For small business owners, it’s likely that “employee retention strategies” ranks among the most often Googled phrases. But why is employee retention so important and what budget-friendly employee benefits options do you have to attract and maintain the best and brightest?
One of the main reasons that employee retentions strategies are so important is that it costs more to recruit, hire, and train new employees than it does to retain quality employees.
In fact, studies show that even an $8 an hour employee can cost a company $3,500 in direct and indirect recruiting and training costs.
What's more, when the time does come to hire new employees, a high rate of retention is appealing to them; long-time employees means you must be doing something right!
The best employee retention strategies for small businesses
There are a lot of ways you can attract talent for your small business.
Everyone has heard about the companies that have ping pong tables in conference rooms and nap pods and on-site masseuses.
It comes as no surprise that these next-level perks come with a high cost. So as a small business owner, how can you make those dollars stretch further when it comes to recruitment?
According to the Society for Human Resource Management, there are some tried and true strategies that can be applied to your company culture. Some of these options don't cost a thing!
- employees want to be treated well and fairly, no matter what level of the company they work in - be an employer who listens well!
- employees value trust between themselves and senior management
- employees want to know their job is secure
- employees want to feel they are using their skills and abilities - make it a point to regularly recognize employees and their achievements!
- employees value compensation, and health benefits rank right up there with a paycheck
Practical tip: according to Forbes, good lighting and a comfortable room temperature can even go a long way in employee comfort and satisfaction!
Depending on the size of your small business (under 50 employees), you may not be required to offer health insurance, so why would you spend money if you don’t have to? Because, as we already mentioned, health insurance benefits are incredibly important to employees.
We understand that it’s hard for small businesses to afford benefits or compete with bigger companies. Small businesses aren’t set up to withstand huge premium hikes year over year. But recruiting the best and brightest means offering great small business health insurance benefits.
That brings us to our next (super helpful) point.
Reimburse your employees for health insurance with an HRA
We think a great solution for small business owners is to offer personalized benefits through a health reimbursement arrangement. We think HRAs are great for many reasons, but one is that they save you money! They are less expensive than the one-size-fits-all group plans that have historically been available, you don’t have to worry about participation rates, and they are tax-advantaged.
A health reimbursement arrangement, or HRA for short, refers to an arrangement between employers and their employees to reimburse for medical expenses and/or insurance premiums tax-free. The purpose is for employers to help their employees afford rising healthcare costs.
We think your employees are really going to appreciate the personalized benefits that an HRA can offer: Employees appreciate that an HRA allows them to choose their own plan and keep their favorite doctors. Plus, they can take their plan with them if they leave.
Types of HRAs
HRAs are nothing new, but there are a couple of recent "flavors" that we think work best for small businesses.
ICHRA: The Individual Coverage HRA allows companies of any size to reimburse employees for health insurance with no contribution limits. The ICHRA can be an alternative to or used in conjunction with traditional group insurance.
For business owners, ICHRA brings predictable costs, flexible and efficient design, and budget control. There's no need to worry about rising premiums or participation rates.
QSEHRA: The Qualified Small Employer HRA (or small business HRA) is similar to the ICHRA, but with a few key differences: namely, contribution limits and business size. Contribution limits for QSEHRA 2020 are as follows: For an individual: $5,250/year or $437.50/month. For a family: $10,600/year or $883.33/month. To qualify for a QSEHRA, companies must be less than 50 employees.
Still need help with the best employee retention strategies for small businesses?
You can also use our Tax savings calculator to calculate how much your organization and your employees could save each month on taxes compared to offering additional salary or health stipends.
Good luck in your hiring efforts!
A wife to one and mother to four, Keely does all of the things. She’s also dabbled in personal finance blogging and social media management, contributed to MetroFamily magazine, and is passionate about good food, treasure hunting and upcycling. With a B.S. in Psychology from the University of Oklahoma and a knack for a witty punchline, it’s no surprise that Keely’s social posts are as clever as they get. In her (very little) free time, you’ll find Keely with her nose in a book or trying out a local restaurant with her family.