What are Additional Services - and Should You Offer Them?
Contrary to popular belief, money is not always the most important thing when it comes to employee retention. While base salary is certainly an important factor in job satisfaction, a Forbes Advisor survey found that 26% of small business owners believe their employees quit to get better benefits, and 62% of companies have their benefits packages in place changed last year.
If it's been a while since your company reviewed its benefits, now is the perfect time to see how you compare to other companies that may already be on the radar of your employees and top candidates.
What constitutes a high-quality social benefits package is constantly changing. If your HR department doesn't keep track of which perks are at stake and which ones are really impressing the best talent, it can make it harder to achieve your company's recruiting and retention goals.
Every company has its own needs and priorities. No matter how you decide what is best for your employees, you can rely on IceHrm's Benefits Administration to make the entire process a breeze for HR and employees. Read on to discover some of the most sought-after benefits that can help your business stay competitive in a crowded market.
What are additional services?
Benefits are any perks that supplement an employee's regular salary. They are generally referred to as social benefits and include, for example: Health insurance and pension plans.
Benefits can determine whether a candidate accepts your job offer (or whether they apply at all). In fact, 68% of job seekers want to know what companies have to offer, but 36% of hiring managers admit that their company doesn't disclose benefits up front. In addition to supporting your recruiting efforts, they also impact how long employees will stay with the company.
Taxable additional services
According to the IRS, any additional benefit you provide is taxable and must be included in the recipient's salary unless the law specifically excludes it. If the recipient is an employee, the benefit is generally taxable and must be reported on Form W-2. However, if the recipient is an independent contractor or partner, the benefit is not taxable but may need to be reported on Form 1099 or Form 1065.
Additionally, IRS Publication 15-B lists several non-taxable additional benefits, including:
- Accident and health benefits
- Adoption support
- Employee stock options
- Health Savings Accounts (HSAs)
- Reimbursement of tuition fees
- Cell phones provided by the employer
- Meals
- And more
Calculation of additional wage benefits
Percentage of fringe benefits shows how employees' wages correlate with the benefits offered to them. This percentage will help you assess whether your benefits package is both competitive in the market and cost-effective for your company. For example, according to the U.S. Bureau of Labor Statistics, benefits costs accounted for 29.4% of total compensation in the private sector in June 2023. Knowing your plan will also help you determine how many employees your company can afford at any given time.
Non-wage labor cost rate for employees
To calculate your employee payroll cost rate, divide an employee's annual payroll cost by his or her annual salary and multiply that number by 100. The equation is as follows:
(Total costs for fringe benefits/annual salary) X 100 = Fringe benefits rate
For the total amount of non-payroll costs, you must take into account unemployment insurance, health insurance and all other mandatory and voluntary benefits in your compensation package.
To illustrate, if an employee's annual benefits are $25,000 and his or her annual salary is $100,000, the fringe benefits rate would be as follows:
($25,000 / $100,000) X 100 = 25%
This means that your company will pay the employee 25% on top of their annual salary.
Additional wage benefits for hourly employees
The benefit rate for hourly employees is calculated the same way as for salaried employees, but with an additional step. Since they are paid on an hourly basis, you must first calculate their annual salary. To do this, multiply the hourly rate by the number of hours worked per week and the number of weeks in the year.
For example, if an employee's hourly rate is $45 and he works 40 hours per week, his annual salary would be:
$45 X 40 hours X 52 weeks = $93,600
Let's say benefits are $15,000 per year. The benefit rate for this employee would be:
($15,000 / $93,600) X 100 = 16.03%
So your company pays the employee 16.03% in addition to his annual salary.
Examples of additional services by industry
Since applicants and employees generally view benefits like health insurance as a must-have, it is in a company's best interest to offer additional incentives to stand out from the competition. What, for example, you ask? Well, that depends on your industry and other factors such as: on the size of the company, what your competitors are offering and the personal values of today's job seekers and employees.
