Ep. 5: Offering Health Benefits to Employees: Pros and Cons

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Ep. 5: Offering Health Benefits to Employees: Pros and Cons

Health benefits…to offer or not to offer? That is the question on the minds of many business owners. In this episode, we discuss the benefits (pun intended) of offering your employees health insurance.

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Transcript

Fletcher:

Welcome to the Hire Talent podcast, the straight forward recruiting advice for entrepreneurs by entrepreneurs. I’m Fletcher.

Stephanie:

And I’m Stephanie.

Fletcher:

Our podcast is also just around helping entrepreneurs hire the best talent possible. This has been my lifelong journey. I’m excited to share it with you. It’s what we do at our business to hire talent. Our core activities are providing pre-hire assessment tests. These tools are used to help assess and predict on the job successful talent. We’re very passionate about this. We’re constantly evolving our tools. We’re constantly developing new techniques. Along with that, we spend a lot of time consulting our clients on A to Z best recruiting practices.

Fletcher:

So everything from creating the job ad to best interviewing and reference checking techniques to onboarding strategies to get the most out of your new talent. We’ve also through this journey have started and executed a professional executive search business. That’s allowed Stephanie and I to literally interview thousands and thousands of people over the last years, practice what we preach to try out these strategies that we’re sharing with you today so you can implement things that are tried and true. It’s not just coming from theories or textbooks, literally we’ve executed over 8,000 interviews. We do this day in and day out. So we want to [inaudible 00:01:26] with you guys and we’re excited to kick off this podcast series here for you.

Stephanie:

And if you’re interested in being on the show or have any questions, have ideas, want to discuss some of your challenges in hiring, let us know. Feel free to get in touch with us. Email us at info@thehiretalent.com. That’s info@thehiretalent.com. Check out our website, preemploymentassessments.com. Give us a call.

Fletcher:

714-582-2730, love to hear from you.

Stephanie:

Looking forward to it.

Fletcher:

All right, guys. Episode five. Today, we’re going to talk about benefits. Later on we’ll talk about compensation. That’s a whole massive conversation. I’ll be speaking at the [inaudible 00:02:36] statewide Florida conference in August on compensation. The hot topic of these states are changing the rules about how we inquire about people’s past pay history. There’s enormous pay inequalities. Women and minorities make anywhere from 77 to 82% of the salary of white men. So there’s definitely huge issues-

Stephanie:

What’s up with that?

Fletcher:

Yeah, what’s up with that right? I may not be the most qualified, right person to talk about this, but it’s a real issue. The facts don’t like. I’m not a particularly bleeding heart liberal, but there is a difference and it’s happened for a reason. Our society has allowed it to happen. States are forcing employers to change how they talk about compensation with people and probably rightfully so. That’s probably pretty scary for folks. It might piss off a lot of people going, “Hey, I’ve always done it this way. What’s wrong with it?” There’s also some, probably good motives for how we approach compensation and talk about it. We’ll talk about that a lot in Conference at the [inaudible 00:03:56] conference in Florida.

Fletcher:

We’ll talk about it here on the podcast up to that talk there in Sherm. But today, it’s just kind of a pet peeve topic for me. I just had a recent experience with a client where, they’re a small business, we’re a small business where we get to a point in talking about somebody’s recruiting efforts we ask what would you like to pay this person? They say, “Whatever,” right?

Stephanie:

Yeah.

Fletcher:

20 bucks an hour, $100,000 a year. Then, the next question is okay. What kind of additional benefits do you offer or are you willing to offer? They say, “Well, don’t really have anything. We’re just really flexible. We take half days on Fridays.” Oh, but do you offer any health benefits?

Stephanie:

Yeah.

