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Nonstop Blog:

The Importance of Employee Benefits and The Surprising Way They Can Affect The Bottom Line


We all know how employee benefits can affect the bottom line in not-so-positive ways (read: rising healthcare costs eating away at budgets). But what if we choose to walk on the sunnier side of the street, and look instead at how providing high-quality, affordable healthcare to your staff can actually support your operating funds?

Research shows that employees believe benefits to be just as important as salaries (with healthcare benefits topping the list) and also is one of the primary reasons for choosing and/or staying in a job. In short, all things being equal, an employee will leave a job – even one they like – for another position that offers better healthcare. And it can take around 20 percent or more of a worker’s salary to recruit and retrain a new employee (and much more for higher skilled employees).

In fact, the CFO of a large community health center (CHC) reported that its employees were choosing to sign on with other medical institutions primarily because those organizations were able to offer better benefits. This resulted in the CHC having to recruit and retain new employees – to the tune of $40,000+ per replaced employee. If you consider that in 2014, the average rate of voluntary turnover with nonprofits was 14 percent* then this potentially could cost this particular CHC more than $500,000 annually due to insufficient employee healthcare benefits. 

And that is only the cost for recruitment and retraining. Non-direct monetary losses can also add up when it comes to staff turnover, such as the loss of critical relationships with the communities being served, loss of productivity as new employees ramp up, and valuable staff time taken away from programing in lieu of getting new employees up to speed.

So what does this mean for your organization and its budget? While not everyone who leaves an organization does so because of lackluster health insurance, it’s a sure bet that offering a thoughtful and well-designed plan is a good strategy for retaining at least some of those employees and keeping everyone happy and healthy. And at the end of the day, the money saved from lower turnover can be reinvested into that improved healthcare program – or other pressing needs such as programming or staff development.

There are a number of creative approaches to healthcare on the table these days and a new wave of brokers are getting savvy to the notion that traditional fully-funded healthcare isn’t always the best option for affordable or accessible care.  For nonprofits looking to boost their healthcare offerings, the best place to start is to find a broker that has extensive experience working with and designing healthcare programs for the independent sector specifically. Second to that, it is worth looking into how small-to-midsize for-profit organizations are starting to move their healthcare model towards more innovative realms, such as self-funding and partial self-funding. After all, nonprofits are also businesses – why not model employee healthcare after those who are already doing it well? As an example, the CHC above chose to change their approach to employee healthcare by switching to a partially self-funded healthcare plan, allowing them the chance to remain competitive with other medical institutions and reduce turnover rates.

Your employees are your biggest and most important resource, and investing in them by ensuring their health and wellbeing is the first step towards creating and maintaining a sustainable organization. 

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* Nonprofit HR 2015 Nonprofit Employment Practices Survey

The information and materials herein are provided for general information purposes only and are not intended to constitute legal or other advice or opinions on any specific matters and are not intended to replace the advice of a qualified attorney, plan provider or other professional advisor. This information has been taken from sources believed to be reliable, but there is no guarantee as to its accuracy. In accordance with IRS Circular 230, this communication is not intended or written to be used, and cannot be used as or considered a ‘covered opinion’ or other written tax advice and should not be relied upon for any purpose other than its intended purp