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Should My Business Pay the Full Amount for its Group Benefits?

by Connor MacNeil / April 18, 2020

When setting up group benefits, business owners can usually decide how the costs of the benefits that their business offers will be split between the business and its employees. Many business owners decide to have their employees pay some of the costs associated with their benefits. Doing this has a few benefits for a business.Group Benefits Massachusetts

Should My Business Pay All the Costs Associated with the Group Benefits It Offers?

Shifting Some Group Benefits’ Costs to Employees

Having employees pay a portion of their group benefits’ costs, obviously, helps a business reduce its labor expenses. Whatever portion employees pay for, a business doesn’t have to pay for. With how much some benefits (most notably health insurance) cost, shifting a portion of the costs to employees can provide significant savings.

For some businesses, having employees pay a portion of their benefits’ costs is the only way the business can afford to offer benefits. Other businesses are able to use the money they save to pay for additional benefits, increase employees’ pay rates, or increase the business’ profitability.Group Benefits Massachusetts

Reducing How Many Employees Sign Up for Benefits

When employees are required to pay for a portion of their benefits’ costs, they’re less likely to sign up for the benefits. Employees that need the benefits will still likely sign up for them, but those that don’t probably will forgo them in order to keep more of their paycheck.

In contrast, employees are likely to sign up for benefits that are fully paid for by a business. When a benefit doesn’t cost them anything, employees might as well take advantage of it -- even if it will be of little use to them.

Businesses don’t have to make employees pay a lot in order to reduce how many employees sign up for benefits. Requiring just a nominal fee will force employees to consider whether they want the benefit. Many may still sign up for all benefits if they just pay a small amount, but they’ll at least have to think about the benefits and whether they actually want them.

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Businesses also don’t have to apply this technique to all the benefits they offer. For instance, a business that has a robust benefits package might elect to foot the entire bill for health insurance (although it would likely cost a lot to do so). The business would do this because most, if not all, employees would want the health coverage.

If the business offered a secondary health insurance policy that employees could use for supplemental coverage, though, the business might require employees to pay part of the secondary policy’s premiums. This would give those who need it access to even more health coverage, while those who didn’t want the extra coverage wouldn’t sign up for it.Group Benefits Massachusetts

Further Lowering Business’ Costs for Benefits

By reducing the number of employees who sign up for benefits, businesses are able to further lower how much they pay for employees’ benefits. Each coverage that an employee doesn’t select is a regular cost that the business doesn’t have to pay.

For small businesses, even a small reduction can have a large impact on the business’ bottom line. For large businesses, these reductions can lead to big savings when many employees opt out of benefits.

Have a Knowledgeable Broker Help with Your Business’ Benefits

These three benefits options can make a big difference to a business, but determining which group benefits employees should pay for and how much they should pay is challenging. For help deciding how to split the costs of the benefits your business offers, contact a knowledgeable broker who specializes in employee benefits packages.

Tags: Financial Services, Group Benefits

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