About 3 million American workers voluntarily quit their jobs their month, according to data from the Bureau of Labor Statistics. If you were quick to say that they left because they didn’t get a pay raise, you would be surprised that nearly four in five U.S. employees would prefer a new or additional benefits to a pay increase. Women (82%) and employees ages 18-34 (89%) are among those that are the most likely to prefer extra perks over a salary bump. To help you attract and retain talented individuals in your organization, let’s review the top benefits that employees want.
Health, dental, and vision insurance
Survey after survey demonstrates that being able to cover health-related expenses is top of mind for American workers. When 2,000 individuals were given the option to choose a list of 17 benefits for a lower-paying job to make it comparable to a higher-paying job, 88% of them chose better health, dental, and vision insurance. This survey, conducted by Fractl, showed that 54% and 34% of respondents would give this benefit “heavy consideration” and “some consideration”, respectively, when choosing between a higher-paying job vs. a lower-paying job with better workplace coverage. And for good reason! According to a Kaiser Family Foundation, in 2015 the average premium at small businesses nationwide was $6,163 a year or $513.58 a month. If an employer were able to cover about half of that, that would represent close to $3,100 in annual savings for the employee. Related article: How Much Does Health Insurance Cost a Small Business?
More vacation time or paid time off
This benefit came second on the Glassdoor’s Q3 2015 Employment Confidence Survey and third on the Fractl poll. Turns out that taking a vacation lowers your medical costs by improving your health:
A review of 50 years of medical studies concluded that working over 10 hours per day increases the risk of coronary heart risk by 80% in employees of both sexes.
Another review of about 50 years of data determined that female homemakers who took vacation once every six years or less had nearly twice the risk of developing heart attacks or having a fatal heart problem than those who took time off at least twice a year.
The Uppsala University in Sweden found that people taking vacation take fewer antidepressants than those who didn’t take breaks.
On top of improving the physical and mental health of employees, having time off has shown to provide individuals a boost in creative problem solving. Now, what employer doesn’t want more creative workers? For all the ins and outs of various types of vacation policies, particularly for small businesses, review our guide: Small Business Vacation Policies
Flexible work arrangements: Work from home, dress code, adjustable schedule
Over 75% of respondents to the Fractl survey indicated that they would give “some consideration” and “heavy consideration” when choosing between a high-paying job and a lower paying job with more work-from-home options. In Glassdoor’s poll, 30% of respondents valued a work-from-home feature more than a pay raise. Many employers are catching up on this common request from employees. 54% of employers offered telecommuting in 2014, up from 45% in 2009. Keep in mind that besides telecommuting, you should consider a wide range of flexible work arrangements, including casual dress code, flexibility to take breaks, seasonal scheduling, and alternate location arrangements. Considering hiring somebody to be fully remote? You’re not alone because the Society for Human Resource Management found that 20% of employers offer telecommuting positions on a full-time basis. If you’re an employer of millennials, keep in mind that this group puts work/life balance as the top evaluation criteria for job opportunities.
401(k) plan or other retirement savings plan
According to Glassdoor’s poll, 31% of polled employees value a 401(k) plan, retirement plan, and/or pension plan over a salary bump. Let’s run some numbers as to why this make financial sense. Imagine that an employee with a 20% tax rate is given the option to take a $5,000 salary bump or a $5,000 deposit in a 401(k). With the $5,000 salary bump, the employee only takes home $4,000. On the other hand, with the 401(k) deposit the employee keeps the entire $5,000 now and defers taxation until retirement when they’re more likely to be in a lower tax bracket. Additionally, the $5,000 contribution lowers their taxable income by $5,000 in their return next year. If you’re thinking that offering a workplace retirement savings plan is too expensive, here are three key things to consider:
Eligible small business owners can claim a credit of up to $500 for qualified setup and administration costs for an eligible employer-sponsored retirement plan. You can also include costs to educate your employees about the plan. Using Form 881, you can claim the credit for small employer pension plan startup costs for each of the first three years of the plan.
Qualifying employer contributions to employee retirement accounts are tax deductible. Consult Publication 560 to find out how much you could deduct based on the type of plan you choose.
Providing a retirement plan is less expensive than providing more health care. Let’s use the earlier estimate of $3,100 per year to subsidize an employee’s health care. With Human Interest, you would spend a setup fee of $499 and an annual cost starting at $1,488 per employee. That’s a total of $1,987 in the first year and $1,488 thereafter, before you can claim up to $500 in tax credits for the first three years.
Here are some additional resources:
Student loan and tuition assistance
According to The College Board, in the 2011–2012 school year over 18% of college graduates carried loan burdens in excess of $40,000, up from just 2% of graduates back in the 2003-2004 school year. This explains why 48% of job seekers would give at least some consideration between a higher-paying job and a lower paying-job with student loan assistance (44% to a lower-paying job with tuition assistance). On the other hand, 19% and 18% of respondents to the Glassdoor poll valued employee development programs and tuition reimbursement, respectively, more than a pay raise.
Paid parental leave and childcare assistance: daycare, adoption, dependents
13% of respondents to the Glassdoor survey valued paid parental leave and childcare assistance more than a pay raise and 42% of Fractl respondents gave consideration to a lower paying offering paid maternity or paternity leave. In the Fractl survey, free daycare services came even before some other common benefits, such as free snacks or free coffee. When evaluating the paid parental leave and childcare assistance policies for your organization, consider also leveraging a flexible spending account (FSA) for dependent care or adoption assistance or a health savings accounts (HSA) for dependent care. Current and future parents may appreciate the option to cover eligible expenses with pre-tax dollars and lower their tax liability. To learn more, review Beyond an FSA: Dependent Care, HSA, Adoption, and More.
The bottom line: Ask your employees!
While these stats are useful to gather a sense of benefits trends nationwide, at the end of day you’re responsible for addressing the unique needs of your employees. Being proactive in thinking about what benefits to offer your employees is a good business practice, because it’ll put you ahead of the curve. But you don’t want to find out after an employee has left, or a job candidate turns down your offer, that you could have solved the issue with good benefits. Talk with your employees about what benefits make the most sense for them and involve your accountant and HR manager, if applicable, to make sure to cover all applicable regulations.
Article ByDamian Davila
Damian Davila is a Honolulu-based writer with an MBA from the University of Hawaii. He enjoys helping people save money and writes about retirement, taxes, debt, and more.