Choose a benefits package

Compensation is the actual salary paid to an employee. Whether intended or not, employee earnings are common knowledge. That is why it is important to develop a structure that promotes fairness, improves morale, and increases productivity. After all, the objective is to attract, retain, and motivate qualified employees.

Start with a job description, then wage surveys (internal and external). Wage surveys can be obtained from many sources externally. Keep in mind the source and any personal interests it may have. Once each position has been described and compared within your market, rank each position monetarily. Give ranges and allow for flexibility as the company expands (see How to know you are paying your employees fairly). Update at least yearly to stay abreast of any changes. Performance Evaluations should be tied in as well.

To be competitive and stay in business, do not offer more than you can afford. Today's downsizing of large companies makes the small business look secure. The small business also offers flexibility. Most small businesses offer the following benefits:

• Vacation: one to two weeks after one year of service. 
• Holidays: New Years, Memorial Day, Independence Day, Labor Day, Thanksgiving (some also give Thanksgiving Friday as well), and Christmas.
• Sick Leave: five to twelve days annually. 
• Retirement (if offered): mainly 401K plans.
• Health Insurance: employer finances 80 - 100% of employee and family medical coverage.

A health plan is an integral part of an employer's benefit package. Deciding on which plan to offer and who will provide the plan can be overwhelming. Below are definitions of the types of plans available. The major types of health plans are:

• Indemnity Plan or "fee for service" plan, which is defined as a health insurance program that provides specific cash reimbursements for covered services. Payments may be made directly to the patient or assigned to a provider. Although fee for service plans offer the most freedom in selecting physicians, it's also the most expensive.
• Health Maintenance Organization (HMO) is a prepaid managed medical plan. It provides specified services for a fixed premium per person. Services are obtained through designated hospitals and doctors. You choose a primary care physician from a list of participating physicians. The chosen physician manages your health care and all specialty care referrals. There is usually a small copayment and no deductible.
• Preferred Provider Organization (PPO) is a managed health care plan in which a network of providers agrees to serve a group of employees in a fee-for-service arrangement. Fees are usually at discounted rates based on volume purchasing power. It's considered a combination of indemnity and managed care plans. You receive the most benefit from using network physicians, but have the flexibility to go outside the network.
• Point of Service (POS) is usually an HMO plan with the option of an out-of-network benefit.

Employee input can be beneficial when reviewing available options. This will enable you to better serve individual needs. Since your goal is to serve their needs, several plans should be offered. Once you have chosen the plan or plans appropriate for your organization, evaluate providers. Standard questions asked of providers include:

• a list of participating physicians and clinics in your local area.
• a list of licensed primary care givers and specialists in your region.
• patient satisfaction statistics.
• a list of other employers using their services, preferably in your area.
• copy of a sample agreement they would ask you to sign.

Mandated benefits include:

• Social Security - federal level and applies to all employers. Employee contributes 7.65% of earnings and the employer matches the funds.
• Workers' Compensation - at state level. Some states allow a company to opt out and provide their own plan. Benefits are paid to employees with on the job injuries or death.
• Unemployment Compensation - federal and state level, and applies to all employers. Experience ratings determine state fund amount. Therefore, it is important to keep reliable and thorough records to challenge claims. Keep facts on each layoff, termination, and resignation in writing.
• COBRA - federal level, applies to companies with 20 or more employees. Allows an employee to continue health insurance under certain circumstances.
• FMLA - federal level, applies to companies with 50 or more employees. A company must allow and employee up to 12 weeks off for certain medical reasons if an employee has been employed for at least one year or worked 1250 hours.