SOP 159 — Select and roll out employee benefits

1. The constraint and what graduates it

Human resources is defined as how you lower the chance that regulators and employees sue you.

Item	At this stage (20 to 49 people)
The constraint	Higher-level talent will not come, since those people expect a full compensation package: benefits, retirement and so on
To graduate	Set up benefits, retirement and advanced compensation plans

This kind of goes with hiring at this size: the reason given for hiring taking longer now is that these are things an offer will include. The pay side, building compensation plans for higher-level people, is SOP 160 — Build advanced compensation plans.

2. What matters to you is not what matters to them

Benefits sound incredibly boring, and the view here is that they are; they are also very important. You may not care about benefits. In one example, the owners say they do not, and think they do not even use their own insurance. Many people do care. They have families and children, and they love that they do not have to pay for things out of pocket, because the company they work for now gives them excellent benefits. Something that is not important to you can still be important to the people you are trying to attract.

3. The claim that benefits return more than pay

A point for business owners: benefits typically have a higher return than compensation, it is claimed. The example given: spend $11,000 a month so an employee has outstanding benefits, said to be $122,000 a year, and that may keep someone as well as an extra $40,000 a year in pay would. You make the trade for the money on their behalf ahead of time, and include it; a lot of times, it is said, that is actually a cost saving to you. The reason offered is that people value benefits more than the money they cost to get. This is described as a lesson learned by someone who tends to be very oriented to dollars and cents.

The figures do not hold together as stated. $11,000 a month for a year is $132,000, not $122,000, and either yearly figure is more than the $40,000 it is set against, so the example as stated shows no saving. Which amounts were meant is unclear. Not established on this page.

4. Choose a provider and a plan, then roll it out

Think through this as a process. Five steps, in order:

Assess needs. Identify the top benefits your employees require and desire, and make sure they fit your budget and your legal obligations. Depending on the size of your company and the state you are incorporated in, you might be obliged to give a certain type of benefit to a certain degree. Look that up; you can find it on Google, it is said. That legal claim is carried as it was made; state benefit law is not covered on this page. The other piece is what your people want. People in a lower age bracket and a higher one typically have different needs from benefits, so learn what types of benefit are available and which are in highest demand across your workforce. For example, where a lot of your people are having their first children and building their first families, they have a lot of needs for dependents, so what the benefits will do for someone's children is kept in mind while assessing, in one practice.
Analyze providers. Research providers by industry: start with the ones popular for the kind of business you are in (software, service, medical, tech and so on), since all of that factors into whom you go with. Then look at their industry experience, their reputation and reviews, and their technology. Technology matters because it does not matter how good the benefits are if people do not know how to use them, and knowing how comes down to a good benefits portal. The biggest mistake named, in one practice, was choosing a provider with great benefits whose platform was so outdated that employees did not want to use the benefits, because it was so archaic they could not work out how. It looked as if it came from 1990, and some of them do.
Appraise the plans. Once you go with a provider, it will give you three to five plans you could go with. Evaluate them by the type of plan and its cost, balanced against what you can afford, and by value-added services: wellness programs, health programs and the other extras people add now, depending on the plan you pick. The biggest thing you are choosing is how much you cover and how much your employee covers. The suggestion given: when the provider gives you plans to appraise, have it run a sample scenario for an individual contributor, a manager and a director on your team, so you know what they would pay out of pocket and what you, as a company, would pay. Benefits will add anywhere between 15 percent of payroll on the low side and 25 to 30 percent on the high side, just to cover them.
Assess the support and compliance. Once you have picked a provider, make sure it will have your back: that it meets regulatory standards and handles the administration. At 20 to 49 people, this is where things went wrong in the past, in one example: a provider and a plan with no administrative support, and then a hire to do all of it. You do not want that at this small a size. When you are big, with hundreds or thousands of people, you will need a whole department to handle benefits. At this point, if you can outsource the administration to the benefits provider, that is the ideal. It is promised to be something you do not want to deal with, or want anyone on your team to deal with, and you do not have to pay someone an extra $80,000 a year in payroll just to administer benefits.
Adopt and adjust. Once you have chosen, communicate the benefits to your employees, and sell them rather than just tell them about them: present them as if it were someone's birthday, or a holiday, an occasion. Most of the time, it is said, people underplay this and do not talk about it as a big deal, yet you are increasing your payroll costs by 25 percent just by adding it. It will attract talent, and it also helps people and makes their lives better; sell them on that. Keep collecting feedback about your benefits, on a quarterly basis in the view here, so you can decide when renewal comes. Essentially, each year you decide whether to stay with the provider, the plan and the amount of support provided, and continuing to ask for feedback is called the only way to decide that in a way that serves the company. Have your rates reappraised on an annual basis, too.

5. Why the rates are looked at again each year

The health-care provider cannot tell you, as the employer, who on your team uses the benefits or to what degree. The reason given is non-disclosure and health-privacy rules; that claim is carried as it was made, and health-privacy law is not covered on this page. Just as a person has a credit score, a business has something like a health score, and an insurer or benefits provider looks at it. In a case described from a smallish company in this size range, one person on the company's plan was extraordinarily expensive, which made the whole company look very expensive to cover, and that cost still comes out of the employer's pocket. It is called a good thing that you are not told who it is. If, later, that person is no longer with the company, you want the rates appraised regularly, so the better score can earn you a much lower risk rate than before.

6. Why this sits before 50

As boring as all of this is, these are called the things required to grow. This sits in graduating beyond 50: get it in place now, because you will need it.

7. Weigh benefits by their values, not yours

One way to see it, in the view here, is from a sales point of view. When someone describes why they stay at a company, they talk about their pay a little, but they say the benefits are great, or that they have great stock options. Think about what people use to sell others on why they are at a company. Often these things are not weighted the way you weight them as an entrepreneur, because by the very definition you make different decisions than your team does. Weigh benefits by their values, not yours.

8. What this page does not decide for you

The figures behind the claim that benefits return more than pay. The amounts given and the arithmetic are set out above. Not established on this page.
How to split the cost between the company and the employee. This page gives no figure for the share the company should cover.

9. What this page does not cover

Retirement plans and stock options are not covered on this page. Employment law and health-care law are not covered on this page, and neither are state benefit rules or health-privacy rules; the legal statements above are carried as they were made.

Telling someone who is let go what happens to their benefits is on SOP 153 — Fire without surprise and plan who covers the work. How raises are set is SOP 134 — Set pay increases.