Starting A Small Business? How Can You Provide Employee Benefits Without Breaking The Bank?

If you've recently made the decision to quit your W2 job and start up a small business, you may be equal parts worried and excited about the major changes to come. Owning your own business can often be the path to an early retirement or much more comfortable lifestyle -- but in other cases, your startup attempt could fizzle and fail. The ability to find valuable employees and encourage them to stay as your business grows can often be the difference between success and failure. Read on to learn more about some employee benefits you may want to provide as an incentive for a motivated and talented workforce -- as well as those you may be required to offer once your business reaches a certain size. 

Are you required to provide your employees with health insurance?

The passage of the Affordable Care Act (ACA) made some sweeping changes to the way employer-provided health insurance is handled. However, this law has built in provisions to protect smaller businesses from having to shoulder this cost. If your business has fewer than 50 full-time employees (or an equivalent number of part-time employees), you won't be required to provide health insurance or pay a tax for failing to do so. However, if you yourself don't have health insurance, purchasing a group plan that your employees can also benefit from may be the most cost-effective option from both a personal and business perspective.

In addition to the exemption from employer-provided health insurance, businesses with fewer than 50 full-time employees also aren't subject to the requirements of the federal Family and Medical Leave Act (FMLA), which requires covered employers to hold open an employee's job (or similar position) for up to 26 weeks while the employee recovers from an illness or helps take care of an ill parent, spouse, or child. This can help you avoid major disruptions and immediately hire a full-time replacement if an employee plans to be out of work for a lengthy period of time due to illness.

What are some other benefits that can encourage qualified employees to choose your business over another?

During the early stages of building a business, having knowledgeable and dependable employees is key to your success. While some businesses and employers have taken advantage of the recent recession to get more done with less -- often to the detriment of their employees -- the economy has since rebounded, and without a competitive benefits package, you may find that the most qualified talent winds up elsewhere. Even if you can't afford to provide health insurance during your startup period, there are some other tax-deductible benefits that can help increase productivity without significantly affecting your bottom line.

Many defined benefit retirement plans like Simplified Employee Pensions (SEPs) and Savings Incentive Match Plan for Employees (SIMPLE) allow you to make tax-free contributions to your own account and deduct any contributions you make to employees' accounts. By promising to match up to a certain percentage of each employee's total contribution, you can encourage your workers to save for their own future while providing them with a non-salary benefit that won't be subject to tax (on their end) and may be deductible (on yours). 

In addition to the deductibility of your contributions to an employee's retirement plan, as long as you set up these group benefit plans during a time when you have fewer than 100 employees on your payroll, you'll be able to claim up to 50 percent of the cost of setting up and maintaining these plans for the first three years, for a maximum deduction of $500 per year.  

For more information, talk to a company like NFP, P & C, Inc.

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