NEW YORK (TheStreet) -- How often do large employers offer free waffle breakfasts to employees?
Probably not that often, but it's something a small employer could give at minimal cost that can go a long way toward keeping morale high -- a "benefit" enhancing workplace fun, excitement and joy. That can cross over into productivity.
It's an example of a benefit raised by Derek Winn, a consultant at Business Benefits Group in Fairfax, Va.
The main thing is "to attract and retain talent," he says. "If you're not offering benefits, you're not going to find that second employee a lot of times."
Business owners should look to offer more than just health insurance -- they should offer creative, cost-effective reasons for employees to work for them, he says. But of course applicants come looking for health benefits for themselves and their families much more than they do waffle breakfasts, and offering health benefits can be scary for small business owners. The insurance is seen as costly and confusing.
That doesn't have to be the case.
Owners who plan on growing a business will probably face the problem eventually anyway; once a business gets to a certain size, varying by state, owners are required to offer minimum levels of health insurance. Winn says there are "magic numbers" to group plans: Employers with just two workers are eligible for benefits plans. At 10, employers can usually take advantage of reduced rates and enhanced benefits for life insurance, disability, dental and sometimes vision. With 25 workers enrolled, employers are eligible to move to a new underwriting process in which carriers use a "group risk screener" and get rid of individual medical applications.
Winn says even businesses with just two employees can have sound, cost-effective benefits plans, and good packages need not be daunting or too costly. TheStreet offers five suggestions for small-business owners when it comes to benefits:
1. Hire a consultant.
The health insurance industry has seen major change and consolidation in recent years, including at such major players as Blue Cross Blue Shield, UnitedHealth Group (UNH) - Get Free Report , Aetna (AET) and Cigna (CI) - Get Free Report .
Business Benefits Group is one firm that can provide business owners with help sorting through the offerings and saving money.
"Consultants should represent all carriers and not just traditional health care, but also consumer-driven plans , to save costs and bring other advantages," Winn says. "If you're going to just one carrier, you're not being consulted. If your broker is presenting one carrier, you're not being consulted. And if they're just traditional plans, you're again not being consulted."
Benefits consulting firms can help firms benchmark plans against other local businesses, as well as comply with health care reform laws.
2. Assess workers' short-term and long-term needs.
These days, the U.S. work force maintains four generations of employees, each with different needs. Maintaining a combination of employer-paid and employee-paid health insurance benefits can keep the plan flexible and within an owner's budget, Winn says.
Executive coach Carolyn Thompson, a former business owner who used Business Benefits Group to implement her firm's plan, says it's important to think ahead.
"The most important thing when you're creating a benefits plan is that you're not just going to meet your financial needs, but you will meet the needs of the employees," Thompson says. "A lot of people guess about these things."
Business owners need to be ready when employees hit certain life stages, Thompson says. Are most of the employees under 30 and single? Are they married with kids needing lots of doctors' visits, over 50 or nearing retirement age? Should the benefits package include work-life balance options? Does it include a day where employees can work from home?
"Determine what they're needs are first, then determine what works with your budget," she says.
3. Roll out benefits slowly.
A gradual implementation of benefits packages for a company, and holding back some for new workers, are other ways to keep costs down for business owners while retaining talent.
Owners want to be sure they can afford the benefits they have chosen for employees, and a common way when it comes to health insurance is by following the 80/20 rule -- employers pay 80% and employees pay the rest, Thompson says. She suggests rolling out benefits over three to five years.
For a new employee, holding back some benefits is also a way of incentivizing them to stay with the firm longer. Full vacation time might come after a year; a high 401(k) match might also come later.
"Don't give too much up front," but you also don't want the plan to look cheap either, she says. In essence, find a healthy balance.
On a side note, Thompson adds that employers should never negotiate more salary for an employee opting out of a benefits plan. An employee's situation can change down the road where they may need the insurance -- then the firm is stuck paying a higher salary and benefits.
"It's not a good practice to start," she says.
4. Dare to be different.
Nicholas Turner, the co-CEO of Kaye/Bassman International, an executive search firm specializing in insurance, banks, pharmaceuticals and biotech, says the firm chose an average health care plan to be able to afford other perks for the 100-person team.
"When it comes to health insurance ... I personally disagree that you need to have the best plan," Turner says. "A middle-of-the-road plan is perfectly OK. "
Kaye/Bassman, which Turner notes has awards for being a great place to work, also has a limit to how much it will pay for employee-plus-spouse-and-family health insurance costs.
Turner suggests spending the difference between plans elsewhere.
"We take the difference between middle-of-the-road and premium plans and apply it to global incentives," he says, citing such things as corporate trips and attendance at conferences. "Oddly enough, people's psychology will lean toward 'Wow, we had three all-expenses-paid vacations this year through this company. That place is amazing.' They didn't come here and say 'Wow they paid 80% of my health insurance.'"
On the other hand, the firm emphasizes 401(k) contributions.
Since the firm is sales-driven, it has set up a variable match program that depends on the success of the team and overall business each year. "If the company is doing well, people can see we're going to allocate a lot more," he says.
While the company is technically midsize at 300 employees, smaller businesses may want to follow suit. Wellness programs are emerging as crucial to the long-term control of health care costs and yield net savings of $3.44 for every dollar spent, according to the Health Research Institute and the Cooper Aerobics corporate consulting division's website.
Newtek employees are not forced to participate in the program, which consists of a complete free examination and follow-up health tips.
The findings of the exam are not reported to health care providers, and so far there has been some employee resistance, but Sloane is hoping it will be fruitful in lowering his firm's health care costs.
"We pay for 100% of health benefits of our staff, but people view that as an entitlement, not a benefit. As a business owner it drives me crazy because that benefit has a cost associated with it," he says. "If all of a sudden health care costs went through the roof, we can't necessarily pay for that in its entirety. The fact that the staff is willing to work with an outside provider and become healthier to get lower premiums -- that's a good thing."
—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.