Missing Out on Benefits? Here’s What Small Businesses Are Losing
When running a small business, every dollar counts. It’s tempting to trim costs wherever possible. For many small business owners, offering employee benefits like health insurance might seem like an unnecessary expense. But while it may seem like you're saving money in the short term, the long-term costs of not offering employee benefits can far outweigh the initial savings.
The Real Cost of High Turnover
One of the most significant hidden costs of not offering employee benefits is the impact on employee retention. Without benefits, employees are more likely to leave in search of better opportunities elsewhere. High turnover rates can be incredibly costly, especially for small businesses. The process of recruiting, hiring, and training new employees is not only time-consuming but also expensive. According to some estimates, replacing an employee can cost anywhere from 16% to 213% of their annual salary, depending on their role and experience level.
“According to some estimates, replacing an employee can cost anywhere from 16% to 213% of their annual salary, depending on their role and experience level.”
Frequent turnover can disrupt your business operations, leading to decreased productivity and lower morale among your remaining employees. A stable workforce is essential for maintaining consistency and efficiency, and is the foundation of growth.
The Competitive Disadvantage
In today’s job market, offering employee benefits is not just a nice-to-have—it’s a necessity. Many job seekers consider benefits to be just as important as salary, if not more so. Without a benefits package, small businesses may struggle to attract top talent. This can put you at a competitive disadvantage, especially when larger companies or other small businesses offer comprehensive benefits packages. A recent NFIB survey found that over half (56%) of small employers currently offer health insurance to employees.
In a competitive market, your ability to attract and retain talented employees can be the difference between growth and stagnation. By not offering benefits, you risk missing out on the skilled workers who can drive your business forward.
The hidden tax benefits
While offering employee benefits requires an upfront investment, the financial impact can be mitigated with a properly-structured tax strategy. Health insurance-related expenses are generally deductible as an "ordinary and necessary" business expense from federal business taxes. This means that businesses can deduct the costs of employee health insurance from their taxable income, reducing their overall tax liability.
“A recent NFIB survey found that over half (56%) of small employers currently offer health insurance to employees. ”
Unfortunately, most small business who do offer health insurance aren’t taking full advantage of the tax benefits available to them or their employees. When asked if small employers have considered offering a tax-preferred reimbursement or financial incentive to purchase health insurance on their own, over half (68%) of the NFIB survey respondents reported they have not considered it.
Conclusion
For small businesses, the decision to offer employee benefits should not be taken lightly. While the initial cost may seem daunting, the hidden costs of not offering benefits—high turnover, decreased productivity, and a competitive disadvantage—can far outweigh the savings and leave tax benefits on the table. Investing in employee benefits is an investment in your business’s success, ensuring that you can attract and retain the talent you need to thrive.
