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In the cutthroat business world, attracting and retaining the best talent is a perennial challenge. Many employers often gravitate towards offering higher salaries to lure potential candidates. However, there’s a compelling case to be made about the effectiveness of offering employee benefits over mere salary increments. One of the most persuasive arguments lies in the realm of tax benefits. Here’s a deep dive into why you might want to adjust your compensation strategy.
1. Tax Advantages Take the Lead
For businesses, employee benefits are tax-deductible. This can significantly reduce the company’s tax burden compared to increasing salaries, making it more economically feasible. Furthermore, many benefits provided to employees, such as health insurance, are often excluded from taxable income, offering employees a double advantage: receiving the benefit and reducing their taxable income simultaneously. Think about it this way. Everyone needs health insurance and to save for retirement. Both essential needs are tax-deductible to the employer and the employee. It is far more efficient to buy/receive through an employer than take a higher salary and pay for these two essential needs with after-tax money. And it is far more effective to provide these benefits than paying a higher salary which means paying higher FICA taxes at 7.65% and higher workers’ compensation costs.
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2. Holistic Employee Well-being
Offering benefits like health, dental, and vision insurance signifies a company’s commitment to the holistic well-being of its employees. A workforce that feels cared for in all aspects of their lives is generally happier, healthier, and more engaged.
3. Loyalty and Retention Skyrocket
A comprehensive benefits package can lead to reduced employee turnover. When workers feel they’re receiving long-term value from their employer, they’re less likely to jump ship, thus saving companies significant costs in hiring and training. This is especially true for employees who have dependents on their health insurance program.
Related: 4 Critical HR Mistakes Companies Make That Hurt Their Growth
4. Enhances Overall Job Satisfaction
Benefits such as paid time off, professional development allowances, and wellness programs go a long way in ensuring employees are content and engaged, positively impacting their output and commitment.
5. Financial Flexibility for Employees
While high salaries can be enticing, they might not address some of the immediate concerns employees might have, like health costs or childcare. Benefits that cater to these concerns provide a form of financial relief and security. Additionally, newer benefit offerings like pet insurance and student debt relief cater to someone emotionally as well as financially.
6. Positive Company Culture
Cultivating a culture where employees feel valued often starts with the benefits package. Perks that promote work-life balance and well-being contribute to a more harmonious and productive work environment.
Related: 6 Costly Mistakes CEOs Make Managing Business Insurance and How to Avoid Them
7. Boosts Productivity
Employees who don’t have to stress over healthcare costs or finding the next learning opportunity are more likely to be focused and efficient. This, in turn, drives the company’s growth. An example is financial wellness. If an employee continues to deal with the stresses of credit card debt, high interest rates on loans, and the feeling of never clawing their way out of financial troubles, they are more apt to sacrifice mental clarity for financial gain. Rushing off to a second job as a waiter instead of staying late on an important project is a prime example of this.
8. Setting Your Company Apart
In saturated job markets, what sets one company apart from another may not be the salary but the unique benefits they offer, making them a more attractive option for top talent.
Benefits Have Team-Building Power
While a competitive salary is undeniably crucial in the recruitment process, the long-term advantages of a robust benefits package, especially the tax incentives, cannot be understated. For the forward-thinking entrepreneur, this could be the game-changer in building a dedicated, satisfied, and high-performing team.
For more information on setting up, improving upon, or benchmarking your own benefit programs, click here.