Mutual Benefits

Giving employees the benefits they want means a healthier bottom line.

This is the myth: Small businesses cannot afford to offer benefits, so they don't. Swallow that myth, and your business may bolster its bottom line in the short run. But that same penny-wise philosophy may strangle your business's chance for long-term prosperity. "There are certain benefits good employees feel they must have," says Ray Silverstein, founder of PRO, President's Resource Organization, a Chicago-based small-business advisory network.

"Everyone who interviews for a job today wants to know what benefits are offered," adds Henry Moyer, a partner in Hirschfeld, Stern, Moyer & Ross, a benefits consulting firm in New York City. Heading the list of must-have benefits is medical insurance, but many job applicants also demand a retirement plan, disability insurance and more. Tell these applicants no benefits are offered, and, often, top-flight candidates will head for the door. "Without benefits," says Robert J. Kaufman, an Atlanta business litigation attorney, "you probably won't attract good people."

But there's another, shiny side to this coin: Offer the right benefits, and your business may just jump-start its growth--and fast-track companies from Starbucks to Tom's of Maine know just how much velocity a creative benefits package can add to a business's growth.

"Give employees the benefits they value, and they will be more satisfied, miss fewer workdays, be less likely to quit, and have a higher commitment to meeting the company's goals," says Joe Lineberry, a senior vice president at Aon Consulting, a Winston-Salem, North Carolina, human resources consulting firm that recently surveyed some 1,000 employees nationwide on what benefits programs mean to them. "The research shows that when employees feel their benefits needs are satisfied, they're more productive."

As a case in point, consider London Temporary Services, a 35-employee business recently cited by Los Angeles County for its family-friendly benefits--including a medical plan, vacation time, nine annual sick days and the unconventional extra benefit of two half-days off per month. Why give employees that time off? "They need it to take care of personal matters. Many use it for doctors' appointments for themselves or their children," says co-owner Ileene Bernard, who has offered this benefit since 1981. "Of course it costs us money to give this time off. But we believe we get it back in greater productivity and reduced turnover."

Another example is Skokie, Illinois, gasket-maker Fel-Pro, whose employees have free use of a 220-acre recreational facility with swimming pools. The company also sponsors a day-care center next door to its manufacturing plant and provides a thorough health-care plan as well. Founded in 1918, Fel-Pro has followed the same generous approach to its employees from the start, and that philosophy has helped it grow into a highly profitable, 2,000-employee company. "The better you treat employees, the more they can concentrate on doing their jobs," says Scott Mies, Fel-Pro's director of work-life benefits. "Treat employees well, and it comes back to you."

At Seattle-based Starbucks, meteoric growth has also been fueled at least in part by a benefits policy that provides medical coverage and stock options to employees, including the part-timers who make up two-thirds of the company's work force. These benefits--plus paid vacations, a retirement plan and a "coffee benefit" that gives employees a free pound of beans weekly--have helped keep Starbucks' employee turnover at rates well below the norm, says company vice president of human resources services Bradley Honeycutt. "We've had wonderful success attracting and retaining good employees," he adds. "Many employees come for the benefits--and stay for them. We believe our benefits have helped us grow."

But you don't have to be a big company to meet employees' benefits needs. This is amply proven
by Tom's of Maine, a 72-employee company in Kennebunk, Maine, that makes toothpaste and related personal-care products. Tom's employees not only get health insurance and retirement plans, but new parents can take up to four paid weeks of leave, and all employees are encouraged to take up to 5 percent of their paid work time and invest it in volunteering for a local community group. "What we give to our people, we get back from employees who are refreshed and ready to work," says company president and co-founder Tom Chappell.

These small businesses are not alone. A 1994 survey by the U.S. Bureau of Labor Statistics found that in companies with fewer than 100 employees, two-thirds of workers participated in a company health insurance plan, 88 percent had paid vacations, 61 percent participated in employer-provided life insurance plans, and 42 percent participated in retirement plans.

That sounds about right to Moyer, whose company specializes in developing benefits packages for small businesses. "Our office is handling about 150 group programs right now," says Moyer. "Most have the same basic elements--group life, medical, dental, long- and short-term disability, and possibly a 401(k) [retirement] plan. In most industries, it's now necessary to offer those benefits to attract qualified employees."

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This article was originally published in the February 1997 print edition of Entrepreneur with the headline: Mutual Benefits.

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