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Make benefits benefit you
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October 15, 1997: 2:32 p.m. ET
Ways to afford the benefits you need to attract and keep good workers
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WASHINGTON (CNNfn) -- For many small businesses, it's always been really tough to offer your employees good benefits.
But in recent years, it's gotten easier for smaller companies to at least offer the core benefits that employees want, experts say.
Even Fortune 500 businesses with lots of dealmaking power view benefits as a costly worry.
Health insurance, for example, averaged $4,332 per employee in 1996, according to the Washington-based Employee Benefits Research Institute.
Small businesses often pay even more, lacking the buying power to cut competitive deals with insurance companies and pension firms.
But small-company owners don't need to bang their heads against the wall.
For one thing, small-business owners can enrich their benefit packages by turning their staffs over to a "professional employer organization," or PEO.
Once known as "staff-leasing firms," PEOs "hire" the employees for the purposes of benefits, human resources and tax administration.
In return, the employees' company pays the PEO either a percentage of payroll, or a flat fee per week for the service (For more information on PEOs, visit the National Association of Professional Employer Organizations website).
Because PEOs bring lots of employees together into a single group, they can offer participating small businesses lower group-rate fees for standard benefits such as health insurance, 401(k) plans, disability, life insurance and more.
Troy, Michigan-based Genesys Group, for example, offers small businesses access to a 401(k) option, "cafeteria" flexible spending plan, a national PPO network and a vision and dental plan.
Genesys works with about 260 client companies, ranging from sole proprietorships to one 450-employee business.
The client companies pay Genesys a flat fee of $9 to $25 per employee per week for the support.
Many of Genesys Group's clients are based in Michigan, where unemployment stands at a 27-year low, making competition for good help fierce.
"Small businesses are telling us that they can't compete with unemployment being as low as it is," said Steve Opperthauser, marketing director for Genesys. "They need to bring more benefits to the table. That's why they approach us."
For employers who don't want to pay a PEO fee, there's at least some new help with pensions, notes David Kemps, manager of employee-benefits policy for the Washington-based U.S. Chamber of Commerce.
Thanks to provisions in the Small Business Jobs Protection Act of 1996, businesses can now create so-called "Savings Incentive Match Plans for Employees" (SIMPLEs), special pension plans designed for smaller firms.
The new law took effect in January, letting smaller businesses offer their employees a more-affordable SIMPLE IRA or SIMPLE 401 (k) plan.
Employers can choose to match up to 3 percent of an employee's salary, or put a contribution of 2 percent of salary per year into the fund.
SIMPLE pensions have become quite popular since their inception, Kemps said.
"A lot of small companies want to hire refugees from large businesses, and (new hires) usually come with (money in) a pension plan," Kemps says. "To retain (the new hires), you have to find a way to offer that plan, otherwise you may lose out."
Once smaller companies do start adding benefits, managers should be sure ask employees what they actually want.
With every dollar a risk, it's foolish to spend money on expensive benefits employees don't especially need, experts warn.
Often, by calling upon a bit of creativity, a small business can tailor benefits and perks for its particular team, notes William Dennis, a senior research fellow with the NFIB Education Foundation, an arm of Washington, D.C.-based small-business advocacy group the National Federation of Independent Business.
Dennis has found that smaller businesses typically add paid vacations, then health-insurance benefits, and eventually pension plans.
But Dennis said employers should pay attention to what their particular workers will likely appreciate.
He said young females of child-bearing age might value health-care benefits, while older males could prefer a strong pension fund.
Small companies should consider "anything from paid holidays to child-care allowances or parking," Dennis said. "Retailers may want to offer a discount for employees that want to shop in the store. There are all kinds of possibilities."
-- Anne Zieger
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