Small Business Big World
Employee Benefit Strategies for the Modern Workforce
Unlock some unique employee benefits to help drive a dedicated and driven workforce as we sit down with Nate Moody from LaBelle and Harriman. In the rapidly evolving job market, learn how companies are moving beyond the norm to provide holistic support systems to their employees. This includes everything from tackling student loan debt with expanded Section 127 plans to cultivating a shared sense of ownership through Employee Stock Ownership Plans (ESOPs).
Learn some of the innovative strategies at play in the world of employee perks, as our conversation with Nate sheds light on the trend towards flexibility, authenticity, and personalization in the workplace.
Unlock some unique employee benefits to help drive a dedicated and driven workforce as we sit down with Nate Moody from LaBelle and Harriman. In the rapidly evolving job market, learn how companies are moving beyond the norm to provide holistic support systems to their employees. This includes everything from tackling student loan debt with expanded Section 127 plans to cultivating a shared sense of ownership through Employee Stock Ownership Plans (ESOPs).
Learn some of the innovative strategies at play in the world of employee perks, as our conversation with Nate sheds light on the trend towards flexibility, authenticity, and personalization in the workplace.
This is Small Business Big World, our weekly podcast prepared by the team at Paper Trails. Owning and running a small business is hard. Each week we'll dive into the challenges, headaches, trends, fun and excitement of running a small business. After all, small businesses are the heartbeat of America and our team is here to keep them beating. Welcome to Small Business Big World, our weekly podcast talking about all things small business compliance, headaches, fun, the joy of small business ownership.
Speaker 1:Today I've got Nate Moody here with LaBelle and Harriman repeat guest. Actually Wonderful to have you back. Thanks for joining us, thanks for having me. Yeah, so just a little housekeeping at the top here. Don't forget, please like us, follow us, subscribe on Apple Podcasts, spotify, instagram, tiktok all those fun things. Keep an eye on us. We do have our Small Business Big World Facebook page, our Facebook group, excuse me, set up, so if you have questions for any of our providers, you certainly can reach out on that. Don't forget you can also email us smallbusinessbigworldpodcast at gmailcom.
Speaker 1:So today we are going to talk about uncommon employee benefits and new employee benefits that can be offered that are outside of your normal health and dental and vision and all the other things that, quite frankly, employees have come to expect. So we see in our industry that we I was talking to one of our colleagues today and basically said the pool of applicants is not a pool anymore, it's a puddle. It's become so hard to find people so we all have to dig deep in our toolboxes and figure out ways to recruit and retain, of course, our employees and then create a culture that we want for our employees and for our clients. So what are some of the things that you're seeing in the industry with these folks? What are people doing in terms of new employee benefits or different benefits?
Speaker 2:Yeah, I think, before we even get into the specific benefits themselves, I think one of the biggest trends that we've seen is just the paradigm between what an employee's expectation of their employer is has changed so much over the last 10, 20, 30 years. Where it used to be you know, we talk about work-life balance those were truly separate, right, and we're starting to see at least employees look to their employer for assistance with all these areas of their life that I think, for maybe older generations, they never would have dreamed of going to their employer for help in some of these different areas. So that's one of the big trends we've seen Employees just expect their employers to be thinking about their retirement and be thinking about all these other financial benefits that historically have stayed a little bit separate. Plus, I think with every new generation, there is something to be said for the more things change, the more they stay the same.
Speaker 2:But I do generally think that every generation has some unique financial challenges that they face, and one of the biggest ones that we're starting to see is on the student loan debt side. I think it's right up there with a couple other. I think it's credit card debt and mortgage debt as being one of the three highest consumer debts nowadays, and unfortunately it's not going the right direction. And then we've seen what a political football student loan forgiveness has become, and so the good news is there has been a lot of legislation of late that has incentivized private solutions to student loan assistance, and what I mean by that is employers helping their employees with student loan debt. So, certainly in the not-for-profit space, we have the Public Service Loan Forgiveness Program, which is a program in which, if you work for a non-profit or the government for 10 years technically 120 months and you make qualifying payments, you can have whatever your outstanding loan balance is at the end of those 10 years forgiven tax-free.
Speaker 1:So that's going to drive people into different industries right there, right, you know, no more corner office. Now we're on the streets, you know, helping folks.
