Is Offering Employees Health Insurance Good for Business

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Is Offering Employees Health Insurance Good for Business?

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Small business owners aren’t required by law to provide health insurance to their employees. The Affordable Care Act (ACA) stipulates that only large businesses with 50 or more full-time employees must offer the benefit or pay a penalty. As a business owner, you know that healthier employees are happier employees. Payroll is likely your single largest expense, and recruiting new employees eats up additional time, money, and patience. The name of the game isn’t simply to attract the best talent, but to retain it. This becomes especially true if your business is in a highly competitive industry. Offering health insurance is one way to attract and keep the best people. If you’re not offering it, chances are one of your competitors is.  

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You may have considered offering health insurance, but found the process to be too complicated, or too expensive. The fact is when you own a small business every year is an adventure, and every small decision can have a big impact on your bottom line. Your margins are thinner than those of your big business counterparts. There are more constraints on your resources, too. If your company spends more on benefits than it brings in, you aren’t giving your employees a perk—you are putting their very jobs in danger.   It’s important for small business owners to remember that the costs associated with providing health insurance aren’t confined to just the benefits. Employers that provide health benefits must stay current with a host of complex, confusing laws and restrictions. Complying with these requirements typically involves the services of paid advisor or attorney. You guessed it: that costs money.  

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The Pros: Boost Morale, Foster Loyalty, and Save Money Too Benefits boost productivity. Says one small business owner from a recent article in the Washington Examiner, “I want my employees to have…coverage so that they can focus on work and not worry about their health insurance.” Translation: A worry free worker is a more productive one. Remove the health insurance consideration from your employees’ minds, and their productivity will rise accordingly. Benefits bolster morale. As mentioned above, a robust benefits package that includes health insurance helps businesses attract and retain the best employees. Quality employees give any business a competitive edge.

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 The loyalty factor. Employees who believe “the boss” is invested in their welfare are more likely to reciprocate the feeling. This translates not just to increased productivity, but also decreased absenteeism, a better overall attitude at the workplace, and less employee turnover, all of which are exceedingly good for the bottom line. Businesses with fewer than 25 full time employees that offer health insurance can deduct up to 50 percent of the cost of their employees’ premiums through the Small Business Health Care Tax Credit. That’s a nice arrangement, though, as the saying goes, certain restrictions apply: To qualify you must pay at least half of your employees’ total health insurance premium costs and pay average annual wages below $50,000.

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 Providing benefits may strengthen your bargaining power. Evidence suggests that employees may be willing to accept better benefits in lieu of a higher salary. Minimally, this can help offset the cost of offering benefits in the first place. It may even save your business money. The small business provisions of the Affordable Care Act incentivize employer-funded benefits. Small businesses may benefit from some of the ACA’s collective perks, such as access to health insurance marketplaces and certain exemptions.

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The Cons: Too Costly, Too Confusing, Too Complicated  Health insurance is an additional expense for businesses to shoulder. Moreover, with premium rates subject to change on an annual basis, it’s never the same expense twice. This can complicate budgeting, planning, and forecasting.    The playing field is uneven. Providing health insurance for employees can cost more for small employers because they lack the purchasing power of their big business counterparts. Without any weight to throw around, small businesses end up paying more than larger corporations for the same coverage.

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Small business owners claim providing health insurance inadvertently encourages discrimination. Because the ACA bases the price of coverage on age, it becomes considerably cheaper to hire younger employees. According to the Examiner article, hiring a single, 25-year-old worker would cost $385.57 per month for their insurance versus $1,046.44 for a single, 60-year-old. That’s a large disparity, and it can impact hiring practices. Painful compliance headaches. Staying current with state and federal employment laws can result in a pile of legal fees. Worse, mistakes can lead to costly lawsuits or regulatory fines.

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Summary: Small business owners aren’t required by law to provide health insurance to their employees. The Affordable Care Act (ACA) stipulates that only large businesses with 50 or more full-time employees must offer the benefit or pay a penalty. As a business owner, you know that healthier employees are happier employees. Payroll is likely your single largest expense, and recruiting new employees eats up additional time, money, and patience. The name of the game isn’t simply to attract the best talent, but to retain it. This becomes especially true if your business is in a highly competitive industry. Offering health insurance is one way to attract and keep the best people. If you’re not offering it, chances are one of your competitors is.  

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