Fletcher:

There is a significant segment of entrepreneurial businesses out there that are small. They have maybe less than 10 employees and they’re not offering health benefits. I understand. It’s pretty daunting. It seems really, really expensive right. It’s one more added expense. You’re trying to get a small business up and running. You’ve got a lot of pressures on financially driving that business forward. But it’s a topic that, to me, if you think about it makes a whole lot of sense. So when we don’t offer health benefits to our employees, something is off here.

Fletcher:

We’re missing a point. The more and more I’ve thought about it, the more and more it bothers me. Here’s how I think about it. I’m a human being. Stephanie?

Stephanie:

I’m human also.

Fletcher:

Yeah, you are. Good.

Stephanie:

There’s something I’ve been meaning to tell you.

Fletcher:

Right. Okay. So, I don’t know. I get sick.

Stephanie:

Yeah.

Fletcher:

Do you ever get sick?

Stephanie:

Yes. I do. Occasionally.

Fletcher:

Occasionally. Sometimes we get hurt. Some of us have families, children, spouses. We’re all human. We’re all subject to getting sick and potential expense related to our health. Right.

Stephanie:

Even if you’re not sick, try being a woman. You need regular check ups. That’s part of being a woman. It’s part of life.

Fletcher:

We all have women in our lives.

Stephanie:

Yeah.

Fletcher:

In some shape or form. Yeah, it’s a tough thing. I can imagine, I can barely imagine.

Stephanie:

Yeah.

Fletcher:

As an outsider, I’ve seen it. So the fact of the matter is, we all need health care of some kind or another and we all need that protection of if something catastrophic happens to us as well. If something catastrophic happened to any one of us, it would be a tremendous financial burden for our families, for ourselves. Everything that we’ve worked for in our lives could disappear in a heartbeat, literally.

Stephanie:

Yeah.

Fletcher:

I think we’ve probably all been there. I watched my father pass away and spent a year in and out of the hospitals. And that hospital bill was not cheap.

Stephanie:

Yep. Same.

Fletcher:

Other people have had other experiences where cancer, I mean [crosstalk 00:08:11].

Stephanie:

Yeah.

Fletcher:

How many people have seen that happen? Little kids, they hurt themselves all the time. Break their arms, fall down, knock their teeth out.

Stephanie:

Dental care, that’s not even medical. That’s a totally different expense.

Fletcher:

Yeah, there you go. Dental care and vision for many people. I’ve been blessed with great eyesight. I’m also blessed with great teeth, but yeah, I still want to go to the dentist two times a year to get those things scrubbed really good, pictures taken.

Stephanie:

Yeah.

Fletcher:

The fact of the matter is, being human means we need health insurance.

Stephanie:

Yes.

Fletcher:

So if we’re not going to get it given to us through other people’s tax dollars, which I think most of us agree with is not the way we want to pay for health insurance, then we have to get it somewhere. If we have to pay for it ourselves as an individual, which is now mandated by law, that’s expensive.

Stephanie:

very expensive.

Fletcher:

Yeah. So, especially you figure about folks who are in lower, mid level compensation range or even in the highest levels. It’s very expensive. I estimate, and I don’t have huge facts, but you’re probably spending roughly anywhere from $4,000 to $6,000

Fletcher:

a year per individual to cover. So, as a business owner, that’s an expense that can be spread out over time. Is also tax deductible for both employee as well as the business. So, a lot of companies say, “Well, we’ll just pay them.”

Stephanie:

Yeah.

Fletcher:

Okay, fair enough.

Stephanie:

At least they’re doing that.

Fletcher:

Well, at least they’re doing that, yeah. But, in many places, that’s going to cost anywhere from 20% to 30%.

Stephanie:

Yeah.

Fletcher:

From a tax liability standpoint. If I give you another $500 a month, then the government is going to [inaudible 00:10:23] 20% of that. And the employer is going to pay another 15% to 20% on top of that $500, so they’re going to pay another $100 in tax in order to pay that person that amount. Where, if you just paid them $350 towards a plan, then the company has that as a deduction. The employee doesn’t pay tax on that benefit that they get. It’s an nontaxable benefit. It’s actually significantly cheaper for everyone.

