For businesses for all sizes, employee benefits is one of the top spend category. Large companies can somewhat control and reduce employee benefits cost by leveraging the volume discounts but for small to medium business that is not an option. Also given the recent changes due to Affordable care Act(ACA), SMB’s benefits cost will further increase
Following are some of the ways in which SMB’s can control and reduce their employee benefits cost
Consider Outsourcing HR to a PEO
Besides providing experienced and professional HR support, outsourcing HR to a Professional Employer Organization(PEO) can considerably reduce your cost of the employee benefits.
The PEO groups all clients into a “buying pool” when negotiating rates with insurance providers. That means that SMBs can take advantage of negotiating large company rates despite their smaller size. That can be especially beneficial as you can find some insurance providers that often apply “age bands” when pricing out a SMB’s benefits plan.
Plan costs per employee are subject to what “age band” an employee falls into. So, the older the employee is, the higher the individual plan cost is needed. Using service of a third party HR provider for benefits administration can eliminate the utilization of “age bands.”
Educate your employees
As you probably already know,the costs of HMO and PPO plans are not the same thing. So, educating your staff on the costs and features of each of them and helping them choose the right plan can remarkably impact overall benefits costs. This is especially true for SMBs with a younger demographics.
Most of the plan providers are willing to educate companies and their employees about the options by holding seminars on-site. According to Principal Financial’s Friedrich, [tweetthis]“The biggest mistake a company can make is to offer lots of options but no education.”[/tweetthis]
Every SMB should start the process of selection by breaking the benefits into three main groups: health care, retirement, and specialty benefits.
If you want to read more about health care, retirement, and specialty benefits, click here.
There’s no one-size-fits-all solution, but plan providers can give you guidelines for choosing the right benefits package. The also can advise you while picking a local broker to help you steer the multitude offerings.
Offer a more booming benefits package but make employees contribute
If SMB wants to compete effectively and attract talent, executives should offer health insurance, life and disability insurance and a retirement savings plan. For specialty benefits such as vision and dental coverage, investigate what your current employees need and whether they’ll be willing to contribute.
It common practice that employees pay 10-20% of the cost of their benefits package.
Investigate the market
Switching providers are really time intensive process, but it’s always a good thing to check rates of several providers every year. The tendency of increase of annual rate is not universal for all providers.
Investigating the market can give you the chance to find more good advice like the opportunity to shift to Consumer Directed Health Care programs, which are customized to meet the needs of a specific group employee benefits plans.
Choose higher deductible plans
The traditional health insurance plan works with copays and deductibles. It helps with paying Doctor bills, prescriptions and lab tests from day one. However, there may be an initial deductible to be met, but it is lower in most of the cases.
A high deductible plan, naturally, has a high deductible that must be met before the insurance will start paying for the doctor’s bills, prescriptions, and lab tests. To be in the situation to qualify as a high deductible plan your deductible must be at least $1000.00. The average deductible is $5000.00. Once you reach the deductible the insurance will chip in with 100 % coverage. That means that you will no longer be obliged to pay additional costs. This can be a good option if you think you can’t afford health insurance.
Offering employee discounts on Wellness Program
[tweetthis]SMBs can save money in the long term by adding “wellness component”- fitness programs, nutrition counseling and many other health plans.[/tweetthis] There are insurance plans that include a wellness program at a minimal cost such as $150 to $200 per employee per year. The government is weighing tax incentives for SMB wellness programs as well.
There are many companies such as Facebook that extend their benefits to offer help when it comes to health (fertility treatment for example), stress, fitness, and general well-being. That way of thinking can be very beneficial for staff, and help with improving productivity as well as reducing absenteeism.
Work with a Third Party Administrator
One of the best ways to implement a expense-reducing strategy is to work with a Third Party Administrator in order to analyze your Employee Benefit Program costs. The Third Party Administrator will use this information to find opportunities to reduce expenses and increase the satisfaction of the employees with your health care program.
Rewarding employees for good health
In most cases, this is positioned as a cost cut for employees who participate in company-sponsored wellness programs and/or who are engaging in healthy activities.
It’s a fact — healthy employees are often very productive employees. That is the reason why you should reward your employees and their families for a healthy lifestyle. Through such stimulating reward program, you surely will get a workforce more committed to good health and a healthier climate in your company.
Like with many other employee motivation programs, disciplining employees for unhealthy lifestyles is usually not as effective as rewarding wanted behavior.
You can find many ways to reward employees who are working toward better health.
Offer more transparency into an employee’s health information
Offering more transparency into employee’s information and expanded access to an individual health care expenses can be good practice . Most employees would like to have online access to this information, but only if their privacy will be protected – they do not want for their health care information to be integrated with any online record keeping or social networking.
Manage benefits cost with technology
Managers and employees can come to significant cost savings by using online tools like benefits enrollment and payroll entry. The number of companies that are found their way to lower their costs by expanding their usage of benefits technology, automation, and employee self- service is rising every day.
Remember, the expense of premiums isn’t the only thing that makes benefits so expensive. The cost of administering benefits is significant factored as well. So, making good use of benefits management automation is critical if you want the best practice in your company.
Savings extracted from technology can come from the ability to:
- Run faster transfers of registration information to benefits carriers
- Realize important savings in time required for preparation and entry of data
- Boost employee satisfaction with benefits information access
- Cut down information errors in benefits admission
SMBs which set up web-based services for benefits are often able to lower their cost for benefits, decrease overall HR administration associated with benefits, and improve their ability to attract job candidates and retain employees.
It can be a very nasty choice – offer juicy benefits and give up on profits vs. cutting back on benefits and risk losing good employees.
The need of figuring out the right formula has grown more critical as health care costs continue to rise and the economy continues to stand. Even worse, most entrepreneurs of SMB don’t have the time and/or the expertise to unscramble this messy calculation.
It’s very hard to manage to come with a well-balanced basket of benefits, which is neither too luxurious nor too Spartan for most SMB owners.
Hope that this 10 ways will help you reduce employee benefits cost.