Growing your startup can feel like a constant battle of David vs. Goliath, no less in attracting and retaining the talent your company needs in order to thrive. When it comes to medical, retirement and other traditional employee benefits, unfortunately many startups have a benefits strategy that is scant or non-existent. However, with a few shrewd benefits hacks, your company can lay the groundwork to be competitive with much larger companies and do so without breaking the bank.
1. Self-insurance isn’t only for the Big Guys
Most small businesses that offer health insurance choose to be fully insured and pay the same rates as all other businesses in their area with that insurer. However, for businesses as small as 5 employees, there has been a recent surge toward level funding, a type of self-insurance program where you pay fixed amounts every month into a claims fund and stop-loss insurance covers any claims above a certain threshold.
This strategy works especially well for startups where employees tend to be tech savvy, as this correlates highly with adoption of telemedicine and price transparency tools that can lower medical expenses dramatically. How much does this all save? With a generally healthy group of employees and some education on how employees can avoid wasteful expenses, you can save as much as 25%-40% while maintaining the same level of benefits.
2. Don’t get fooled on 401(k) fees
All 401(k)s are not created equal, and small businesses tend to end up with the worst arrangements if the decision makers don’t know the direct and indirect fees that are involved. In fact, fees can vary as much as five times from one plan to another, with most of these fees carefully shrouded or built into investment costs.
The good news is that with proper due diligence, the fees of many small business 401(k) plans can be lowered by a full 1% of the plan’s assets—a difference which can allow you to accumulate an extra 20 percent or more in your account over the course of your career. That means that even if you can’t afford a company match just yet, you can make up some ground just by sponsoring a plan with an employee-friendly fee structure.
3. Consider a “defined contribution” employee benefits strategy
Startups need to be especially diligent in how they allocate their limited resources. While your employee benefits budget may be constrained, you can get the edge over other employers by being more flexible and transparent with your benefits contributions.
Newer benefits technology platforms make it easy to offer a broad array of benefits to employees on a defined contribution basis. Here, employees allocate their benefits dollars to what matters most to them—whether that is traditional health, dental, and vision or niche products like pet insurance or student loan repayment—and can easily supplement these with their own contributions from their paychecks.
While there are different levels of implementation to consider, having some version of this strategy in place early in your company’s development will make it easy to increasingly reward employees as you grow and are able to contribute more to the benefits budget.
With these three benefits hacks as a starting point, your startup can begin to level the playing field and offer benefits that are truly in the best interest of your employees.