photo credit: Robert Scarth
You’ve no doubt been at pains to cut costs during this recession. Now is the perfect time to review your hiring strategies and pay scales. More important, it’s time to look at the fringe benefits you could and should be offering. Your company might save a bundle by replacing dollars with benefits.
I’ve heard many people state that their job doesn’t pay as well as they would like, but that their benefits are awesome and they are truly happy when they make this statement. This means that they are getting more fringe benefits and their employer is benefiting by paying lower taxes on this employee, it’s a win win situation for everyone.
For example, say that you pay one employee a gross wage of $2000 per month and then require that they seek out their own individual health plan. By the time you deduct the taxes out of their pay check and they deduct their insurance premium (usually higher for individual plans if offered at all for pre-existing conditions) then they are down to a take home pay every month of $1300. This employee is going to feel cheated, not only are they not getting paid very well but they also are not receiving benefits through you, not a good deal.
If you were to offer this same person a monthly wage of $1800 and in addition pay for a group benefit plan for them, you take away taxes from their paycheck and their take home pay monthly is now $1350, they are actually ahead even though you pay them less. Not to mention the company is saving on money as well. On their salary you have to contribute or “match” the same amount of taxes that they pay out of each pay check, this means an additional 11 percent that you pay out on one employee.
With these particular numbers you would still have a savings of $22 per employee, which does not seem like a lot but when you multiply that by how many employees you have it adds up to be quite a sum of money. So remember that there are way’s around providing benefits for your employees without raking you through the coals.