When you start a new business and hire your first employees, health benefits are not at the top of your list. You’re focused on fine tuning your business plan and generating revenue. However, as your company puts down its roots and starts to grow, there comes a time when health benefits become a consideration.

So, just where is the tipping point? The answer comes down to cost, but it also comes down to the value; the payback of your investment to your bottom line in terms of the cost of hiring and employee turnover.

As you start to evaluate if now is the right time to start offering small business health benefits, here are two considerations.

Are We Ready to Offer Health Benefits Financially?

For most small businesses, offering health benefits only makes sense when the business is turning a profit and you are confidently covering overhead and personnel expenses (including paying yourself).

There’s no magic number revenue-wise. Every business is unique. For some businesses, the tipping point might be $500,000 in revenue, for others it might be more.

To help understand if your company is ready financially, ask yourself these types of questions:

• Are we meeting current overhead expenses?
• What is our financial forecast?
• Do we have a budget for health benefits?

How Will Health Benefits Impact our HR Goals?

Once financial security is established, offering health benefits starts to make sense from a recruiting, hiring, and retention standpoint. Current and prospective employees want and value health benefits.

But it’s not just about cultivating happy and healthy employees. Offering health benefits also makes sense from a personnel and cost standpoint. After all, there is a cost to attract, hire, and keep the best employees. The right package lowers your HR costs, especially if you are operating in a competitive labor market.

Health benefits become a priority when you need them to attract and keep the best employees. In other words, not offering health benefits is costing you more than offering them. How do you know when you’ve reached the tipping point?

Start by calculating your current employee retention rate and the cost of employee turnover to understand the payback on an investment. Understanding these basic HR ROI calculations will help you benchmark and see the result of all of your HR initiatives, including health benefits.

Evaluating Health Benefit Options

Once you decide, yes, now is the time to start offering health benefits, the next question is what type of health benefits to offer? Small businesses tend to evaluate these four health benefit options:

1. Individual Health Insurance Reimbursement (provide employees an allowance to purchase health insurance)
2. Private Small Group Health Insurance Plan
3. SHOP Marketplace Group Health Insurance Plan
4. Co-operative Group Health Insurance Plan

The approach that makes sense for your small business will depend on your budget and goals.

Conclusion

Has the time approached for your small business to offer health benefits? The first step is to understand your financial capacity and your HR needs and goals. The second step is to evaluate your options and pick an approach that allows you to maximize your investment. Ready to get started? See this free Zane Benefits workbook on planning for small business health benefits.

Christina Merhar is a guest author and Senior Editor for Zane Benefits, the leader in individual health insurance reimbursement for small businesses. She has a passion for helping small employers understand the ins and outs health benefits and Human Resources.

In a recent article, we talked about job-related frustrations experienced by employees. Those frustrations included “not sharing about salary and benefits”, and “not having a culturally diverse and gender diverse leadership teams.” In this article, we are addressing the consequences of those mistakes and others—employee turnover.

What exactly is “turnover?” Well, in this context, it’s certainly not a pastry. Employee turnover can be defined as “the rate at which you gain and lose employees.” It is a measurement of how long employees tend to stay, contrasted against the rate at which they leave—voluntarily or involuntarily. This is useful information for several reasons.

Understanding your rate of employee turnover relative to the industry overall, may indicate an internal issue you need to address. According to the Bureau of Labor Statistics (BLS) Job Openings and Labor Turnover Survey (JOLTS), there were 5.0 million job openings on the last business day of January, this was the highest level of job openings since January 2001. Looking at one industry, home healthcare, direct-care workers provide an estimated 70 to 80 percent of the paid, hands-on long term care and personal assistance received by Americans who are elderly, chronically ill, or living with disabilities. According to a study by the American Health Care Association, annual turnover rates among the long term care industry are approximately 70 percent. In other words two out of three long term care workers leave their jobs in the course of a year.

High employee turnover in any industry strains clients, employers, and workers. High turnover can harm productivity, especially when you consider the investment made in recruiting, hiring and training workers. When they leave after only a short period of time, employers are not getting the best return on investment and that is costly to the bottom line.

Reasons for turnover have been discussed in other articles in this blog. Let’s concentrate now on measuring the cost of turnover and what steps can be taken to mitigate the impact on the business.

Calculating turnover is fairly straightforward. Here is a simple formula:

Monthly turnover rate = (# of separations in a month ÷ # of employees in a month) X 100

For example, ABC Company experienced 5 separations in March; ABC employs 50 workers during the month. 5 ÷ 50 = 0.1 X 100 = 10% turnover rate for March.

