The Importance of Providing Benefit Packages to Your Employees

By Flora Fuentes, Unique Hair Concepts, Ardsley, New York

Are you having difficulty hiring new team members for your business? Have you posted on popular hiring platforms such as Indeed, ZipRecruiter or Workable only to feel discouraged by little to no response?

Most applicants will check the salary offered when they check on a job advertisement. However, while that’s a key consideration, many applicants also want to know about employee benefits. These can be worth thousands of dollars more to the employee every year, so they’re a key area for small businesses to consider.

Assessing the stats

Back in 2017, the Kaiser Family Foundation reported that half of small businesses across the US offered health insurance to their employees. Five years previously, the figure was 59, showing a downward trend. This stat applies to small businesses with three to 49 employees. In contrast, almost all businesses (96%) with 100 or more employees provided this same perk.

The US Department of Labor released a report on Employee Benefits in the United States in March 2023. It points to a trend of benefits being more prevalent among those with 100 or more employees. The National Federation of Independent Business surveyed small businesses and discovered that two-thirds of them (65%) did not provide health insurance because of the cost. Even those who provide coverage say it is tricky to manage the cost of doing so.

It’s a similar picture to retirement plans. A 401(k) plan offers tax advantages to those who are saving for retirement. With a 401(k) plan, the salon employer takes a percentage of an employee's earnings to invest in the plan. This means the employee is paid after that deduction.

The employer may also decide to match the amount paid by the employee. This means a 401(k) is a desirable benefit to have in any benefits package — potentially the most important of all. It would be impossible to invest as much cash for retirement via any other route, thanks to the tax advantages.

What’s in it for you?

It’s vital to look at these stats in terms of benefits for the employees — and for the small businesses concerned. Taking on someone new costs time and money. An excellent employee is a real asset. Looking after them will help you retain them more easily. The Pew Research Center found that low pay was the top reason why U.S. workers switched jobs in 2021, with 37% giving this as a major reason. Moreover, 23% listed poor benefits as a major reason for going elsewhere.

Another study found that only 7% of salon employees stayed at the same salon throughout their careers. Most moved at least once, with many people moving several times. Given the stats, it’s easy to see how tempting it would be to move to a salon with a strong benefits package that included a 401(k) plan, for example.

It's crucial to have plans for retirement or ill health should it arise. Small businesses that don’t provide employee benefits are not likely to attract the best applicants for their job openings. Think about it — if a job position doesn’t provide these things, the employee needs to sort them out independently. This involves larger monthly outgoings, and those may not sit well with the salary offered by the small business. It’s a double-edged sword in that sense.

It's not just about attracting the attention of the best employees, either. A solid benefit package also makes it more likely that you can retain them. A good salary is one thing. Offering a retirement package, health coverage, and other perks makes any position more attractive to someone looking to work for a small business.

A retirement plan, health coverage, a vacation allowance and other perks will make any job you offer more attractive. Yet it’s not just about the benefits themselves. It’s about the image they present when someone is applying to work for your business.

These benefits and others like them tell would-be employees that you care. You’re serious about finding and retaining the best employees who can help you grow your business. And to that end, you’ve put together a package that you believe is going to reward them for their hard work.

Benefits help you retain the best employees.

People switch jobs for all kinds of reasons. However, we’ve seen that low pay and poor benefits packages are two of the main ones. If your salon offers the minimum benefits, think about how you might change that. We’ve seen there is a link between this and employee retention.

Given the cost and hassle of finding new employees, think about the amount of time you could free up to do more for your business, rather than recruiting yet more people. In addition to the benefits of retaining talented staff, speak to your accountant about the tax benefits your business qualifies for by offering health insurance and retirement packages.

The better you can make your benefits package, the more attractive your business will be compared to other small businesses in the same sector. That’s something worth considering when you’re seeking the best talent — and it could be one of the best benefits for you. After all, it’s not just about seeking out talent, it’s about retaining it — and with a strong package to offer, you’re more likely to draw the attention of the best in the business.