October 15, 2021
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One of the biggest dilemmas facing small business owners today is whether to offer health insurance as an employee benefit. Each year, small businesses are faced with the task of weighing the pros and cons of offering group health insurance to their employees and themselves.

“I guess because of the pandemic I have to offer insurance.”  “Will this help my business?”  “Can I afford to offer these benefits?”  “How will this affect my bottom line?”  “I don’t know anything about insurance, how would I answer my employees' questions?”

JewelersHealthCare.com highlights some of the reasons why health insurance is a must-have offering for every employer, no matter the size.

Improved Hiring and Recruiting

A recent survey of small businesses across the United States found that 66% of employers offering health insurance benefits to their employees did so to hire and retain the best employees. The data on the employee end is even more drastic:
  • A 2017 survey from Lending Tree found that 33% of people have turned down a job offer due to lack of employee benefits.
  • A 2018 survey from Willis Towers Watson showed that 46% of respondents cited health insurance as a key consideration in choosing their current employer.
  • Most notably, a survey in 2016 from Fractl, published in the Harvard Business Review, noted that 88% of respondents would be more likely to take a lower paying job if health insurance were offered.
With only 55% of US based companies with less than 100 employees offering health insurance, providing an attractive benefit to potential talent sets you apart from the rest of the pack. In a small business, one employee represents a substantial percentage of your overall team. Being able to attract the right employees can be the difference in a success story and an ultimate disaster. This is even more true in the post-pandemic era where small businesses need to pull out all the stops to attract top talent.

Better Employee Retention

With all the challenges of finding and hiring the right employees comes the capability of keeping them on board. Dealing with both direct and indirect turnover costs are a burden for any company, let alone a small business. The direct cost of finding, onboarding, hiring and training a new employee exacerbates the indirect costs of lost productivity, gaps in customer service, not achieving your businesses core competencies or any adverse effects on company culture. Some studies have been done to quantify the actual cost of employee turnover, with one study concluding that the average business spends 21% of an employee’s salary to replace him or her. Additionally, 56% of employers who were offered health insurance through their current employer answered that their coverage was a deciding factor in their decision to stay with their company.

Given the importance of employee retention on small businesses, the ability to offer health insurance is paramount as it provides a stickiness to employees and mitigates the possibility of turnover becoming an issue.

Tax Incentives

Most often, the largest driving factor keeping employers from offering health insurance benefits are the premium costs. Many businesses, especially smaller ones, worry that the price tag of offering coverage to their employees may break the bank. Thankfully, tax incentives can help small businesses weather the burden of those costs. There are a few different ways employers can receive tax benefits by contributing to group health insurance:
  • In most cases, premiums paid by businesses for employee coverage are 100% tax deductible.
  • The contributions you make to employees’ small group health insurance benefits are tax-exempt, according to the Employer's Tax Guide to Fringe Benefits from the Internal Revenue Service (IRS). This means those costs are declared for informational purposes only and are not part of any tax calculations for your business. They are not subject to federal income tax withholding, social security, Medicare, federal unemployment (FUTA) tax, and are not reported on Form W-2. Taking advantage of this incentive is particularly valuable — it can lower your tax payments, or in some cases, even eliminate them completely.
  • Section 125 or sometimes Premium Only Plans (POP) allow employees to enroll in coverages and pay for these benefits pretax. Here’s how it works: The dollars you commit toward employees’, their spouses’ and dependents’ premiums are an obvious financial plus for them, but are not considered ‘wages’ by the government and therefore aren’t taxed the same way, for example on their paycheck.
  • Contributions you make to employees’ Health Savings Accounts (HSAs), a type of pre-tax savings account. HSAs can be used when paired with a high-deductible health plan (HDHP). In general, contributions to an employee’s HSA are a deductible business expense for your company. Those contributions can also be excluded from an employee's income, and are not subject to Social Security, Medicare, or federal income taxes.


Wellness and Employee Culture

Employee culture and wellness is a top priority when thinking about whether to offer benefits (and what kind). Too many employers think about the insurance plan itself, and not anything indirectly related. For instance, many insurance plans do come with supplemental wellness initiatives that can also be used as a tool to incentivize good health habits. It could also be a great tool to continue to foster a family like culture within the businesses. By taking an interest in supporting employees’ health, they are more likely to be more productive, stay employed there longer, and rave about how awesome they are treated as employees.

Operational Costs

It is a best kept secret that health insurance can be an operational cost that YOU can control. As a Jewelers of America member you have JewelersHealthcare.com and their advisors to help you learn how to take back control of your Healthcare while freeing up resources to distribute elsewhere in your business.

Interested in other tips, tools, and techniques aimed at helping you run a more secure and successful jewelry business? Browse more of our Business Tips.
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