For your employees’ benefit and yours
Compensation is more than just a paycheck. Health coverage, retirement plans and tuition reimbursement can help a practice recruit and keep talented workers.
Employee fringe benefits are a hot topic for many U.S. employers, and as long as businesses have to compete for talented workers, benefits will remain front of mind for hiring managers. Benefits significantly influence a person’s quality of life, and they help compensate employees for the value they provide to the business. A healthy benefits package and creative on-the-job perks can mean the difference for an employee choosing between two veterinary jobs at the same pay scale. A survey performed by Fractl revealed that job seekers care most about health benefits, followed by flexible hours and more vacation time.
The type of employee will influence the benefits a veterinary practice provides. For example, a young college student likely cares more about tuition reimbursement and less about a competitive health insurance plan, especially if the employee is covered by a parent’s insurance. Therefore, a veterinary practice that frequently hires college students might offer distinct benefits compared with a practice that primarily hires graduated professionals.
Perks vs. Benefits
One way employers can stand apart from competitors is by distinguishing on-the-job perks from financial and insurance benefits. The Fractl study found that employees were much less interested in perks like free snacks or work-sponsored activities and more attracted to formal financial benefits like matching 401(k) contributions and health insurance. That’s not to say perks don’t influence a job seeker, but they aren’t even among the top 10 benefits listed in the Fractl survey.
For employers to truly stand out, they need to provide competitive health benefits. Luckily, small- to medium-size veterinary practices have multiple options that are both affordable and competitive.
A small practice might choose to offer group health insurance. In this scenario, an employer chooses a universal plan for all employees and typically pays a portion of the premium, leaving the employees to pay the remainder. A 2018 survey from the Kaiser Family Foundation found that, on average, employers paid 82% of the premium, or $5,711 a year per employee.
Breaking It Down
For employees, group health insurance has its pluses and minuses.
- The employer typically subsidizes premiums.
- Premiums are often the same for small and large families.
- All employees on the same insurance plan might have unmet unique needs.
- Employees who prefer to be on a spouse or parent’s plan will not a premium subsidy.
- Group health insurance is usually more expensive than individual health insurance.
Health Reimbursement Arrangements
One option that small practices can use to attract and retain employees is a health reimbursement arrangement. The HRA is a method for employers to reimburse employees for health insurance premiums and out-of-pocket medical expenses tax-free.
With an HRA, employers set an allowance cap that dictates the maximum allowable monthly reimbursement amount. If an employer chooses, the reimbursement amount can accumulate each month and restart at the end of each year. Employees purchase an individual health insurance plan that fits their needs, submit the proof of purchase and be reimbursed up to the allowance cap.
For example, if an employee purchases an individual plan that costs $375 a month and the allowance is set at $400 a month, the employee has a remaining reimbursable allowance of $25 a month for the purchase of medications and other eligible expenses.
Like with group health insurance, an HRA has its pluses and minuses.
- Employers can set guaranteed maximum allowances that fit their budget.
- Employees can use reimbursement allowances to pay for insurance premiums and eligible items tax-free.
- Employers and employees save money on income and payroll taxes.
- Employers using the right software can spend as little as five minutes a month administering the benefit.
- Employees can keep their individual plan if they change jobs.
- HRAs have specific limitations for S-corp owners who own more than 2% of the business.
- Self-administering an HRA is time-consuming and comes with unique compliance regulations that pose financial risks. Therefore, self-management is not advisable for most small businesses.
Contributing to retirement savings is another valuable benefit that veterinary practices could offer. In general, people don’t simply work for the next week’s paycheck. Instead, they also are preparing for the future. Investing in employees’ retirement savings is another great way to attract and retain top talent.
Employers can offer a competitive retirement package in a few different ways. The first is a traditional 401(k) plan and the second is a contribution to an employee’s individual retirement account, or IRA. According to U.S. News & World Report, the most common 401(k) match formula is 50 cents on the dollar up to 6% of an employee’s annual pay.
A 401(k) is a tax-advantaged retirement savings account that employers can offer. It allows employees to save money for retirement and offers employers an additional tax-free compensation method. In 2020, the contribution limit is $19,500 a year per individual.
Much like a 401(k), an IRA is a tax-advantaged retirement savings account. However, it is established by the individual rather than the employer. Employers can contribute to an employee’s IRA account at a tax-advantaged rate like with the 401(k), but IRA owners under age 50 can contribute only up to $5,500 a year.
Because the veterinary industry requires technicians and nurses to have formal schooling, tuition reimbursement is a great way to attract and retain them. Employers can reimburse education expenses of up to $5,250 a year tax-free per individual. In addition, the tax advantage applies to both undergraduate and graduate schooling.
Veterinary practices also should consider paying for or contributing to additional training and certifications for staff members. Not only does continuing education keep employees engaged with their work, but it refreshes old knowledge and offers a chance to learn new skills. As a result, employees can contribute more to a veterinary practice’s services.
Investing in employees is a measurably, beneficial way to attract and retain top talent. It indirectly influences the quality of services provided by fueling an employee’s personal development and quality of life. In addition, employees satisfied with their compensation feel less pressure to seek other employment opportunities.
As employers look for ways to decrease turnover and demonstrate a higher level of appreciation for employees, the benefits above are a great place to start.
Alex Flitton is content marketing manager at PeopleKeep, a creator of HRA benefits automation software for small businesses. Learn more at www.peoplekeep.com.