Small business owners understand the value of offering benefits, but some struggle to afford them, and businesses can pay a high price tag for making mistakes in administration of benefits, a new report finds.
The report was published by Skynova, an online invoicing company. In a survey of 266 small-business owners, the company looked at what benefits were most frequently offered, what were the most expensive benefits, and how they felt employees valued their benefits. The study also looked at surprise costs and the costs of mistakes in compliance and accounting.
In retaining employee, basic benefits are key
“Keeping an employee around isn’t always easy, but small-business owners have had the most success retaining their workers if they presented them with health benefits, training, and retirement savings plans,” the report said.
Training was the most-offered benefit, with nearly half or respondents—49%—saying they offered training as a benefit.
Health insurance was the second-most offered employee benefit, offered by 39% of small business owners. Other benefits offered were retirement savings plans, at 22%, and family medical leave, at 21%.
Some benefits are much more costly than others, the survey found. The most expensive benefit for small business owners was health insurance, at a cost of $4,142 annually per employee. By comparison, training costs were $932 annually per employee. Retirement savings benefits were also among the more expensive benefits, at $3,912 annually per employee. Paid time off, which was offered by only 15% of the small businesses surveyed, was also expensive, at an annual cost of $3,392.
Still, employers recognized the value that benefits represented to employees. When asked if they felt employees appreciated their benefits, 73% of employers said always or very often. The report added that 74% of employers said paying for benefits was worth it.
“Offering benefits to employees increases the likelihood of them staying long term, boosts morale, allows for productivity, and generally sets the foundation for your business to grow (due to the positive culture being instilled),” the report said.
Surprise costs and errors
More than half—53%–of small business owners said they had at least one unexpected cost due to employee benefits, and 42% of respondents said they were unable to hire new employees due to unexpected costs. Health insurance was again the most costly item in this category, with 26% of owners saying they had unexpected costs due to health benefits.
In addition, small business owners said the cost of health insurance (34%), Medicare (31%), and Social Security payments (26%) kept them from expanding their business. Errors were also costly for employers. The survey found that 43% of owners reported having made a mistake with when dealing with employee expenses. The report said mistakes pertaining to health insurance, Medicare, and Social Security tended to be the most expensive. Errors with Social Security payments were the most costly, with an average cost of $28,085 per mistake.
And the errors were not rare—39% of small business owners said they had made a mistake with health insurance benefits, 31% said they had made a mistake with Medicare, and 29% reported errors with Social Security. For health insurance, the average cost per mistake was $9,967, and for Medicare the average cost per mistake was $15,900.
The report concluded that the rising cost of doing business leaves little margin for error with small companies. “With costs rising, business owners, especially those running small companies, need to be on the ball when it comes to their finances,” the report concluded.