Benefits: Getting Bang for Your Buck

by WOHe

Over the years, the scope and cost of benefits that most kitchen
and bath firms provide to their employees have risen dramatically.
In fact, it’s not unusual, as we will see, for a business to be
paying benefits that equal one third or more of the actual salaries
or wages paid to employees.

While these benefits have done much to provide an improved basic
standard of living for the average worker in this country, their
cost and, sometimes, even their existence can be largely unknown to
the typical worker.

Let’s take a look at the array of benefits that are normally
provided by employers in the kitchen/bath and remodeling
industries, as well as some ways for you to structure those
benefits and make your employees aware of them.

In general, there are two categories of employee benefits: those
mandated by some government agency and, most often, paid for
through a payroll tax, and those that are optional and provided by
the employer.

In most states, mandated benefits include the following: Social
Security (employer’s portion), state unemployment, federal
unemployment and workman’s compensation insurance.

These mandated benefits were originally created as a “safety
net” that would provide employees with a means of making ends meet
if they were no longer able to continue working.

Unlike even the recent past, most employees today do not expect
Social Security alone to provide them with the means to retire at
the level that supports their current lifestyle, but rather view
the benefit more as just one of the building blocks of their

The cost of these mandated benefits typically adds 10% to the
basic wage cost for office and clerical employees, and can add as
much as 20% to 40% for the employees who work on your projects in
the field.

Then there are certain optional benefits that have come to be
expected by the U.S. workforce. The most common of these are the
various health insurances including medical, dental and vision
coverage. While coverage of this type for employees is likely to be
expected in the kitchen and bath industry, extending the coverage
to employees’ dependants is less likely.

Another of the optional benefits are days off from work, with or
without pay. Typical paid days off consist of holidays, vacation
and sick leave. In the remodeling business, vacations and holidays
are generally expected by all employees, while sick days are not
always offered.

In addition, there are some “non-traditional” types of paid
absence that have come into favor recently including maternity or
family leave, personal days off and sabbatical leave. This last
group of paid days off is rarely offered in our business, but is
becoming more common in those businesses that are having to compete
fiercely for employees.

Still another benefit that has gained notoriety in recent years
is the retirement and/or profit sharing plan. These plans the most
common of which is the 401(k) plan allow employees to set aside
some of their earnings free of taxes until their retirement. It’s
also common for employers to match a portion of those employee

Maintain control
One of the greatest challenges facing any business is to maintain
control over these optional benefits.

In general, the single-greatest factor that drives the
escalation of benefit costs to a business is the simple fact that,
in order to attract and retain employees, you must be competitive
with other businessess in your industry.

Your competition is the primary market for the employee talent
that you need to attract, and you’ll quickly find that you have
little choice but to match the optional benefits offered your
competitor’s employees particularly in the kind of tight labor
market we’ve experienced the last few years. Benefits being offered
to employees in other, unrelated, businesses will also tend to pull
along the general level of benefits that all businesses must offer
to attract and retain employees.

One reality to keep in mind about benefits is that, once a
particular benefit is granted to employees, it moves out of the
“optional” category and into the “expected” category. In light of
this, it’s important to carefully think through the long-term
impact of providing additional benefits to employees before you
institute those benefits.

One means of controlling benefits is what can be referred to as
providing them in the form of a “cafeteria” plan. What this means,
stated simply, is that employees are given a pre-set “allowance”
for an array of offered optional benefits, and then are able to
choose the benefits they want from that list.

Other benefits include those that relate to the work needs of
various employees. These include tools and tool allowances, company
vehicles, fuel allowances, educational allowances and the like.
There are also various company functions such as dinners, parties,
picnics and staff outings that really can be considered a form of

In addition, there’s an array of minor benefits that an employer
may provide, such as beverages and snacks, and meals for employees
who work through lunch or after normal business hours.

Build awareness
One of the serious misperceptions among business owners and
managers is that their employees are aware of the benefits they’re
receiving, as well as the cost (value to them) of these

The reality is that most employees are not aware, and are
usually quite surprised, to learn that the cost of the benefits
that their employer is providing will often equal as much as 50% of
their basic pay.

One of the best ways to keep this information in front of your
employees is to have your accounting staff prepare a summary of
benefits for each employee at least once a year, detailing the cost
of each of the benefits that an employee receives. This summary
should show the cost per hour or month for each benefit, and should
also express this cost as a percentage of the employee’s base

Whatever benefits you decide to provide as an employer, make
sure that they’re ones that are actually desired by your employees
and that the employees are aware of them. If there’s a lack of
employee interest or awareness, there’s little reason for your
company to incur the costs in offering these benefits.

Related Posts

Leave a Comment

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More