It's always a good time to review your employee benefits package, or to implement one. There just may be savings waiting.
A solid package of employee benefits helps companies attract good employees. And they are a tool companies can use to retain those good employees once they’re onboard. Not having to recruit and hire represents cost savings right there — especially with a competitive job market for today’s talent — but there are also significant business tax savings involved in offering employee benefits.
Companies are wise to consult with qualified accountants on potential tax advantages of making employee benefits available, such as health insurance and retirement plans. And there is no time like the present to start this research.
Deductibles for the win
Benefits like health insurance and employer contributions to qualified employee retirement plans are tax deductible for companies.
Having these benefits available for employees help companies’ save money as they are not subject to FICA taxes. FICA stands for Federal Insurance Contributions Act, and it’s the money taken out of paychecks to pay for Social Security and Medicare funding.
Where health insurance and contributions to retirement plans are benefits we hear about often, there are certainly others that also save your company in tax payments. Your accountant can help you make the best decisions for your business situation.
For example, employee achievement awards for length of service are exempt from FICA, up to a certain amount; a great way to let team members know they are appreciated and recognized for their dedication. Educational assistance — for knowledge employees need for on the job or not — is tax-deductible; for non-job-related classes, it’s only deductible up to a certain amount (your accountant can help with this). Group term life insurance up to $50,000 for employees is exempt, as well.
Meeting with your accountant to review what employee benefits can offer your company in terms of better tax savings — while potentially boosting company morale and recruitment strength — is a smart planning move. And as your company grows, changes and evolves, it’s worth revisiting these issues on a regular basis.
Like snowfall, tax deductions can really add up. Staying informed of the value they bring — with the help of your accountant — will help you clear the path to maximum business savings.