Offsetting Stagnant Salaries with Increased Benefits

By Zach Hutcherson, CPA, MBA

While base pay remains a top consideration to attract and retain employees, increasingly a strong benefits package is important as well. Towers Watson, a leading global professional services company, found in a recent survey that employers indicated they may allocate more funds for employee benefits because of only moderate pay increases in the coming year.

BENEFITS AFFECT HIRING

Some employers have reported that their benefits, or lack thereof, have prevented them from hiring certain employees. These employers are looking to improve their employee benefit packages and may need to allocate more to make them competitive.

Employees are increasingly listing benefits as an essential element of their job satisfaction. According to Towers Watson, employees are more likely to prioritize retirement guarantees over pay increases by a greater than 3-1 margin.

In fact, the loss of benefits is a bigger concern than the loss of a job. In Gallup annual Work and Education poll, 40% of employees surveyed expressed concern that their benefits will be cut in the near future. That compares to 28% who fear they'll be laid off, and another 28% who worry that their pay will be reduced.

WHAT BENEFITS MATTER TO EMPLOYEES?

Studies have shown that benefits play a large role in employee satisfaction. What are some reasons to offer employee benefits that in turn, can benefit employers? Here are a few:

TAX CREDITS. If employers offer health care plans that include dental or company paid premium life insurance plans, these expenses can help at tax time. For example, small employers (less than 25 full-time workers with average wages less than $50,000) who pay at least half of their employees' health insurance premiums can use tax credits where premiums are paid for health and life insurance and dental and vision plans.

ATTRACT TALENTED AND LOYAL EMPLOYEES. Offering an employer match can help attract and retain talented and loyal employees. For example, employees or potential employees who participate in their employers' qualified plan will increase whatever they contribute by a fixed percentage, thus increasing their personal benefit. Inform employees about the cost of the benefits you offer, including the total cost incurred for the benefits and how they factor into their total compensation package. This will illustrate how much you're investing in them.

LOWER TURNOVER RATE. By offering a competitive mix of salary and benefits to employees, employers may see less employee turnover.

BENEFITS EQUAL SECURITY

Employees are looking for more security in their retirement benefits. By offering a competitive benefits package, employers will have a better chance to attract and retain the key employees they need.