Does your small employer (defined as 100 or fewer employees) offer employee benefits? If so, consider yourself one of the lucky ones. Or consider your employer one of the gracious, thoughtful ones. Whichever you prefer.
According to the U.S. Census Bureau, a whopping 98% of all businesses in the U.S. have fewer than 100 employees. These small businesses account for approximately 35% of the U.S. workforce. Now that’s a force to be reckoned with. And yet, only 47% of them offer benefits to their employees.
The primary reason for the lack of benefit programs offered by small businesses is the recent recession and continued weak economy, according to the research firm LIMRA. Micro businesses, those with less than ten employees, have been hit especially hard.
What Benefits do Small Businesses Offer?
So, what about the other 53% of small businesses that are ponying up for employee benefits — what are they offering? The overwhelming favorite benefit offered is health insurance, followed by prescription drug benefits. Dental insurance, life insurance and vision insurance round out the top five. As expected, the larger the company size, the larger the percentage of employers offering benefits to their employees.
Employer Sponsored Life Insurance
25% of small businesses offer some type of group life insurance coverage to their employees. Typically, this coverage is term life insurance; although, some plans may include universal life or whole life insurance. Many programs are designed to offer a base amount to the employee — usually a multiple of their salary or some similar amount. On top of the base offering, the employee can then purchase additional coverage through payroll deduction.
The cost of group life insurance coverage is typically more than you would pay for a personal policy.
This seems like an attractive benefit and many employees take advantage of these benefit programs. But like most everything, there are pros and cons to consider.
1. Good Health Not Required – Employees can typically buy life insurance coverage up to a certain amount without having to prove good health or take a paramedical exam. This is a big advantage for people with serious medical conditions or a family history of the same.
2. Convenience – Employees can pay for their coverage through automatic payroll deductions without ever seeing the money.
1. Cost – The cost of group life insurance coverage is typically more than you would pay for a personal policy. The reason? See #1 above. You know that guy a few cubicles down who’s always out sick and helps himself to a smoke break every 20 minutes? He’s responsible for driving the cost of the plan up for everyone.
2. It’s Not Really Yours – It’s nice of your employer to offer you a group life insurance plan. But what happens after the next round of budget cuts? Will your plan survive? If not, you could be looking for a new policy.
3. You Can’t Take it With You – Well, most of the time this is the case. Depending on the plan, you may be able to convert the plan to a personal policy. But the cost is almost always prohibitive (once again, a big shout-out to the chain-smoking guy down the hall for that). So if you find yourself suddenly out of a job, you will most likely have to scramble for life insurance coverage.
Something You Can Take With You
This sage advice … and a comic!
Your individual circumstances will always dictate what employer benefits you should take advantage of. Just be sure you know what strings may be attached. And always have a Plan B ready in case your employer suddenly joins the growing number of small businesses cutting ties with their employee benefit plans.
Sources: LIMRA, U.S. Census Bureau