This post was sponsored by Greg Colen of Ultimate Benefits LLC, a Morganville, N.J. full- service benefits consulting and brokerage firm. Colen is a graduate of the University of Pennsylvania and Ultimate Benefits has been in business since 2006. The company offers a complete line of plans including group health, dental, vision, health savings accounts, and health reimbursement arrangements aimed at startup and small businesses. Colen can be contacted at firstname.lastname@example.org.
Tech companies should look at offering benefits very early on in their evolutions, as soon as they are able to bring on high quality talent. Benefits are big satisfiers to good employees, and have a big impact on a company’s success.
Some tech startups are afraid that they can’t afford to offer benefits, but employees are a big revenue-producing asset that a company can’t afford to neglect!
The first benefit a tech startup should consider is a good group medical plan. The basic components of the plan must include a good network of local providers, and coverage for the major areas of medical care: Primary Care Doctors, Specialist Doctors, Prescription Drugs, Emergency Coverage, Outpatient Coverage and Hospital Inpatient Coverage.
For very small tech companies, medical insurance may be enough, but for any startups with plans for growth, a group dental plan is very important to most employees. Again, it should be selected so that there’s a good selection of local in-network providers. It should include all types of dental services, generally categorized as Preventative, Minor (e.g. cavities, etc.), and Major (e.g. bridges, crowns, etc.)
An out-of-network benefit is more important for dental benefits, since dentists are more selective about which networks they use. A good broker can perform a network analysis when selecting the dental plan, but the out-of-network benefit will help to cover all bases. If possible, the employer should select a dental plan that allows for immediate coverage of pre-existing conditions (although this costs extra with certain carriers). Many plans limit the amount that the carrier pays towards annual claims, and the employer must consider carefully what limits will satisfy employees.
Vision plans are inexpensive to provide, but can be an excellent offering for a growing company competing for talent. This can be one of the most cost-effective benefits for a start-up company. Not only are the plans popular, but there are inexpensive options. A lesser-known fact is that a good vision plan doubles as a great wellness benefit! An annual visit to a qualified vision provider can not only correct vision, but also can head-off some serious medical conditions, including diabetes.
As a startup grows, the benefits plan needs to grow with the company. There are some creative ways that small businesses can use Section 125 Health Reimbursement Arrangements or high-deductible-health-plans that are compatible with Health Savings Accounts (these will be topics for future articles). Employers also need to have a plan for managing employer vs. employee contributions towards the plan costs, especially considering that the plan costs have trended higher than inflation.
Costs can be an issue so startup employers need to consider the required plan administration and insure that there’s trained staff able to handle the Human Resource activities that will grow as the firm grows.
Additional contributory and/or voluntary benefits, such as group life and disability insurance, a retirement plan and perhaps a Section 125 “cafeteria” plan can also be considered, at each appropriate stage of the startup business lifecycle.
The cost of benefits will vary based on the size and type of business. Please see this New York Times article that shows the cost trend of benefits relative to total payroll.
Just as prevailing salaries/wages are tracked by industry/geography, similarly a competitive benefits package will be different by region/industry, and also will evolve based on the labor economy and demand for talent. A good broker can help tech startups evaluate all of their options and costs.