Speaker 2:Exactly, exactly. And then on the for-profit side they have a couple different tools sort of in their toolkit. The first one is what's called a Section 127, which most people will recognize as a tuition reimbursement program, and that's been around, I think, since like the 80s. But then during the pandemic and specifically from a law called CARES Act, they actually expanded the definition of tuition reimbursement to include student loan reimbursement and the breadth of applicability for that program was cast very wide as a result of that, because there's not a ton of employees who are working full time, going back to school, that need tuition reimbursement, but there's a lot of employees who have student loan debt to reimburse an employee up to $5,250 per year and have it excludable as income, which most of the time you're helping an employee pay off any form of debt, that's considered compensation. You got to pay income tax, got to pay payroll tax always a lot of taxes so that's a really, really powerful benefit and one of the greatest things about it is that it doesn't fall within ERISA, so you can be somewhat discriminatory with who you provide it to, how much you provide. You can link it to tenure.
Speaker 2:And then on the heels of that was Secure Act 2.0, which was a major retirement plan piece of legislation passed in 2022, was it introduced the ability to provide a retirement plan match on behalf of an employee's student loans.
Speaker 2:So what does that mean? It actually came about as a result of a company, abbott Laboratories, who most people are more familiar with, particularly in New England, after the pandemic, because they were doing a lot of the COVID testing. They identified a huge population of employees who were not able to take advantage of their 401k match because all their money was going towards student loan debt, and so what Abbott Laboratories did was they went to the IRS, got a private letter ruling that basically said hey, if you make payments towards your student loans, even if you're not participating in the 401k, we'll still recognize those payments and put money into the plan on your behalf. So no longer did employees have to choose between paying down their debt or saving for retirement. Now Abbott Laboratories helped them do both. Congress and the IRS looked at that and said, hey, that's a pretty cool idea, we should allow everybody to do this, and that was actually included in that Secure Act 2.0. So now actually effective for 2024, you can do that.
Speaker 1:So that's a really unique benefit. I mean, that's kind of combining both worlds. That's really neat. What you know when you talk about this education reimbursement, it's tuition reimbursement. Does the company make the payments for the employee, or are they just putting in their check and the employee still has to make their payments, right?
Speaker 2:See, this is where every business owner is probably looking at saying how am I going to record keep that? How do I know they're going towards student loans and that I'm not going to be paying this person some loan reimbursement? Then they show up in a brand new, you know Ford F-150. There's always the ability for abuse in these programs. But the good news is for the Section 127, the education reimbursement, it is a self-certification, which is nice. So an employee can you know, self-certify that they are truly a student loan debt, and then the employer does not have to necessarily make them directly to the loan, so you don't have to get involved in how much your employee owes or anything like that. They can just make that reimbursement right to the employee.
Speaker 1:And they don't have to do the full amount, right? You could say, hey, I only want to give you, I'll give you a hundred bucks a month towards that. It doesn't have to be the full max out, right?
Speaker 2:That's exactly right, and what we often see is it actually tied to tenure. So, okay, you come work for me for a year and I'll give you $50 a month towards your student loans. You spend two years with me, I'll give you $100 a month. Three years I'll give you $150.
Speaker 1:So you're stacking and trying to build longevity at the same time Exactly. Which, of course, retention is just as important as recruiting right 100% Trying to keep people you know for varying reasons is hard.
Speaker 1:So what you know we've talked a little bit before about kind of the ESOPs, and that's one that's a pretty unique situation as well. But these employee stock ownership plans where the employee is getting ownership of the business, and that's not something that most employees are used to right. What's that look like in terms of a benefit? What's the mindset in going there and the culture in creating one of these?
Speaker 2:Yeah, I think, unfortunately, that it's not always. Esops aren't always put in place because of the cultural component, although I'm somebody who grew up in an ESOP-owned business and I feel strongly, as my dad did when he first transitioned our family business to a minority and now a majority ESOP, that you should do it for that reason. I think at times you see it as an exit strategy. But why? I think part of why we've seen ESOPs become so powerful and I'm going to kind of bring in some of my retirement plan trends is we've seen this big push as every employer has started to realize that their employees expect a lot out of them. Right, every employer is expected to be a mission-driven organization, regardless of whether they're for-profit or not-for-profit.
Speaker 2:People want to work for a company they believe in. They want to be able to post on social media what they're doing and why it matters. And so in response to that, unfortunately often, like what we've seen in the investment world around ESG and socially conscious investing, we're seeing every company what I'm sort of calling culture washing, which is saying, oh, we do pizza parties and we do all these things that show that we care about our people, which are not negative things. Not negative things, but one of the nice trends that's come out of that is an ESOP, which I think. What better way to align the interests of a company with the interests of the employees than to actually give them literal interest in the company?
