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It’s a typical day at Bob’s Company, Inc. Bob notices that a recently-hired employee is now eligible for dental benefits. So, Bob hands her an application. As he walks away, she asks, “What’s the cost?”

Bob’s reply? “It’s free. The company pays for it.”

If this was a movie rather than an article, the startling shower music from “Psycho” would come on at this point.

Or maybe it would turn into a take-off from “Young Frankenstein.” Instead of “It’s alive!” the line could be “It’s Free!”

Shame, shame on Bob. He wasted a terrific opportunity for a “teachable moment” with a new employee.

Of course it’s not “free.” Every benefit provided by the company costs good money.

Free. What was Bob thinking? He should have responded something like this: “Our dental insurance costs about $25 per month. The company pays for it. It’s part of your compensation – just as our other benefits are.”

Too often employees think only about base wage or salary when the subject of compensation arises. This happens because we business owners and employers let it happen. You’re likely to hear something like “I make $35,000 per year.” You are very unlikely to hear an employee say, “Well, my base is $35,000, but on top of that my employer generously pays another $12,000 for my health insurance. Counting my paid time off, my other benefits and my payroll taxes, I cost my employer a whopping $58,000 per year.”

So, how do we get our “bang for the buck”? How do we get our employees to recognize and appreciate all aspects of the compensation package - so the company can enjoy a fine ROI in the form of increased employee satisfaction, improved productivity and reduced turnover? How do we drive the “entitlement culture” out of our companies?

Here are some approaches to use:

  • During hiring interviews, listen for signals. If the candidate is focused like a laser beam on your vacation plan or grimaces noticeably when you explain that you don’t pay 100% of the health insurance, these are not good signs. (Note: Yelling “Next!” is not a tactful way to end an interview.)
  • Your candidate job offer letter should outline the entire compensation package and focus on the total value – not just the salary.
  • Make ongoing education part of your company’s culture. Talk about the cost of doing business. Let your folks know how much insurance rates go up every year. Make sure the employees know that they have a vested interest in the company’s success … if they help the company succeed, you can continue to subsidize their insurance costs and provide excellent benefits.
  • Print a year-end statement for each employee, showing his or her total compensation and benefits costs.
  • Consider all aspects of compensation costs when budgeting and projecting pay increases. Example: Let’s say you like to provide an average 4% pay increase per year, and your total company compensation expense (including benefits) is $800,000. A 4% overall increase is $32,000. If you expect your health insurance to go up $5,000, you now have $27,000 left for salary increases. (Back to education: Explain your rationale and the math to your employees. Involve them in the decision. Maybe they want more salary increases and are willing to bear more of the insurance costs. If they help make these decisions, you’ll get better buy-in.)

You invest lots of money in your company in the form of salaries and benefits. Chances are, payroll and related expenses are the largest line items on your income statement. Spend the additional time and effort to maximize the investment. Done right, it can pay you back many times over.

PS: Bob’s story has a happy ending. He realized the error of his ways and corrected his statement to his employee.

Disclaimer: Any resemblance between Bob and any real business owner – alive or dead – is strictly coincidental.

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Bill Collier is the author of “How to Succeed as a Small Business Owner … and Still Have a Life” and is the St. Louis area coach for The Great Game of Business. He helps businesses teach their employees to think and act like owners. He can be reached at 314-221-8558 or bill@collierbiz.com.

 

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