally or informally.