It’s not enough to know the rate of turnover, it is critical to understand the cost. In simple terms, the formula looks like this – let’s use the sample above:

That is quite a sum of money to impact the bottom line each month. What can be done about it? Here are 5 steps that will help.

Step 1 – Clarify your purpose organizationally and individually. Lack of clarity and direction can kill your business and wreak havoc on your team. Know where your business is heading and direct and motivate your team to move forward.

Step 2 – Be smart about recruiting and hiring practices. Hire people who not only have the skill and knowledge your company needs, but also have attributes that work well within your business’s culture.

Step 3 – Develop strong work relationships and communication from day one. New-hire orientation is more than a one-time, one-day event. Look at it as a process of integrating and acclimating a new employee to your company’s unique culture and way of doing business.

Step 4 – Realize that performance management is not an annual event. Performance management is a valuable retention tool. It drives employee behavior to align with your agency’s goals and objectives. It is critical to consistently measure and monitor employee performance against the company’s performance.

Step 5 – Keep your eyes open and be proactive. The best way to build a winning team for your small business is to be aware and responsive to the needs of your business and your employees. Stay in constant communication with employees – don’t ignore signs of problems and learn from past employees.

This is just an overview of the problem of costly turnover. For more detail, MJ Management Solutions has developed a downloadable book, “Practical Tools to Manage Costly Employee Turnover” with forms and checklists to help you through the 5 steps outlined here. This e-book gives you strategies you can start using right away to reduce turnover and lower your human resource costs.

This article first appeared at M.J. Management Solutions, Inc.

MJ Management Solutions, Inc., is a human resources consulting firm that provides small businesses with a wide range of virtual and onsite HR solutions to meet their immediate and long-term needs. From ensuring legal compliance to writing customized employee handbooks to conducting sexual harassment training, businesses depend on our expertise and cost-effective human resources services to help them thrive.

As a small business owner, the ideal situation is to recruit and retain top quality employees who feel satisfied with their work, positive about their pay, and have a desire to be long time contributors. You want them to feel loyal to your company and advocate for your small business. Individuals like these are the ones to get and keep! So how do you make that happen?

It’s All About Benefits

Studies indicate that there’s a reciprocal relationship between benefits and job satisfaction. MetLife’s U.S. Employee Benefit Trends Survey, which interviewed 1,510 company benefits decision-makers and 1,203 full-time employees in 2013, found that professionals satisfied with their benefits are more than twice as likely to also be satisfied with their work.

“In the 12 years we’ve been doing this study, employees consistently indicate that their benefits offering is an important reason why they choose an employer,” says Michael Fradkin, Senior Vice President of Markets and Growth Strategies with MetLife.

Benefits Equal Satisfaction

On the flip side, employees tend to be disgruntled if they are not offered benefits. Fox Small Business Center reports that half of small business employees said they are not satisfied with their current benefit plans. Those employees who are satisfied with their benefits tend to be more devoted to their employers (72%). A few things the employees surveyed said they valued were financial education programs and wellness programs, which employers actually found to be cost-effective (72%).

According to Entrepreneur, what employees really value, next to salary, is more basic perks. They want excellent medical insurance, including vision and dental. They want generous life insurance and retirement policies. Paid vacation, sick leave, and flexible schedules are in demand too.

Beyond Basic Benefits

If you’re interested in really going the extra mile for the employees you value, give some thought to what you would want if you were in their position. Is a foosball table and free soda really what would benefit your life? The following is a list of benefits that quality employees appreciate and seek out.

• Telecommuting. While some companies have come around to allowing employees to work from home when the business allows it, many still won’t consider it. Companies that allow telecommuting – particularly when a staff member is slightly under the weather but can still work, or when someone needs to wait at home for a repair person or delivery – go a long way toward earning employees’ loyalty.
• Professional development and training. As the economy has forced companies to do more with less, budgets for training and development have taken a hit. As a result, employees are often expected to produce more results without getting the adequate training they need. Professional classes, workshops, and seminars could help employees to learn the skills they need to take on new responsibilities.
• Flexible schedules. Juggling work and home life is a tall task for anyone. Workers are increasingly looking for a non-conventional work schedule to accommodate the needs of their personal lives. Allowing workers to choose their own schedules, within reason, and under the condition that their work is performed at a high level, is a key way to attract and retain strong performers.
• Good management. Nothing drives employees away faster than poor management. Managers who exhibit bad managerial behaviors like too controlling, not giving enough direction, unrealistic expectations, creating a climate of fear, just to name a few, will not keep good employees.  No matter how much a staff member likes their job or their company, if they have a bad relationship with their manager, it will overlap into their work life every day and eventually drive them to search for something else.

