Entrepreneurs hear that they need to grow their teams and plan for bigger and better things every day. They develop plans centered on bringing in talent, creating new organizational structures, and putting that talent to work in core growth areas for the business. However, another key part of growing a team is planning for the wellbeing of the team. Yet, employee benefits are rarely at the top of an entrepreneur’s mind.
They should be. After all, a company’s success relies heavily on talent. To attract top-performers and keep them, you have to think beyond standard compensation.
To learn more about how and why to think about employee benefits, we spoke with Stacy Kahan, President of Lang Financial Group. After over twenty years running a boutique insurance firm focusing on entrepreneurs growing from teams of two to hundreds or thousands, she has seen virtually every type of growth scenario. When it comes to employee benefits, one idea holds true across different companies and industries.
“People in the world like choices and they want to know they can grab something if they want. Truly, every single person in a company has a different need. Having a menu of options allows people to pick and choose,” said Stacy.
What does that menu look like? When it comes to medical benefits, you have to think about offering various doctor and hospital networks, as well as varying out of pocket costs and premiums. As Stacy put it, a young, single employee with no medical history will need a very different plan than a middle-aged employee with a family and a preferred physician. Providing four to five plan options that range from the bare minimum to more robust, upgraded offerings ensures that your employees will feel secure.
“We have learned that financial security is the driver to operating at a high level during the day. We want to ensure that employee financial security is set [when we structure plans].”
Just as important as offering multiple options is effectively communicating what those plans are and how they work. Without good, clear communication, your employees won’t know what to choose, how to enroll, or even where to direct their questions, causing headaches all around. You have to make the information available, but boil it down to its simplest terms.
You also have to plan for both the short-term and the long-term. From the outset, you have to tailor a strategy that accounts for you present employees but still allows for future growth and retention. That’s where cost-strategy comes into play.
Cost-strategy hinges on one simple question: how are you going to split the premiums with your employees? This will determine the range of options you can provide, as well as a strong understanding of who is on your team and who you plan to hire. Specifically, executive level hires coming from other companies are likely used to group plans with access to teaching hospitals, a wider range of in-network providers, and more options when it comes to actual services covered. You have to match that expectation against what you can afford for your team overall. In most cases, the right choice will be offering a comparable plan, but splitting the premiums so that the employee pays a larger share than he/she would have at the previous company.
While startups are far from monolithic in how they structure their cost-strategies, Stacy estimates that the average split comes down to 75% employer-paid premiums versus 25% employee-paid. However, she has seen a growing trend of startups taking over 100% of the cost, which she advises against for two reasons. First, it’s an expensive option, one that might limit the growth you’re driving towards, especially when you consider that benefits are thousands of dollars you pay to your employees on top of their compensation.
Second, “If you don’t pay for it, you don’t see as much of the value. It’s human nature. I would rather [an entrepreneur] pay an employee a little bit more and split the cost because now the employee can follow up on what’s going on in the benefit world and not take it for granted. They’ll appreciate it more and feel more loyal because they’ll understand it.”
While all of these basic principles are easy to understand, they aren’t necessarily easy to execute. As an entrepreneur, you likely simply don’t have the time to learn about the benefit space and determine which plans to provide, how to put that cost-strategy together, or even what your competitors offer. Additionally, you might not know how to address compliance, which could open you up to future liability. If you lack the expertise and don’t feel you or a team member have the time to devote to developing it, you may want to consider parterning with a firm that can explain the process and put your whole employee benefits structure together.
If that’s the route you eventually decide to take, make sure you choose your partners wisely. Look for individuals who can clearly educate you on the benefits space, provide recommendations, and come up with an execution plan that allows for you to be as hands-off as you want to be without opening yourself up to risk.