Benefits: Getting Bang for Your Buck

Over the years, the scope and cost of benefits that most kitchen and bath firms provide to their employees have risen dramatically. In fact, it's not unusual, as we will see, for a business to be paying benefits that equal one third or more of the actual salaries or wages paid to employees.

While these benefits have done much to provide an improved basic standard of living for the average worker in this country, their cost and, sometimes, even their existence can be largely unknown to the typical worker.

Let's take a look at the array of benefits that are normally provided by employers in the kitchen/bath and remodeling industries, as well as some ways for you to structure those benefits and make your employees aware of them.

In general, there are two categories of employee benefits: those mandated by some government agency and, most often, paid for through a payroll tax, and those that are optional and provided by the employer.

In most states, mandated benefits include the following: Social Security (employer's portion), state unemployment, federal unemployment and workman's compensation insurance.

These mandated benefits were originally created as a "safety net" that would provide employees with a means of making ends meet if they were no longer able to continue working.

Unlike even the recent past, most employees today do not expect Social Security alone to provide them with the means to retire at the level that supports their current lifestyle, but rather view the benefit more as just one of the building blocks of their retirement.

The cost of these mandated benefits typically adds 10% to the basic wage cost for office and clerical employees, and can add as much as 20% to 40% for the employees who work on your projects in the field.

Then there are certain optional benefits that have come to be expected by the U.S. workforce. The most common of these are the various health insurances including medical, dental and vision coverage. While coverage of this type for employees is likely to be expected in the kitchen and bath industry, extending the coverage to employees' dependants is less likely.

Another of the optional benefits are days off from work, with or without pay. Typical paid days off consist of holidays, vacation and sick leave. In the remodeling business, vacations and holidays are generally expected by all employees, while sick days are not always offered.

In addition, there are some "non-traditional" types of paid absence that have come into favor recently including maternity or family leave, personal days off and sabbatical leave. This last group of paid days off is rarely offered in our business, but is becoming more common in those businesses that are having to compete fiercely for employees.

Still another benefit that has gained notoriety in recent years is the retirement and/or profit sharing plan. These plans the most common of which is the 401(k) plan allow employees to set aside some of their earnings free of taxes until their retirement. It's also common for employers to match a portion of those employee savings.

Maintain control
One of the greatest challenges facing any business is to maintain control over these optional benefits.

In general, the single-greatest factor that drives the escalation of benefit costs to a business is the simple fact that, in order to attract and retain employees, you must be competitive with other businessess in your industry.

Your competition is the primary market for the employee talent that you need to attract, and you'll quickly find that you have little choice but to match the optional benefits offered your competitor's employees particularly in the kind of tight labor market we've experienced the last few years. Benefits being offered to employees in other, unrelated, businesses will also tend to pull along the general level of benefits that all businesses must offer to attract and retain employees.

One reality to keep in mind about benefits is that, once a particular benefit is granted to employees, it moves out of the "optional" category and into the "expected" category. In light of this, it's important to carefully think through the long-term impact of providing additional benefits to employees before you institute those benefits.

One means of controlling benefits is what can be referred to as providing them in the form of a "cafeteria" plan. What this means, stated simply, is that employees are given a pre-set "allowance" for an array of offered optional benefits, and then are able to choose the benefits they want from that list.

Other benefits include those that relate to the work needs of various employees. These include tools and tool allowances, company vehicles, fuel allowances, educational allowances and the like. There are also various company functions such as dinners, parties, picnics and staff outings that really can be considered a form of benefit.

In addition, there's an array of minor benefits that an employer may provide, such as beverages and snacks, and meals for employees who work through lunch or after normal business hours.

Build awareness
One of the serious misperceptions among business owners and managers is that their employees are aware of the benefits they're receiving, as well as the cost (value to them) of these benefits.

The reality is that most employees are not aware, and are usually quite surprised, to learn that the cost of the benefits that their employer is providing will often equal as much as 50% of their basic pay.

One of the best ways to keep this information in front of your employees is to have your accounting staff prepare a summary of benefits for each employee at least once a year, detailing the cost of each of the benefits that an employee receives. This summary should show the cost per hour or month for each benefit, and should also express this cost as a percentage of the employee's base pay.

Whatever benefits you decide to provide as an employer, make sure that they're ones that are actually desired by your employees and that the employees are aware of them. If there's a lack of employee interest or awareness, there's little reason for your company to incur the costs in offering these benefits.