Small businesses are faced with a dilemma. With a finite amount of money, should they offer a robust benefits package or focus on maximizing employee salaries? When your business offers a 401(k), health insurance, or a combination of employee benefits, their effect on employee morale and retention may actually surpass that of a larger paycheck with fewer, or no, benefits.
For example, a recent Harris Poll revealed that 4 out of 5 American workers would rather receive an upgrade in their benefits package than an increase in pay. So, why do employees often value benefits over maximizing their salary?
The cost of a sudden health crisis may negate any extra salary an employee may have earned. In 2013, unpaid medical bills were one of the most common reasons a person was forced to file bankruptcy. As a whole, Aetna reports that health care spending may account for 20 percent of the US gross domestic product (GDP) by 2021—one-fifth of the US economy. Therefore having health insurance may be the most valuable benefit an employee can receive.
Americans’ retirement savings are at an all-time low. Offering a 401(k) or similar retirement account may help your employees and their families meet their retirement goals. Employers also have the option to match contributions to help grow retirement funds faster. An employee who receives “free money” from their employer each year (which may be compounded over time) may find it worth more than a salary in the long run. Measure the possibility for yourself; what would compound interest do for your employees?
Some of your employees need to also take care of their families. Benefits like life insurance, and short- and long-term disability, are taken seriously by employees. If something were to happen to them, how can they feel sure that their family will be taken care of? If your employees are the only ones who can provide insurance coverage for their entire family, a larger paycheck won’t always help with the major expense of ancillary coverage that their family will need.
There is no question about it: benefits can be a much more meaningful offering to employees than a maximized salary. Not only can benefits potentially be worth more monetarily over time, they may also offer priceless piece of mind that can alleviate some of the stress your employees feel at work and at home. That’s a benefit anyone can appreciate.