Why Owners Should Not Overlook Employee Benefits

Over the last several years the cost of everything has gone up.? More importantly, everyday items such as food, gas, and housing have seen a steady increase that has definitely put a strain on personal budgets.? One area that is starting to get some recognition for cost increases is insurance.? Many consumers are starting to really feel the pinch as homeowners insurance and auto insurance have adjusted dramatically higher.? For business owners these cost issues have been front and center basically since the pandemic.? While many business owners have been trying to cut or maintain input costs, or have delayed hiring new employees, one area that tends to sit in the back of the business owners mind is employee benefits.?

Most small business owners that I work with look at employee benefits as necessary and usually just leave it at that.? They will tend to look at this briefly during the anniversary date and just renew for the next year without giving too much consideration to potential alternatives, potential cost savings, or digging into how their plans affect the employees and therefore the business.?

At a time when we see headlines about strikes from the longshoremen or at Boeing it becomes even more important to review these benefits and what it means to employees.? This is especially important for smaller businesses where employee turnover and employee happiness directly affects the bottom line.? Additionally, all of these little things add up to the valuation of a business when it comes time to sell.?

Here are a few tips that can help business owners when it comes to employee benefits.

1.????? ?Don’t wait for the busy season in the 4th quarter to renew your benefits.?

As stated earlier, most owners will wait until the anniversary to talk with their benefit brokers.? Businesses are able to change carriers and change anniversary dates at any moment.? Think of it this way, if you are going to do real tax planning to save money on taxes, would you wait until the last minute to work with your accountant.? You probably would not because the accountant is so busy trying to beat a deadline that they are more focused on the sheer volume than putting creative things in place to save taxes.? The same applies for benefits and the less busy your broker is and the more time you have to make a decision, the more options you can explore to see what is best for your company.?

2.????? ?Consider using multiple brokers that specialize in different lines.

While many of the large brokers offer a one-stop shop for medical, dental, business etc. there is no harm to have different brokers looking at your benefits and possibly offering specialty in a particular area.? While this may require a little bit more time and effort from the business owner, there is a possibility to either save or expand coverage that meets the needs of you and your employees.?

3.????? ?Do not price shop.?

It is our human nature to simply look at things we need for ourselves or our business and compare prices and go with the cheapest option.? Cheaper is not always better and in the benefit brokerage world all carriers should be submitting the same pricing.? More importantly you should consider the entire scope of services the broker is providing.? Things like scope of services, owner and employee education, and business support should be considered.? Think about how much happier an employee would be if they actually understood their benefits not too mention how much easier the onboarding process can be for new employees.?

4.????? ?Engage your broker throughout the year and prepare for renewal.

This is an important aspect because preparation and proactive approaches to every part of your business drives value.? An experienced broker will be able to help you predict renewal percentages which can assist you in cash flow and budgeting forecasts.? Additionally, like the first bullet point it allows you to weigh different options as your business evolves.? At the very least, being proactive and having a process for this will look impressive to a potential buyer of your business when that time comes.?

5.????? ?Let the experts be experts.

Benefits are an area of the market that is ripe for cross-selling.? There are many financial planners, P&C brokers, payroll providers, and banks that will offer benefits brokerage along with their core services.? This is an add-on or a loss leader that gets their foot in the door and leads to other business down the line.? Pure benefit consultants will be better equipped to provide a larger menu of options, education for you and your employees, and be able to quickly adapt to any changes in the industry.?

While these are just a few tips for looking at your benefits package. I cannot stress enough how valuable it can be as a business owner to constantly be working on getting better at every part of the business.? Not only will you see tangible benefits today, but you will see even more tangible benefits when it comes time to monetize your business ownership.??