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Employee Benefits Can Be Costly for Small Businesses
Employees of small businesses have access to fewer benefits such as health insurance, private pension plans, paid vacation and sick leave than do the employees of large businesses, according to a new report released last month by the Office of Advocacy of the U.S. Small Business Administration.
The report, "Cost of Employee Benefits in Small and Large Businesses," also finds that the costs of providing benefits can vary dramatically with the size of the company. For example, the per-participant costs of defined-contribution pension plans such as 401(k)s are as much as 14 times more for the smallest firms than for their largest counterparts.
Among the highlights of the study:
- Paid vacation leave is the most frequently available benefit; access to pension plans is the least common. About the same percent of small companies offer paid vacation as do large businesses.
- More than 81% of employees working for large firms reported having access to paid sick leave, compared to 65% for employees of small firms.
- The weighted average cost of health insurance premiums per enrolled employee is relatively high for the very smallest firms having fewer than 10 employees and declines as the size of the firm increases.
- Small companies experienced a faster increase in health insurance premiums than large companies during the period from the mid-1990s to 2002.
- In 2002, a smaller share of employees were eligible to enroll in businesses’ health insurance plans than in 1997, regardless of the size of the business. Companies of all sizes have reduced the availability of health insurance due to the increasing cost associated with benefits in recent years.
- In the largest companies, about 75% of all employees have access to a retirement plan, compared to a range of 11% to 35% for smaller companies.
- Small firms tend to pay more in administrative costs for pension plans than do large firms.
 Learn More About Compensation Plans in Managing Your Employees
“Managing Your Employees,” available through BuilderBooks.com, is designed to help builders manage the people and paperwork of their businesses easily and productively. It will help you establish, clearly communicate, consistently implement and document effective human resources policies and procedures. To view or purchase this publication online, click here, or call 800-223-2665.
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