The cost of hiring employees
One of the most exciting, and terrifying, moments in the trajectory of growing your own business is hiring your first employees. It is exciting because it means that your business is not a total flop. It is terrifying because there is a lot to figure out, including how to effectively compensate and retain your employees.
A robust benefits package will be critical to your retention strategy. The challenge with traditional benefit plans, however, is that they can get expensive, usually averaging between 15-30% of a company’s payroll. When you are still an early stage, and growing company, that counts and controls every dollar spent, the cost of benefits can be significant.
Introducing Health Spending Accounts (HSAs)
A good potential starting point is to offer your staff a health spending account, or HSA. An HSA is a benefit that allows your employees to make claims for a wide range of medical, dental, and mental health services. As the business owner, you set the budget for how much each employee can claim for these services each year. As your business grows, you may decide to increase the total amount that you allocate to the HSAs of your employees.
Controlling the costs of benefits
Traditional health benefit plans can sometimes make it challenging to control the costs of benefits. If claims in one year are higher than anticipated, the premiums for the next year, or cost that you pay for access to these benefits, can go up.
With HSAs you are in full control of setting your budget. And you only pay for what your employees claim. For example, if you allocate $1,000 to your employee’s HSA, and they only claim $500, then your business will only pay for what is actually claimed ($500). If your employees do not make any claims, then you are not out of pocket anything. This is unlike a traditional health insurance plan, where you pay a premium, regardless of how often your employees use the plan.
HSAs allow you to convert out of pocket, after tax personal medical expenses into a before tax business expense. You can then write-off these medical expenses through your business. This will in effect lower your taxable income.
Staff retention tool
HSAs are also a great option for your staff because they provide flexibility. They can decide exactly how to spend their healthcare dollars, and even claim things not covered by some traditional healthcare plans. This includes orthodontics, medically required plastic surgery and medicinal marijuana. Providing such flexibility when it comes to benefits, makes the HSA a great retention tool for small and growing businesses.
Requirements and costs
You need a registered business to apply for an HSA, and the only cost to have it is an administrative fee of 10%, plus any applicable taxes, on each claim made. For small and growing businesses, who need to manage costs but want to offer an attractive benefits package to their staff, the HSA is a great option.