Every year, more than 627,000 new startups open their doors. For those business owners, finding employees and establishing a good company culture is a high priority.
After all, your business is only as successful as the people who work at it.
Attracting the best employees right out of the gate is tough. And for startups looking to build long-term momentum and growth, the longer you keep your team members, the better.
Employees love creative work areas, free lunch, and an open-minded culture. But they need the ability to take care of themselves and their family. Health insurance is key.
In this guide, we’ll go over how to decide whether startup health insurance is the best investment for your team and your business.
Understand How It Helps Employees
Providing health insurance to employees is a way to show them you care. Today, only about 50 percent of small businesses offer employer-sponsored health insurance.
And if you have fewer than 50 full-time employees, you’re not legally required to. But doing so puts your employees in a tough position.
Healthcare is expensive. The more assistance employees have in covering the cost of physicals, prescriptions, and emergency treatment, the better off they’ll be.
Unfortunately for many startups, this leaves their team members in a bit of a bind. They can stay with the startup and help the company grow or look for a job with a larger corporation that offers benefits. And many will choose benefits even if the new job comes with a pay cut.
By offering startup health insurance, you’re investing in your employees’ futures while preserving the culture and integrity of your company for years to come.
There Are Tax Advantages
Though you’re not required to offer benefits when your organization has fewer than 50 employees, it can reduce your team’s tax liability.
How? Well, when your employees pay for health insurance out-of-pocket, they do so with after-tax dollars.
Taxes are taken out of their paychecks. They then use the money from their paychecks to pay for insurance on their own. Offering an employer-sponsored plan allows employees to pay for insurance with pre-tax money.
The money is automatically withheld from the paycheck and sent to the benefits provider your startup selected. Over the course of the year, this means more money in your employees’ bank accounts and less going to the IRS.
Consider How Health Insurance Impacts Your Bottom Line
Employer-sponsored health insurance is another expense to factor into your startup costs. But that doesn’t mean it’s all negative.
Yes, health insurance is expensive, but it can save you money in the long-run.
The Productivity Conundrum
Think of it this way: if employees get sick, they can pay for medical care and get better sooner or take an extended leave from work. Without health insurance, taking the leave from work could save them money.
But that ultimately hurts your bottom line. When employees are gone, your startup’s productivity suffers. The less productive you are, the less money the company earns.
Investing in employer-sponsored startup health insurance is an investment in your company’s growth.
Tax Advantages for Startups
Employees are not the only ones who get a break on taxes with employer-sponsored insurance. Your startup will, too.
As an employer, you cover a portion of the premium cost for every team member that signs up. These contributions are tax deductible.
The more qualified deductions your business can take, the less you’ll owe on taxes at the end of the year.
How Will You Choose the Right Plan?
There are tons of health insurance plans and options to choose from. And each one offers different benefits.
Start with the basics. Look at your company’s finances and set a firm budget. Then, look at your employees’ demographics.
Are they mid-career or recent graduates? Do they have families or are most of them single? This will help you decide which coverage types to offer.
Speak with an insurance broker to discuss your options. They’ll be able to find the best and most affordable plans for your business. Once you find a few options, compare the price and the benefits they offer to pick the best one for your company.
Offering employer-sponsored health insurance is not the only option out there. Many startups choose to save money by letting employees purchase a private plan through the marketplace. They then give those employees reimbursement for part of the premium cost.
This gives employees the flexibility to choose a plan that fits their unique needs. They won’t have to pay for coverage they don’t need or won’t really use. If employees have questions about choosing private insurance, they can read more here.
But if an employee has underlying health conditions or wants more comprehensive coverage, they’re free to select that type of insurance. And you get to decide how much of a reimbursement you offer.
This can change each year to keep up with the rising premium costs. But even if you increase the payments, you’ll likely still save money.
Reimbursement Still Shows You Care
Yes, employees are likely to stick with an employer that offers benefits. But many will see the reimbursement for health coverage as a type of benefit. This can help you retain the employees you rely on for years to come.
Final Thoughts on Startup Health Insurance
Startup health insurance is a great way to show employees that you’re invested in their futures. And you can offer benefits in a way that won’t break the bank or leave employees looking for new jobs.
But there’s more to getting a startup off the ground than offering the right benefits. Get your business up and running quickly with these helpful tips.