Customary Employee Benefits
Health Insurance
Health insurance provides medical coverage to employees. The cost of health insurance can range from $200 to $1,100 per employee per month depending on how many family members are covered under that individual's plan. In general, coverage for just the employee could range from $200 - $450 per month. The employee plus one could range from $500 - $900 per month, and whole family coverage ranges from $600 - $1,100 per month. Health plans range from HMOs (limited doctors to choose from), PPOs (can have doctor in or out of network), or traditional (any doctor).
When looking at health insurance costs and considering various options, be sure to consider:
- Whether you want the employee to contribute
- Co-pays and deductible (the higher the deductible and co-pay, the lower the monthly premium)
- Prescription coverage (brand name vs. generic)
- How much you would want to pay for prescriptions
- Does it include preventive services (i.e., yearly physical exams)
- Health care costs will continue to rise, so be sure to plan your coverage for the future
Dental Insurance
Dental insurance provides dental coverage to employees. It is very similar to health insurance in that the plans range from HMOs, PPOs, or traditional insurance. The premiums for coverage range from $30 - $50 per month per employee, to $60 - $80 for the employee plus one, and $70 - $120 per month for a family.
When looking at dental insurance companies, take into account the following:
- Whether you want the employee to contribute
- The amount of coverage (recommendation: 100% for preventive services, 80% for basic services, and 50% for major services)
- Look for low annual deductibles
- Maximum coverage per year, generally from $1,000 - $1,500
Life Insurance
Life insurance covers income replacement to beneficiaries in the case the employee dies. Usually coverage is 1 to 3 times the employee's salary. The cost of life insurance ranges from $12 - $255 per year depending on the age of the employee. The older the employee, the higher the cost.
When looking at life insurance companies, take into account the following:
- Whether you want the employee to contribute
- When you would prefer the life insurance benefits to start (i.e., the first day of employment, after six months or 1 year of employment)
- Whether you will cover any of the employee's family members
- Whether you want dismemberment or living benefits (receive benefits if 2 or more limbs are dismembered or if the participant only has six months to live)
401(k)
A 401(k) is a defined contribution plan that allows participants to make contributions to their retirement plan with pre-tax dollars through salary deduction. There are three costs involved in having this form of retirement plan. One of them is administrative costs, which is the cost paid to the administrator who is reponsible for organizing and maintaining the plan. Such fees would include processing applications and sending monthly statements. The fees range from $1,000 - $5,000 per year, depending on the plan. Another cost is the employer's match, which is what the employer puts in for the employee. If the employer decides to match, it cannot discriminate against employees. The match is not mandatory. The typical range would be from 0% - 50% of the employee's contribution. Management (asset) fees are another cost incurred in a 401(k) plan. These costs are charged for managing the assets in the investment vehicles selected. This fee is approximately 1% - 2% of total contributions.
When looking at 401(k) plans, take into account the following:
- If there is an employer match, what kind of vesting schedule would you want to set up, usually ranging from 3 - 5 years
- When employees can enroll and how many hours they must work to be eligible
- Whether rollovers or loans will be permitted in the plan (hardship loans acknowledged by government-applicable only if 1) buying a house, 2) paying for school, and 3) medical costs)
Workers' Compensation
Workers' compensation is mandated by the state. It covers workers who are disabled by an occupational accident or illness. Premiums are based on how much the employee makes and his/her occupation. Audits are performed once a year to determine if the premium calculation was over or understated. If the premiums were understated, you would pay more; if overstated, you would receive a refund.
Disability Insurance
Disability insurance replaces a person's income if they are disabled. Disability insurance could be long-term or short-term. Long-term insurance covers the employee after 90 days and up to age 65. Usually 40% - 60% of your wages are covered. Long-term insurance runs about $10 - $15 per person per month. Short-term disability covers the employee for 90 days. The cost varies between $7 and $50 per month based on how much coverage the employee wants and the employee's age. An example for short-term disability would be maternity leave.
When looking at a long-term disability insurance company, take into account the definition used for disability.
- Social Security definition of disability, which is very narrow
- Whether coverage is available if you cannot perform in your own occcupation
- Whether coverage is available only if you cannot perform any job
Time Off
Typical days off include vacations, sick leave, personal days, bereavement, and jury duty. Standard personal time off for the first year of employment is 0 - 10 days. In addition to personal time off, employees usually do not work on the following holidays: New Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. However, in the automotive industry, it is also common for employees to have the week between Christmas and New Year's Day off and a couple of weeks in the summer for "change over."