Conclusion

Employee benefits, in many forms, make workers feel valued, appreciated, and loyal – from health insurance, to flexible schedules, to paid time off, to working for a great manager, employees want to work for a company that makes them feel secure and satisfied. To attract and retain excellent people to represent your company, consider the types of benefits that employees truly value.

Zane Benefits is the leader in individual health insurance reimbursement for small businesses. Since 2006, Zane Benefits has been on a mission to bring the benefits of individual health insurance to business owners and their employees.

Like many other areas of life and business, human resources has a unique life cycle. However, instead of focusing on the biological aspects of development, the HR life cycle involves the stages employees go through and the role HR takes on during those stages.

Each stage of the human resources life cycle has its own challenges, opportunities, and benefits. For instance, if your small business is experiencing excessive employee turnover, it’s likely that the Motivation stage of the HR life cycle needs attention. If an employee’s skills aren’t improving, you will want to address the Evaluation stage.

When there’s a breakdown at any stage of the cycle, you need to take the necessary steps to correct the problem so both your employees and your business continue to grow.

The Circle of Life For Your Small Business

The typical employee experiences five different stages during their employment with your business:

1. Recruitment
2. Education
3. Motivation
4. Evaluation
5. Celebration

1. Recruitment

Growing your business starts with hiring the right people. Hiring decisions play a critical role in turnover, productivity, and growth. In order to succeed in the recruitment phase of the HR life cycle, your human resources department needs to:

• Create a strategic staffing plan that includes understanding positions that need to be filled, what will be expected of an employee, a strategy for attracting the best of the best, and other hiring concerns
• Analyze compensation and benefits packages to see if they’re competitive enough to attract the top talent
• Develop an interviewing protocol, which may include written tests and multiple interview requirements, as well as a focus on active listening

2. Education

Begin the education process from the moment employees start in their new position. They should know their role in the company, your expectations, and their responsibilities. During this phase of the human resources life cycle, it’s important for HR to:

• Communicate your company’s culture and values
• Train new hires until they fully understand their job’s duties and responsibilities
• Assign a coworker to new employees to support their transition and help them feel more connected with your company
• Introduce new employees to the rest of your staff, and make sure they have everything they need to get started (including passwords, voice mail, parking passes, etc.)

3. Motivation

Turnover is highest in the first ninety days, which is often due to a lack of motivation. Leaders who focus on building bonds with employees in the first ninety days retain employees longer than those who do not make this effort. HR can effectively motivate new hires by: 

• Keeping them engaged, performing at a higher level, and showing commitment to your company
• Offering reasons to stay motivated, such as better compensation, benefits, and opportunities for growth
• Providing recognition to employees who perform at a high level
• Appreciating their contribution to help make your business more successful

4. Evaluation

In this stage of the human resources life cycle, a supervisor evaluates and measures an employee’s performance. It gives leaders and the employee specific metrics and helps determine if he or she is the right fit for the job. Focus on the following:

• Challenge, support, and evaluate employees while offering constructive feedback on a regular basis (not just at evaluation time)
• Conduct performance reviews based on facts, not on feelings
• Spend more of your time discovering employees doing a good job rather than constantly criticizing
• Offer training and professional development to help employees reach their goals and move further ahead in your company

5. Celebration

The fifth stage of the HR life cycle gives you the opportunity to reenergize your staff, thank employees for their hard work, and recognize important milestones. Show your appreciation by offering unique benefits (such as flexible work schedules, gift cards, and extra paid time off). Great businesses find a way to motivate in such a way that employees want to follow them to achieve company goals. A smart leader makes employees feel empowered by giving them a sense of ownership.

The End of the Cycle

All cycles must come to an end—including HR life cycles. Sometimes it ends with retirement, leaving to return to school, leaving for more pay or better benefits, to tend to family responsibilities, or involuntary downsizing for economic or strategic reasons.

Investing the time to do termination right is just as important a part of the employee lifecycle as recruiting, training, or development.

Get Assistance

While going through these critical stages of the human resources life cycle may seem overwhelming to a small business owner or an “Accidental HR Manager,” it doesn’t have to be.

This article first appeared at M.J. Management Solutions, Inc.

MJ Management Solutions, Inc., is a human resources consulting firm that provides small businesses with a wide range of virtual and onsite HR solutions to meet their immediate and long-term needs. From ensuring legal compliance to writing customized employee handbooks to conducting sexual harassment training, businesses depend on our expertise and cost-effective human resources services to help them thrive.