Small Business

How to Strike a Balance on Benefits


By Karen E. Klein Q: I have a small health-care business with four employees. How can I determine what kind of benefits -- health insurance, vacation, personal days -- to offer? I have consulted a local salary survey, but it doesn't include information on competitive benefits. -- B.D., San Diego

A: Sure, there are resources you can use to benchmark your benefit offerings against those of other small businesses nationwide. But since you have such a very small company, you might be better to figure out how much you can spend on benefits and then talk to your employees about their preferences.

So start by doing an informal poll and asking which benefits are most important to them, suggests Laurie Dea Owyang, a human-resources expert with Los Angeles-based Humanasaurus. "Depending on their ages and family situations, you may find that they will value entirely different benefits from the norm, like more time off [rather than] medical-insurance coverage," she says.

LISTING PRIORITIES. Often, employees in small companies don't expect the same level of benefits as those offered by larger employers, Owyang says. Instead, they are looking for the flexibility that smaller companies provide, things like the ability to set work aside if a family emergency arises, flex time, and the working from home.

After you've compiled your employees' wish list, find out how realistic they are by talking to other small-business owners in your area about the benefits they provide. If possible, ask businesses in the same health-care niche as your firm, or close to it. Join a professional organization for your industry and read their publications. Trade and professional journals often conduct membership surveys that are extremely good sources of information.

Owyang recommends that small companies offer a minimum of one or two weeks of annual paid vacation, at least five paid sick days a year, and observance of the seven largest national holidays. "If you can afford it, consider medical insurance and then life, dental, and vision coverage," she says. But "keep in mind that once you offer a particular employee benefit, it's very difficult to take away that benefit, so you should be willing and prepared to offer it going forward."

SURVEY SOURCES. You can find information about what other small companies offer their employees by checking the Web site of the Bureau of Labor Statistics. The agency conducts large and statistically detailed surveys of employer practices and posts the information on their site free of charge. Their 1996 Employee Benefits Survey of 54 million workers in establishments with 100 or fewer employees could be a good -- albeit somewhat dated -- benchmarking source for you.

For more up-to-date stats, Jeremy Handel of the American Compensation Assn. recommends the 2001 Employee Benefits Study done by the U.S. Chamber of Commerce. The survey results cost $50 for members and $75 for nonmembers. If you complete the 2002 version of the survey before June 30, the chamber will send you the 2001 data for free. Have a question about running your business? Ask our small-business experts. Send us an e-mail at smartanswers@businessweek.com, or write to Smart Answers, BW Online, 46th Floor, 1221 Avenue of the Americas, New York, NY 10020. Please include your real name and phone number in case we need more information; only your initials and city will be printed. Because of the volume of mail, we won't be able to respond to all questions personally.


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