Fletcher:

And it’s only going to cost you $4,000, $5,000, $6,000 a year.

Stephanie:

Yeah. And you can advertise that you offer insurance so you even look better to your candidates that you’re concerned with that.

Fletcher:

Yeah. So we did an interesting experiment. A client is hiring an administrative role, kind of a mid-level role. It’s going to be a decent compensation position. It’s a decent opportunity for somebody coming into their business. We asked every single one of the applicants a couple of questions. Do you need health insurance? Would you like health insurance?

Stephanie:

Interesting.

Fletcher:

We collected well over 300 candidates for an opportunity like this. 100% of the candidates said they either need it or would like it.

Stephanie:

Wow. I believe it.

Fletcher:

100% guys.

Stephanie:

That’s crazy. Everybody.

Fletcher:

Every single person indicated they must have it or they would like to have it.

Stephanie:

Did you ask this of the applicants or the people you talked to?

Fletcher:

No, the applicants. Every single applicant. Yes.

Stephanie:

Wow.

Fletcher:

That applied to the job. Good, bad [inaudible 00:12:19].

Stephanie:

Yeah.

Fletcher:

50% of them said they needed it and the other 50% said they would like it. Of course those who needed it would like it.

Stephanie:

Yeah.

Fletcher:

It seems like a no-brainer to me. You’ve just got to build that into your cost of doing business in this day and age. Also you’ve got to think about this as a competitive advantage. If you’re going to invest all this time and money to hire somebody and train them, coach them, nobody I know of says, “Well, I’m happy if people stick around for 12 months.”

Stephanie:

Yeah.

Fletcher:

If you’re listening to this podcast, you’re probably an entrepreneur and you’re probably saying to yourself, “I would love it if everybody I hired stayed with me forever.” Right? I think that’s true of almost all employers. I don’t know any employer who said, “Oh yeah, I love it when people just stick around for a few months and come and go.” I think we’re all, in our minds, we say to ourselves we would like to believe that we’re creating environments that are good long term opportunities for people. But if we’re not offering health insurance, we’re automatically not creating a situation where that person, we’re putting our employees at a disadvantage. We’re creating a situation where that person has got to think about whether they can afford or want to stay here at this place of employment because they really need this basic human protection or service because we’re human and we need to see doctors.

Fletcher:

We need health protection. We need to protect ourselves against catastrophic situation.

Stephanie:

Right. Not even if you need it, but just the assurance that you have it if you need it.

Fletcher:

Yeah. The more conservative viewpoint which I’m pretty strong on is, I don’t want to pay for somebody else’s health insurance. So every time, me as an employer, I don’t pay for somebody’s health insurance, I’m creating a situation where I as a tax payer are probably having to pay for it anyway. So you’re doing a social justice on top of that by offering these things. There’s even a bigger picture you guys. You’re an entrepreneur, you’re a business. You’re trying to grow. You’re trying to expand. You’re trying to conquer the world. What’s going to happen?

Fletcher:

You’re going to add more employees. You’re going to get bigger. You’re going to have a bigger workforce and someday, you’re going to get to 50 employees. Right?

Stephanie:

Right.

Fletcher:

And you’re going to be mandated by law to provide health insurance.

Stephanie:

Is it really a law if you have 50 employees?

Fletcher:

Yeah. Over 50 employees, mandated by law. So, smaller companies, under 50 employees don’t offer health insurance. First of all you’re at a disadvantage when you’re trying to go out and compete and retain the top talent because top talent have families. They have lives. They also are human beings usually.

Stephanie:

Even bottom talent. Everybody. It’s necessary for everybody.

Fletcher:

It’s a human condition. We need health insurance. We need that protection. We need to see the doctor. We need to get our teeth cleaned. We need to get our glasses prescription upgrade. It’s just a fact of life.

