The Cheapskate’s Guide to Employee Benefits: 3 Ways to Cut Costs and Keep Employees Happy

When companies look to cut costs, employee benefits are one of the first things to go. That saves money, but hurts morale – right when you need your team to pull together and work harder. Fortunately, there are ways for you to cut expenses and provide some excellent employee benefits.

Here are 3 great ways to cut the budget without killing the benefits:

1. Keep the Benefits Cut the Cost

Voluntary benefits are better than none at all. You can offer voluntary health, vision, dental, life, and disability insurance to your employees at no cost to you. When you offer voluntary benefits, your employees get optional access to the insurance at lower group rates, but pay 100% themselves. As with sponsored benefits, employee’s monthly premiums are deducted from their pre-tax paychecks each month. Plus, they have the option of choosing from a variety of plans that offer a variety of benefits, depending on how much they want to pay.

Warning: Before you move to voluntary benefits for your employees, keep in mind that Obamacare will require businesses that employ more than 50 workers to provide health insurance by 2014. If your business employs more than 50 employees, you’ll need to find a group health insurance plan from your state-run insurance exchange in 2014. By that time, companies with 50 or more employees will not be allowed to make health insurance voluntary, although vision, dental, life, and disability insurance can be offered on a voluntary basis, regardless of the size of your company.

2. Pay for Prevention Instead of Cures

The healthier your employees are, the less you (and they) will have to pay for health insurance. Whether you offer health insurance or not, starting a wellness program can save everybody money. By reimbursing employees for things like gym memberships, weight loss counseling, and smoking cessation programs, you and your employees could ultimately save a lot.

Healthier employees visit doctors less, are absent from work less and have lower turnover. Research from the Harvard shows that a company saves $2.71 for every $1 it spends on wellness initiatives… many studies say the savings is even greater: perhaps $5 or $6.  An ounce of prevention really is worth a pound of cure.

3. Shop for a New Retirement Plan Option

Did you know that there are at least 12 different kinds of retirement plans recognized by the IRS?  And I’m not talking about old-style pensions. The two that are the best suited to frugal business owners are 401(k) plans and SIMPLE IRA plans.

Traditionally, 401(k) plans include a “matching” contribution from the employer – but this is completely optional. You are not obligated to match what your employees contribute. There are administrative fees to consider based on the size of your company. Medium-sized businesses typically pay between $5,000 and $10,000 per year in administrative fees when you use a full-service provider.

Save on those fees by administering the 401(k) yourself using an online service like ShareBuilder, or by moving all your HR functions to a PEO organization like Insperity, which offers 401(k) plans at almost no additional cost.  (If you have more than 5 or 6 employees, a PEO can save you money in many ways, and provide a catalog of employee benefits at no additional cost.)

If you have fewer than 100 employees, you can avoid administrative fees completely with a SIMPLE IRA plan. With a SIMPLE plan, however, you will have to match the first 3% of what your employees contribute to their accounts annually or contribute a flat 2% of each of your participating employees’ salaries on an annual basis. Opening SIMPLE IRA accounts for your employees is a way to show your support for their financial futures without breaking the bank.

Every business should be looking to cut costs where it can, and employee benefits can be a juicy target. But don’t cut so deep that employees scream (or leave)!  Implementing some of these options can save you money and keep your employees happy and productive!

Dedicated to your success, Susan

Susan Wells is a guest blogger and professional writer who frequently shares content about insurance and financial protection. She writes for insurancequotes.org and various other sites, and she hopes to share her advice with as many interested readers as possible. Susan welcomes comments and questions!