Speaker 1:And I know just in talking with you, in a lot of the ESOPs there's decision making that's happening at the employee level. It's not just, you know, the management's not doing everything they're having. There are committees within the employee population that are really driving that value in and leading the business forward right.
Speaker 2:That's exactly right and there's. You know ESOPs are a very complex element of qualified retirement plans, but I guess I'll touch upon a couple of the really key points. So in ESOP, employee stock ownership plan is where a owner or owners of a business basically sell a portion or all of their business to their employees. And the way they do it is through a trust, sort of like a 401k plan has a trust. The ESOP is a trust and then it allows shares of that business to be granted to employees that work there, based on their tenure and their compensation and whatnot.
Speaker 2:And there are some very significant tax benefits for ESOP-owned business, particularly if you're structured as an S-corp. You're basically exempt. Picture that You're a for-profit company that doesn't have to pay taxes. That's pretty powerful. But where ESOPs are most powerful is not just on the tax side but when you can get the cultural buy-in which is as an employee, if you have an ownership mentality and as an organization you're able to build an ownership culture. That's when you can start to get pretty special things. Because, again, I think a lot of business owners look at their employees and might say why don't they put in the extra hour, why don't they come in on the weekends or whatever it is Like. Well, why would they right? You know it's maybe an extra, you know a hundred dollars, $200 if they come in and spend a couple extra hours. But when you actually have equity, you know. Now, all of a sudden you just have much more vested interest in the success of that organization, which is really great.
Speaker 1:We see varying benefits with our clients. I mean, we're seeing things using the resources you have as your business right. So if you're a dentist's office, hey, we give free cleanings to your family, those kind of things which may not necessarily cost you that much as a dentist. Those are things that we see in some of those benefit worlds. But other things that we've seen some of our smaller businesses do is you know, if you're a restaurant, it's discounts on meals. If you're a hotel, it's the ability to use the pool right In the summer or even in the winter, if it's an indoor pool right, or the gym or whatever might be the case. Some of those things go a long way for that as well, you know.
Speaker 1:I know we've had a couple of clients who are doing trades right. So they'll go out and ask all the restaurants in town, would you give me a $50 gift card? If I give you a $50 gift card and you know, use those for prizes and different things. So just to try to or, if you're a hotel, say, hey, listen, you have a top-performing sales guy, can I have two nights at your resort? You can have two nights at my resort. You know different trades. Things like that are really really good as well. What are you seeing in terms of PTO and paid time off and you know that's been certainly a regulatory challenge lately across the country but you know in terms of, you know, what are you seeing people using? How are they using that as an incentive for employees? Have you seen that?
Speaker 2:Yeah, I'm seeing more flexibility around PTO, because I think PTO means different things to people nowadays, especially now that we've seen more and more companies do unlimited PTO, which I think is kind of a lie. I think one of the more powerful things is offering PTO but actually creating an environment where people can take PTO right, because you can say you offer unlimited PTO but if somebody comes back to an inbox of 1,000 emails every single time they want to leave, they can never truly unplug. Another thing we've seen not to sort of keep coming back to student loan debt is actually the ability to, instead of cashing out their PTO, but actually convert their PTO towards money, towards their student loans. And actually Unum is one of the big employers here in Maine, down in Tennessee, that's implemented that program. So you have the ability to cash out PTO and spend it towards your student loans. That's interesting.
Speaker 1:I wonder how I mean psychologically. How does that I mean? So we talked about unlimited PTO. We have unlimited PTO and it's been an interesting journey for us here. That's probably a topic for a whole other episode, but it's interesting to me that you're incentivizing people to not take your PTO by getting a cash out towards your student loans. I think culturally, I think that's probably great for the business, but is that great for the employee? I don't know. I don't know. I hadn't even heard of that.
Speaker 2:Yeah, I think the idea is trying to again be flexible with the benefits you provide, recognizing that for some younger people they might rather have less student loans than an extra day off. Right, for different people, they have different priorities. Some people might say you know what? Those student loans are still going to be there whether I take my PTO or not. So I'm just going to take my PTO because I want to go on vacation or whatever it is. But for others that really want to prioritize that and that could be a more tax-efficient way of taking that PTO as opposed to just directly cashing out.
