- When companies think about how to attract and retain employees, much focus gets cast on the work environment — but payroll benefits still play a major role.
- Employers should evaluate their benefit offerings including paid time off plans, especially considering increased interest in work-life balance.
- Don’t discount your total compensation package — understand your industry’s labor market and seek market analyses to properly evaluate whether your benefits are competitive. Certain tax credits could also help offset their cost.
Are your benefits attractive to your employees and recruits?
It’s no secret employee turnover can have costly — if not devastating — consequences for a business.
When companies think about how to attract and retain employees, much focus gets cast on the work environment itself:
- Are employees allowed to work from home?
- Does a company appropriately foster inclusivity?
- Is there sufficient access to mental health services?
These are enormously vital questions. However, it is foolhardy to forget payroll benefits still play a major role.
What are the top employee benefits?
According to the 2023 employee benefits survey by the Society for Human Resource Management (SHRM), the top three employer-ranked benefit categories were health, retirement savings and planning, and leave.
If employers are focused on these categories, then aren’t payroll benefits already getting adequate attention? Yes and no — the devil is in the details.
Per the U.S. Bureau of Labor Statistics (BLS), 70% of private industry workers had access to employer-provided health benefits in March 2022 but only 47% of workers were enrolled.
In an economy where an alarmingly increasing number of workers live paycheck to paycheck, having proper health insurance is critical to workers’ economic welfare. This gap represents an opportunity for employers to question whether their cost and coverage options are adequate.
Retirement savings plans
Declining confidence in the stability of Social Security benefits similarly gives rise to a need for secure retirement savings plans. Figures from the BLS show 69% of private industry workers had access to employer-provided retirement plans in March 2022 with just 52% participating.
Among the roughly half of private workers with an employer-provided plan, not all offer substance. Per a recent BLS study, only 41% of companies offering a 401(k) plan provide employer matches up to 6% of employees’ salaries — with only 10% offering more than 6%. That does not account for eligibility (e.g., probationary periods for new hires) or partial matches.
Some companies are opting to do away with 401(k) matches as a way to reduce costs, yet this can be significantly outweighed by increased longer term costs, such as decreased employee retention and more difficult recruiting efforts.
Companies should not discount any items of their compensation package. It is important to understand your industry’s labor market, seeking market analyses as needed to properly evaluate whether changes are warranted.
Employee leave and PTO plans
Employers should evaluate their paid time off (PTO) plans, especially considering increased interest in work-life balance. The BLS’s national compensation survey shows on average, private industry workers get 11 paid vacation dates after one year of employment. This rises to 15 days after five years and 18 after 10 years.
Tenure-based PTO increases promote retention, but two questions come to mind in assessing this data:
- Is the starting PTO package large enough to attract employees?
- Is the progression happening quickly and significantly enough to retain those employees?
Are your benefits measuring up?
Companies should not discount any items of their total compensation package. It is important to understand your industry’s labor market, seeking market analyses as needed to properly evaluate whether changes are warranted so that your benefits remain competitive.
Within that analysis, be aware of the possibility of tunnel vision. Is your company valuing what your target market values and — perhaps more importantly — to what extent? Just because you offer some important payroll benefits it doesn’t mean they are compelling enough to make prospective employees want to choose you. Continue looking for opportunities to create a total compensation package that can help attract and retain employees.
How can you pay for these benefits?
As if improved employee satisfaction and retention isn’t enough of a potential outcome when considering enhanced payroll benefits, there are many tax credits available to help offset their cost.
One is the Employer Credit for Paid Family and Medical Leave, which allows for a federal income tax credit of 12.5% to 25% of the cost of leave, so long as the employer pays 50% of the wages or more according to the terms of a valid FMLA policy. Another allows for an income tax credit of up to $150,000 per year for providing child care benefits or a benefit referral source for employees.
There are so many others that relate to quality training, hiring, and other activities to make the workplace more attractive for the employee. Talk to your tax advisor about your current benefit plans to see if you might qualify for such tax credits.
How we can help
It doesn’t have to be a struggle to attract, retain, or grow your team. A strong workforce initiative can help reduce turnover and create an environment where employees are highly engaged and committed to your organization and customers. And the payroll benefits you offer play an important role.
Our industry-specialized professionals can provide a seamless experience in helping you build a solid employee benefit plan and comprehensive HR strategies and processes that work for your organization. With that, our tax credits and incentives team can help you identify tax savings opportunities that can come with offering these benefits. Contact us for assistance.