As you build a business and hire employees, you are often faced with decisions about which benefits to provide for your staff. With so many options to choose from—from health insurance to retirement savings to profit-sharing and stock-option plans—picking the right package of benefits to keep your employees happy and your business profitable can seem like a daunting task. But a few recent studies help to shed some light on which benefits employees value most, and some of the results might surprise you.
While we’re all familiar with the maxim, “cash is king” but when it comes to employee benefits it seems that this old adage does not ring true. A study conducted by Sun Life Financial found that employees valued their total benefits package more than the cash component of their salaries. And MetLife’s annual Study of Employee Benefits Trends revealed that employees place more value than ever on their benefits, even if they have to fully pay for those benefits themselves.
These findings could have a profound impact on the way that entrepreneurs think about compensating their employees. While many of us may eschew providing a generous benefits package because it is too expensive, and choose to pay employees a more competitive salary instead, this appears to be the wrong approach. Instead, it may make more sense to offer staff a lower salary, in addition to a suite of benefits, while having the employees contribute to some, or even all, of the cost of the benefits package.
As far as which benefits employees value the most, the results of both studies—as well as a survey conducted by the Principal Financial Group—point to a clear winner: health insurance. (Did you notice all three surveys were done by insurance companies?) Given the peace of mind that comes from being insured, and the high cost of obtaining insurance on your own, this shouldn’t come as a great surprise. But what many of us may not have expected are the two categories that ranked at the bottom of employees’ wish lists: profit sharing/bonus plans and stock options. These results show once again that the vast majority of people prefer to receive benefits that increase their sense of security, as opposed to those that could increase their purchasing power and the balance in their bank account.
When it comes to financial benefits, “Defined Contribution Plans” such as 401(k)s, where employees contribute their own money (sometimes matched by employers), actually rank much higher than “Defined Benefit Plans”, where the employer shoulders the cost.
While we’d all like to provide our loyal employees with an extremely generous set of benefits, in the world of small business that’s not always fiscally possible, or financially responsible. But by understanding which benefits your employees are most likely to find valuable, you can provide them with the satisfaction and security they are looking for, and maybe even improve your company’s bottom line at the same time.