Check out these five industries and their popular benefits to help you attract - and retain - top talent:
Construction industry
While large construction companies are usually well established, it is common for smaller companies to overlook benefits that their employees value. In this physically demanding industry, health, life and disability insurance, paid vacation and employer-style retirement plans are in high demand. Other unique benefits include project and management-related incentives.
Since the construction industry has one of the highest turnover rates, averaging around 25% per year, a generous compensation package can help improve retention and team productivity, thereby avoiding costly retraining. Additionally, performance-based bonuses can motivate teams to meet completion deadlines while staying within budget. Management-based incentives are also worth considering, as the use of software can structure employee workflows and provide management with real-time data for business decisions.
Finance
In a survey conducted by Quartz, 101 of the most influential financial companies were asked to disclose their employee benefits. Among those cited by those who responded were adoption or surrogacy and tuition reimbursements, gender reassignment assistance, and expanded leave policies impacted by the COVID-19 pandemic.
As the survey shows, the average parental leave in the financial industry is 8.3 weeks, so many companies are offering fully paid leave of 16 weeks or more to attract top candidates and keep current employees happy. Additionally, offering financial assistance for adoption, fertility treatment and more helps foster a culture that advocates for women and their partners.
Healthcare
Because healthcare workers sacrifice so much to nurse their patients back to health, it is important for companies to support their employees with quality benefits. In addition to health insurance, useful benefits include wellness options (e.g. free gym memberships and mental health apps), paid time off (PTO), student loan assistance, and commuter benefits.
Healthcare organizations offer these benefits to promote holistic employee wellness and encourage them to use their PTO to avoid burnout, which is common in these high-stress fields. Additionally, student loan repayment is an attractive benefit since many employees are likely to have a large amount of debt. And while working remotely has become more normal due to the pandemic, healthcare workers generally don't have that luxury. Providing petrol subsidies or free bus and subway cards can help ease the burden.
Non-profit organizations
While many nonprofit employees value mission over salary, more and more organizations are competing with corporations for top talent by offering enticing benefits. Common perks include on-site meals, bonuses for exceeding fundraising goals, and PTO for sharing their expertise at speaking engagements. To help employees plan for their professional and financial futures, many nonprofit organizations also offer reimbursement for continuing education costs and financial management services such as budget planning.
By reducing employees' personal expenses, e.g. For example, for groceries, tuition, and financial services, nonprofits can help improve work-life balance and compensate for a modest salary compared to what competitors are offering. Additionally, motivational incentive programs that promote better performance are mutually beneficial to the employee and the nonprofit organization.
Technology
Swimming pools, bowling alleys and climbing facilities, oh my! Aside from the stunning office spaces the tech industry is known for, standard perks also include fully paid health insurance, childbearing and adoption benefits, wellness incentives, and unlimited time off.
With tech giants like Microsoft and Adobe leading the way in employee satisfaction, it's easy for competitors to make similar offers to attract talent. By offering fully paid healthcare and supporting those who want to start a family, employers can increase employee satisfaction and meaningfully impact their lives.
Improve your employee benefits strategy
Although additional services incur additional costs, they are worth it in the long run. Your company will be better able to attract top candidates, increase employee satisfaction, and retain employees. By offering in-demand benefits, you enable your employees to take care of themselves and their families while preparing for the future - which can lead to them becoming more personally committed to your company's success.
While it's clear why benefits are good for business, managing benefits programs is no easy task! Manually monitoring entry-level elections and open enrollment information at various points can waste a lot of your HR department's time and energy.
The good news is that managing employee benefits no longer has to be a laborious process. With IceHrm's benefits management, the entire process is summarized in an easy-to-use interface that is directly available to the HR department. Additionally, employees have a user-friendly and holistic view of their preferred benefits - a win-win solution for everyone.
Elevate your company's competitive edge by prioritizing employee benefits. IceHrm's Benefits Administration streamlines the process, enhancing retention and fostering a workforce committed to success. Invest in the future with strategic benefits management.