The Tax Benefits of Offering an Employee Health Benefits Plan

If you’re like most small business owners with employees, you have probably experienced issues with productivity and retaining your best employees. Smaller companies typically pay lower wages and offer fewer benefits than larger competitors. We always recommend that employee salaries at your company fall within the market range, but there are other things you can do to maintain productivity and retain employees too.

Disruptions in productivity reduce profitability; and nothing disrupts productivity more than losing an experienced (and valued) employee and needing to train a new recruit. One reason an employee may leave is to gain access to a group healthcare plan. Today’s employee is more preoccupied by their family’s health and healthcare costs. These costs have risen at a rate that may outpace increases in salary at your company – and this has happened more rapidly in recent years. It is understandably on the minds of all employees, including those at your company.

We know that not every company is in a position to offer a healthcare plan, and, since yours may not be required to offer one, you may not be aware that there are several benefits to the company for offering a group healthcare plan. Before we go into those, I want to stress that Hundley Advisors is not recommending that you begin to offer an employee health insurance plan or any other benefits. We’d be happy to discuss your specific circumstances with you but our main focus here is to help you understand some of the less apparent benefits so you can decide if this strategy is for you.

The Main Benefits to Your Company

The three main benefits of offering a pre-tax healthcare plan to the company are:

  1. Increased employee morale and productivity
  2. Decreased employee churn, and
  3. Tax benefits to the company.

Yes, I just said tax benefits to the company. You are probably aware that employees can deduct healthcare premiums paid or that pre-tax premiums reduce their pay and, therefore, their income taxes. But had you considered that these same pre-tax premiums can reduce your company’s taxes too? That’s right, the amount you pay for pre-tax healthcare benefit premiums for your employees reduces your company’s income and payroll taxes (FICA) too.

Larger companies offering bigger salaries have always presented a challenge for smaller companies that are trying to retain top talent, but there are ways to keep your best employees and keep productivity high. Large companies may pay more, but they are not necessarily better places to work. This is why we always talk to our clients about the benefits an employee healthcare plan offers. And that is just one of the many strategies we can guide you in using to increase your profitability and decrease your tax burden.

Would you like to know if you can benefit from this or any other tax strategies? Give us a call! Hundley Advisors specializes in tax planning that reduce your taxes. And who wants to pay Uncle Sam more than you have to anyway?