BlogsWhy You Should Consider Increasing Benefits Contribution in Lieu of Pay Raise During Annual Reviews
June 12, 2017, by Ryan Miller
Over the years, a common workforce practice has been to reward employees with raises during annual reviews. Though the annual raise is still a go-to strategy of compensation, more companies are switching to creative – and cheaper – alternatives to reward their employees. Healthcare, one-time bonuses and paid time off are some of the perks that companies resort to in lieu of payroll increases. Why does this make sense? Increasing benefit contributions is a very smart strategy that could provide more value to everyone involved.
From an employee’s standpoint, greater sums of money in a healthcare benefits package or a Health Savings Account (HSA) means less money out-of-pocket for personal healthcare costs. And if employees are already paying for medical expenses, these benefits will potentially save them more money over time.
In addition, benefit contributions are tax-free. This ensures that every dollar given towards healthcare costs is received by the employee.
From the employer’s standpoint, the most valuable aspect to the company is increased savings. For starters, benefit contributions are not subject to the same taxes as payroll. This ultimately reduces the total cost of employee compensation and can save your company money. Before implementing this strategy, consider consulting a tax professional to determine the best approach for your company.
Finding the Right Plan
As an employer, it’s important to understand that there is a spectrum of benefits that each employee requires. For instance, a young, healthy and single employee who rarely goes to the doctor and doesn’t require prescription drugs may favor receiving a standard monetary raise.
On the other hand, benefits contributions may help other employees, such as those with a family to take care of, or individuals with known pre-existing health conditions who require ongoing care. Knowing your employees’ needs is helpful in targeting the right plan to benefit everyone.
Increasing the benefit contributions at your company is worth considering. It pays to have all the answers and a good strategy for implementation.
Increasing the benefit contributions at your company is worth considering. It pays to have all the answers and a good strategy for implementation. To discuss these strategies and more, contact Centennial by clicking here or calling (714) 740-1111 ext. 274. We’ll help you make the right decisions about all of your employee benefits.