It’s often difficult to maintain the delicate balance between what a business needs to succeed and what employees need to succeed. Of course, in regard to the rebuilding of the American economy, the fact that so much hope is being placed on the shoulders of small businesses doesn’t make the balancing act any easier. It might seem that employee motivation and addressing the skyrocketing cost of health care are opposing weights in the balancing act, but it’s actually very possible for a small business to achieve both. When the issues are addressed concurrently, human resource assets can be a profit lever (element that can be adjusted to improve profitability). According to a 2010 Harris Interactive study, U.S. small businesses (those with three to 99 employees) identified these top three issues:
- Increasing the productivity of employees was cited by 51% of the respondents.
- Controlling the costs related to Health insurance was cited by 47% of the respondents.
- Retaining employees was cited by 43% of the respondents.
The study, performed for AFLAC, also found that each of these issues is linked directly to the financial bottom line of small businesses. Although there isn’t a one-size-fits-all tactic to address such complex issues, adding a group-rate employee-paid voluntary insurance policy to existing benefits can help with all three issues.
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Controlling the Costs Related to Health Insurance. Health care costs are still outpacing inflation and will most likely continue to do so. A recent report by the Kaiser Family Foundation found that the average cost of family plans increased by 3% between 2009 and 2010. Meanwhile, worker contributions to family plans simultaneously increased by 14% from employers trying to control costs.
Accessing the coverage needed by employees will most likely continue to be a struggle for employers for some time, especially for small business owners. And, even the smallest oversight in how health care costs are managed can have a significant financial impact for small businesses.
How do small business owners manage these rising health care expenses? Many are looking at offering more flexible benefit options, such as voluntary insurance policies. This type of policy is employee-paid and doesn’t have any direct cost to the employer. In fact, it might even cut FICA tax contributions, and thereby lower corporate taxes. In addition to these perks, adding a voluntary plan can also address the challenge of offering hearty benefits under cost or budget constraints.
Employee Productivity. Employees with health and financial struggles are often highly distracted. A distracted employee is a less productive employee. It’s easy to see how health and financial issues combine to form a vicious cycle. Just one illness or accident can impact the financial stability of a worker, possibly even affecting their ability to obtain medical care or pay their daily living expenses. A Harvard research study actually showed health problems caused 62% of all 2007 personal bankruptcies.
This same Harris Interactive study also found:
- Around 58% of the small business owners felt that their business had suffered a 5%-20% loss of productivity due to employees being concerned with personal issues while at work.
- An additional 32% of the owners stated that they have lost 20% or more work productivity.
- Of those small business employees involved in the study, 47% admitted they had a financial or health issue affecting their ability to perform their job.
Voluntary insurance plans can help employees with the out-of-pocket expenses from serious accidents and illnesses through a cash benefit. The money can be used to cover un-reimbursed medical expenses or help cover daily living expenses. The plans can cover anything from cancer or other specified diseases to accident, disability, vision, or dental.
Retaining Employees. The Harris study found the following key points about employee retention:
- As far as employee loyalty and satisfaction are concerned, around 63% of the surveyed small business owners feel their employee benefit package is very influential.
- An additional 18% felt that the employee benefit package was also very influential in an employee deciding whether or not to change employment.
The U.S. Dept. of Labor figures that employee replacement will usually cost about a third of whatever the annual salary is for the employee being replaced. It’s easy to see where just a few employee turnovers can cause serious problems for small businesses that don’t have the funds to recruit and train new employees constantly.
Adding voluntary insurance options can improve the attractiveness of the small business, show employees that they really do matter, and allow the business to compete more effectively with its larger hiring competitors.
In closing, the combination of a slow economy, lack of small business loan availability, and the rising cost of health care has forced many small businesses to cut costs whenever and wherever possible. As these cuts extend to major medical options, the use of voluntary insurance is slowly becoming a staple benefit offering for small businesses.