Are there business advantages to providing health insurance to employees? There sure are—maybe more than you think! Bud Bowlin, benefits advisor, explains.
Bud Bowlin has been advising business owners about health insurance and benefits for more than 35 years. For his 70th birthday, we gave him his own advice column. Got a burning benefits question for Bud? Send it to [email protected].
I own a salon that is a fixture of our community. My 12 workers are all formerly at-risk youth, but you wouldn’t know it if you came in for a cut and color! My employees are the most talented stylists in town, and our clientele is loyal. I place a high value on education (helped me get to where I am today), and so I cover the costs of educating and licensing all my employees.
At our last meeting, several employees asked if I would consider providing health insurance. I’d never really thought about this before. I know it’s not required by law, but I always want to help my employees. Can you tell me how providing my employees with health insurance also helps my small business?
Just Articulating Noteworthy Employer Topic
I’ve got a buddy, Ed, who owns a local, but well-respected, automobile parts store in the small town where we grew up. Some time back, Ed confided that he’d just lost another one of his top “counter” guys to a national, big name competitor. I kept him talking.
Ed was hiring young men right out of high school or the military and training them to be parts men while paying them nice wages. But with over 100,000 parts in inventory, it took a year or two for the new hires to hit their stride and become fully ramped employees. Well, in their third or fourth year, he noticed he was losing his hires to national competitors. This put my friend in the expensive and time-consuming position of constantly recruiting and training new employees.
I asked Ed if he was providing benefits to his employees, and I found that he wasn’t. “It was just something we never addressed or got into,” said Ed. He thought that offering employees a job should be enough to earn their loyalty. But that’s simply not the case anymore.
Today, most employees expect benefits as part of their job package—but this is actually a fairly recent development. During World War II, the government put a freeze on employee wages, and labor was scarce. Employers were struggling to attract and retain workers, and health insurance became one of the new ways to do just that. Group health insurance caught on through support from labor unions and tax incentives for employers and employees. Employers liked that they could deduct the cost of insurance premiums, and employees liked that the contributions were excluded from their taxable income. These favorable characteristics of employer-sponsored health insurance remain true today.
OK, so back to Ed and his auto part shop.
The day after our chat, I gathered census info and quotes for a “middle of the road” medical plan, a basic dental plan, and a short term disability plan (STD) that would pay 60% of his employees’ wages if they got sick or had an accident that rendered them unable to work. I presented the quotes to my buddy, and I showed him how for less than a 9% jump in overall wages, he could compete with his national competitors by offering an equal or better benefits program.
After looking at the numbers, Ed commented that, compared to the individual insurance plan he was paying for, the group benefits cost less for better coverage! Beyond that, the new premiums were tax deductible, and the STD plan provided peace of mind and actual protection for his business, his employees, and their families.
Eighteen months later my buddy reported he had not lost a single employee, and instead, he’d successfully recruited some of his national competitors’ employees to his shop!
Moral: Offering good benefits helps recruit and retain workers! Most employers now incorporate medical benefits into their operating overhead. In fact, medical benefits have gone from a perk, to a must-have, to a real differentiating factor. You currently foot the bill for your employees’ education (a truly noble gift) when they’re at an early stage in their careers. As they grow, their needs evolve, and health insurance becomes increasingly important. I’d hate to see those outstanding employees take their credentials (and clients) to a competing salon just because the other place offers benefits.
Got a question about benefits and insurance? Send it to [email protected].
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