Stephanie:

I think it says a lot about the company too. We spend a lot of time researching, as candidates, researching the companies values and morals and do we fit with their culture and their environment? And I think as a candidate, from a candidate perspective, it says a lot about, especially if it’s a small business, management that they’re concerned with this kind of thing. Like sure they don’t have to offer it, but the know it’s the right thing to do.

Fletcher:

Yeah.

Stephanie:

Or they know that it’s something that’s going to help keep the employees and that the employees need it. They’re not just thinking about themselves and their finances and what’s good for their business. They’re thinking about the other person. They’re investing in their work force, even though they don’t have to and that goes a long way.

Fletcher:

What would happen if your best employee got cancer?

Stephanie:

Yeah.

Fletcher:

And you didn’t offer them health insurance and they didn’t have health insurance? How are you going to feel about that? Right?

Stephanie:

Yeah.

Fletcher:

You might even be in a position where you feel obligated to help cover their health expenses. That’s going to be more costly than just providing them with insurance to begin with.

Stephanie:

In the first place.

Fletcher:

In the first place. Or, heaven forbid maybe their child gets a disease that causes them to have to spend a lot of time in the hospital. Do you think that employee who doesn’t have health insurance is not going to think to themselves, “Man, maybe I need a different place to work because I need to be able to provide that for my family.”

Stephanie:

Would they even consider a job that doesn’t offer health insurance if they have children, especially? Probably not.

Fletcher:

Yeah, they might not. Remember 100% of people surveyed said they would like health insurance. 50% of them said they must get health insurance through their employer.

Stephanie:

It would be interesting too because you said it’s an administrative type job right? Probably dominantly female.

Fletcher:

Yeah.

Stephanie:

We talked about in the beginning, you don’t just need it when you’re sick. You need it all the time, so it’s interesting the gender differences between that.

Fletcher:

Yeah. I wonder if the males would have a lower number there. If they have a family, I imagine they probably would say yes. Maybe younger work force, they’re going to say, “Yes, I need. I would like health insurance.” And they might say they need it, but some of them probably do too. So, the other big factor here, think about it, is if you get to 50 employees, you have to shell out $5000, $6000, $10000 per employees, you’re talking that’s what? $75,000 a year bill you’re going to get hit with all at once.

Stephanie:

And that’s if you don’t offer it.

Fletcher:

You don’t offer it, you hit the 50 employee mark and all of a sudden you decide to contribute $5000 a year per employee.

Stephanie:

Yeah.

Fletcher:

That’s what it’s going to cost you. It could cost you up to half a million. So, starting while you’re small and building that into your compensation and cost structure makes a whole lot of sense. Get used to paying for it.

Stephanie:

Yeah. It’s like a given. Just treat it as a given.

Fletcher:

Yeah. Yeah. Again, you can offer excellent health benefits in most states. So there’s some disclaimers here. I know of certain states where getting health insurance is almost not even offered. I think there’s some places where it’s almost not even available. It’s quite sad. But most states I’d say, you can find very, maybe this day and age, reasonable cost health insurance that can cover the individual almost in their entirety or from bronze to platinum plans. Spending anywhere from $4000 to $6000 a year per individual.

Fletcher:

That number might go as high as $10000. So think about adding that into the cost of employing people. But think about the advantage that you get from obtain ability standpoint, definitely a tax and revenue reduction standpoint. It’s cheaper than paying somebody that money.

Stephanie:

Yeah.

Fletcher:

For both parties. It’s a big difference. I know this is a controversial topic. I would love to hear other people’s opinions. I would love to hear dissenting opinions on this topic. We can go round and round on it all day. If you’re interested in joining us on this podcast to talk about this topic or any other topic related to recruiting, hiring, onboarding, please reach out to us. Info@thehiretalent.com. Again, that’s info@thehiretalent.com. Or you can reach us at 714-582-2730. Look forward to speaking to you, with you on the next episode guys.

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