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A small business can be defined as an independent entity with less than 500 employees, and it’s estimated that there are over 32 million such businesses in the United States alone in 2021 (as per Oberlo’s report).
If you’re one of these small business owners, you know how difficult it can be to run your company on a day-to-day basis, especially when handling both your company’s finances and employee benefits.
But keeping your company’s benefits costs in line doesn’t have to be complicated or overwhelming!
The following are some quick tips to help you manage your small business’s benefits cost, effectively and efficiently.
What do you mean by benefits administration?
The overall process of determining which benefits to offer employees, managing costs associated with those benefits, and distributing that information to employees is what’s meant by benefits administration.
These processes are sometimes overseen by a dedicated employee or an outside firm. The former is referred to as a ‘family’ plan, while an outside firm is called a third-party administrator (TPA).
In either case, it’s important to know exactly what you’re getting for your money. If you don’t, then expect your benefit costs to spiral out of control faster than Linda Blair in The Exorcist. And if you’d rather not be responsible for overseeing these processes, then consider hiring someone who can do it on your behalf – be it internal or external.
What are the different types of benefits?
Common types of benefits offered by employers include basic medical, dental, vision, life insurance, health savings accounts (HSA), disability insurance, and flexible spending accounts (FSA).
Recommended reading: 10 Employment Benefits to Ensure a Happy Workplace
Some organizations offer additional items such as a company-sponsored retirement plan. These are generally handled by third parties to avoid becoming overburdened with administrative work.
For example, HSA plans are arranged through banks or credit unions. The employer chooses an administrator that offers services tailored to small businesses. Employers may receive special incentives from these institutions which can make their costs even lower than what is normally available to individuals.
There is not much difference between designing a plan for an individual employee and one for multiple employees. There will be some complexities in administering group benefits options but it shouldn’t be difficult once you know how it works. Most employees prefer their benefits to be easy to understand so make sure you explain all options clearly in your policy manual along with any pertinent rules related to enrollment or usage.
Why should small business owners care about Employee Benefit Plans?
Small businesses that don’t offer their employees benefits are missing out on significant advantages. Benefits allow employers to attract top talent, which increases productivity and leads to greater organizational success.
Employers who offer health insurance, for example, can reduce turnover, since employee-friendly benefit plans are an important reason employees stay with a company for an extended period.
Businesses also save money in several ways when they provide their workers with benefits; however, some employers still shy away from offering worker perks because they believe they aren’t financially capable of doing so.
This is especially true if your organization is just starting or doesn’t have many resources at its disposal. But, most companies can afford to fund at least one employee benefit plan—health insurance—even if they’re operating on a shoestring budget.
Employer responsibility and cost management
Employers are required to provide a variety of employee benefits, which may include health insurance, life insurance, disability insurance, long-term care insurance, retirement savings plans such as 401(k) plans, vacation time, and sick leave.
Recommended reading: 10 Employment Benefits to Ensure a Happy Workplace
Employers must make timely payments on these obligations. An employer is considered liable for any payment if it is determined that they knew or should have known about an underpayment or nonpayment. This means employers who rely upon their payroll provider to manage these costs cannot pass responsibility onto them.
If you’re looking to reduce your exposure through outsourcing, consider whether your payroll service provider can handle all aspects of benefits administration before signing on.
Stay compliant with federal and state laws
Be aware that small business owners are responsible for administering employee benefits—you can’t outsource responsibility.
In addition to ensuring your plan is compliant with federal and state laws, you also need to understand all aspects of your benefits offerings, from eligibility requirements to open enrollment. You may be responsible even if your plan isn’t self-funded.
If you do use a third-party administrator (TPA), make sure they’re familiar with ACA legislation.
ACA requires that employers offer health insurance coverage to full-time employees. However, if you’re not considered an applicable large employer (ALE), you don’t have to meet ACA requirements. Regardless, it’s still essential to be knowledgeable about all laws in your state, which can include any restrictions or additional legislation on health care coverage.
UZIO is an all-in-one solution that combines benefits management with payroll & HRIS to ensure you have one platform to manage everything.
With UZIO’s world-class benefits administration solution you have the advantage to choose from a wide range of benefits offered by registered benefits brokers or you can choose to bring your own broker.
Work with your broker to create a digital benefits package with a wide variety of product categories including medical, tax-saving, and ancillary plans.
Get in touch with us for an expert-led demo to know more about UZIO payroll services.
