The Entrepreneur’s Benefits Gap (Written By Jonathan J Mentor)

The world of employee benefits is a daunting space for small businesses and entrepreneurs. On the path to the Forbes List, an entrepreneur is already contending with a universe of challenges. In addition to unlocking the formula for hyper-growth and attracting capital, newly minted small business employers must navigate the market to hire and retain the core team of wizards that will lead them to Tesla’s level of celebrity and success. For entrepreneurs building their teams who believe employee benefits are an afterthought second to sales and seed funding, guess again.

Small business employers are responsible for being proficient on a subject that overlaps with the prickly spheres of insurance, taxes, labor laws and employer compliance. When the lines become blurred, it can demand the effort of CEO, COO, HR, accountant, and attorney to resolve employee benefits pains. This all takes place on the already controversial health insurance market where socio-economic and political factors can unpredictably alter the landscape. It’s not the government’s problem whether employers are seasoned or not. They will issue fines, without prejudice, for not being within benefits compliance.

Sounds like a blast, doesn’t it?

It doesn’t end with identifying the challenge. New businesses inevitably consider the support of a benefits consultant, benefits software and/or third party administration to guide them through the labyrinth of insurance products, budgeting, funding, billing, employee communication, benefits policy and sustainability. Shaking the dice with these different solutions to create a cocktail potent enough to resolve benefits related pains is still only half the battle. The right partnerships can be turn-key, but the wrong one will entangle a new company in a web of archaic processes, liability, emails and clean-up. Before the well-intentioned entrepreneur begins installing employee slides (ala Pixar) or finding out where employee nap pods are manufactured (shout out to Google) the emphasis must be placed on core benefits that build a story as the start-up culture matures.

The start-up is busy taking over their industry and improving the world. Priority should be placed on courting Angel Investors and VC’s. HYPERGROWTH! SCALE! SALES PIPELINE! EXPANSION! Yes, but not without the right foundation and that’s the venture’s core staff or landing team. Meeting the demands of a skilled employee prospect is key.

A capable landing team that will add value to the start up’s mission is critical to its vitality. This is especially important when the business is still under 50 employees. Top talent isn’t looking for salary alone. Per a survey conducted by Glassdoor in 2017, 4 in 5 employees want benefits or perks more than they want a pay raise. This information suggests that your initial employee compensation strategy doesn’t begin and end with your genius new data analyst’s salary.

As of June 2017, the Bureau of Labor Statistics determined that private employer costs for employee compensation averaged $33.26 per hour worked with wages representing 69.6% ($23.15) and benefits representing 30.4% ($10.11) …30.4%……yes, you read that correctly……30.4%. Thirty percent of ANYTHING is a figure that will give pause to a small business. Thirty percent is a figure that could make or break a budget, profits, and an entrepreneur’s ability to scale. A figure where bootstrapped budgets struggle against the ravenous urge to scale. One of the start-up’s biggest investments is within.

“It’s not the tools you have faith in. Tools are just tools—they work or they don’t work. Its people you have faith in or not” – Steve Jobs.

For entrepreneurs obsessed with rapid growth and wrangling the best talent to help with that impetus, a group medical plan and a generous PTO policy doesn’t cut it anymore. To give themselves an edge, even the smallest (>50 employees) new employers are now increasingly offering:

Dental Plans
Vision Plans
Supplemental Health Plans
Voluntary Plans
HSA’s, FSA’s and HRA’s
Retirement accounts
Disability plans
Tuition Repayment/Reimbursement
Childcare accounts
Gym/Wellness Allowances
Commuter Benefits
Telecommuting Benefits
Legal/Identity Protection Plans
…and this is just the tip of the iceberg before considering industry specific benefits that have become synonymous with working for a small, innovative enterprise.

The need to organize, budget and administer these benefits has nurtured an enormous benefits consultancy marketplace in the United States as business innovation centers like Silicon Valley and New York City have helped to incubate an explosion of 6,800 start-ups between 2016 and 2017. New businesses are rushing to the market to find solutions and partner with experts on designing an affordable, sustainable, creative benefits program. The variety of solutions that have historically been reserved for more established businesses can be just as perplexing.

Employee benefits consulting is traditionally a high roller’s game where it is the large companies that are courted by the established firms. Firms that possess the resources accessible to a large company’s attractive budget. White-glove service, human beings and tenured expertise reign supreme in the world of Willis Towers Watson®, Marsh & McLennan® and Aon®. They are masters at creating pristine benefits programs attractive to the seasoned business magnates who already count their millions on yachts in the Philippines. To firms this large that handle benefits clients with thousands of employees and generate six figure commissions revenue, a start-up client may be a less than ideal prospect.

The alternative? An effervescent local benefits broker, a shining comet in the expansive benefits galaxy who will make a small business their star client. This kind of partnership will generate bespoke solutions and lots of human support. But the benefits galaxy is expansive. These more local operations lack the specialization, industry specific data, relationships and resources necessary to be a comprehensive benefits solution. It’s essential for a benefits partner to have the foresight to properly assess the benefits landscape as it applies to the entrepreneur and help scale the business. As the business expands and become entrenched in the minutiae that is benefits administration, the local broker may not have the advantage of sophisticated software support and endless representatives that are at the disposal of the larger firms.

Is there a middle ground for the start-up entrepreneur?

Fellow start-ups unite! There are many online technology solutions and software programs available to the ambitious new employer. Namely® makes many HRIS systems look like dinosaurs. Gusto® is about the coolest looking benefits management tool you can buy. With the trailblazer, Zenefits®, pivoting its market base this year from online broker to SaaS program, it portends that these techie solutions can be short-lived. These platforms are data entry intensive, and require a certain level of benefits proficiency to operate. These kinds of solutions are fabulous at resolving many issues hidden among the layers of employee benefits, but there are gaps. Those gaps require the entrepreneur to seek supplemental solutions for the pieces of the benefits puzzle to fit together or dedicate precious internal resources to monitoring these systems.

Ah Benefits…!

The policies, the products, the vendors, the bills, the claims, the communication (the lions, tigers and bears) all require reliable maintenance to be able to work their magic for a new business. Each area of benefits has a solution native to a specific employee benefits gap. But what new business owner has time to flip through a dozen vendors or screens or invoices or applications for services? It should be the benefits partner’s mission to help you avoid a new learning curve in the ascendance of the business. Planning is essential to a new business’ growth and internal issues like employee benefits can become unexpectedly time consuming if not properly implemented. Getting the partnership right the first time can prevent a ton of internal resources from being wasted.

The employee benefits portion of company culture should be designed to save a start-up employer precious time and money. Two resources that should be focused on the almighty unicorn called “hyper-growth”. The initial benefits program can create an employee exit barrier and encourage the landing team to feel valued and work smarter, harder and healthier. Done speciously, without a benefits consultant that is entrepreneurially orientated and the initiative becomes a stagnant responsibility, another minus on the balance sheet. Without recognizing the value of benefits done correctly, the entrepreneur will soon be finding excuses to scale back the benefits program much to the detriment of his core mission.

As an industry, the Benefit’s Consultant’s mission is to continue partnering with employers to keep the solutions at their fingertips. Employee Benefits are but a drop in the ocean of wider vision of the small business’ desire to conquer the world and your Employee Benefits Partner is your infantry.

Written by: Jonathan J Mentor)

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