Speaker 2:But I do want to come back to the point you had made about the trades and whatnot, because I think that touches upon a couple important points in what we've seen in terms of trends in the benefits industry. First and foremost is to understand your people, understand what matters to them. We We've seen sort of a one-size-fits-all approach to benefits for the last 30 or 40 years, but not every employee is going to care about each benefit the same and that's why I think you see like record disengagement with benefits programs. Right, and so being very thoughtful around what your population is looking for in benefits. Second thing that I think is perfect is not every benefit has to be this massive plan, this massive program that requires a ton of administration and costs a ton, something as simple as a gift card for a restaurant worker, a reciprocal program. I mentioned my family business.
Speaker 2:It's a car repair, collision repair, and so you can imagine most of the people that work there are very passionate about vehicles, and so a couple of things that they've implemented is paying for AAA membership and that's 50 bucks a year, If that exactly, and it's one of the most meaningful and they do a benefit survey every year and one of the most highest rated benefits they provide. One of the things they did recently is a calendar. So they create a calendar and they actually go out to 12 coworkers every year and take professionally staged photos of cars that they might have restored Because again, you would think car repair most people are car junkies, so people have old American muscle cars. They got new jacked-up trucks, whatever it is, and so that's something, and then you can share them with your family.
Speaker 1:Just little things like that, yeah and that do you take pride in your work. That's hey, hey.
Speaker 2:I'm, I'm April, right, that's exactly right. That's exactly right. Yeah, yeah, yeah, yeah, yeah, no, that's that's. That's exactly right, that's fun.
Speaker 1:You know it's, it's. Those are interesting things. And certainly you know we've talked about a. Some of these have tax implications, right? So if you're the Section 127, that's a specific carve-out. We've talked about the gift cards and those types of things. Those may need to be paid taxable fringe benefit status, right? So the employee, in order for you to deduct them as the business, the employee may need to take that benefit on their W-2 as taxable income. Certainly, we've seen some great clients who have said hey, susie worked for me for 40 years. I sent her to Aruba as a thank you. That was a $5,000 trip On her last check. We have to tax her on that, which sometimes is not a great goodbye, but you could bonus them out a little bit to cover that as well.
Speaker 1:I mean, there's ways around that, but things to think about in any benefit plan that you're looking at is what that tax implication looks like for you, not just on your budget but also on the employees as well. So some of these newer and more modern benefits haven't caught up to the same tax status as the good old standbys, like health insurance and dental and those kind of things where there's tax-free options. So certainly more and more coming down the road you know the 127s and things like that.
Speaker 2:And there's actually one additional program that we started to explore a little bit, which is Section 129, which is actually a dependent care benefit that is also excludable from income. So it's a tax advantage program and I think any parent across the country can attest to how insane the child care space has gone, how expensive it is, and especially nowadays where you know typically you have both parents working right, this can provide a really really nice benefit, particularly for younger parents. So there are actually a lot of tax advantaged benefits out there in addition to some of these fringe benefits.
Speaker 1:Yeah, I mean there was discussion. I was at a Chamber of Commerce board meeting just a couple weeks ago and there was a group of employers here in town that were talking about trying to start their own daycare right. One of their big barriers to hiring folks was child care. There's not a lot of child care centers accepting new kids. I have friends that having children. They find out they're pregnant and the first thing they do they don't tell their family, they don't do anything. They get on a waiting list somewhere for daycare right. Especially if both parents want to work right. That's huge and the cost is atrocious. It's a mortgage payment for most people, so it's awful.
Speaker 1:But seeing that employers certainly some large employers are already doing that right. I know we talk about Unum here. I'm pretty sure has a daycare center here in Maine, but it was interesting to see that some of these decent sized local businesses were saying how can we band together in order to provide the service that our employees need? It sounds weird, but things like transportation sometimes that's a barrier to getting employees and these are benefits that you might be able to offer If there's, you know, public transportation, if there's parking, certainly in the cities, right Parking is a premium and there are tax advantage benefits to reimbursing for parking and transit that you could use as benefits as well. So certainly different tools in the toolbox.
Speaker 1:I think, like you said, it's really important to go back and say what do my employees want, right? What do they need? What can I? You know, I've seen it in some of the more blue collar spaces, where folks may not have a great home life, they're not stable at home for whatever reason right, it could be. You know, just, they don't have good housing. First of all, they may have had something in the past, but they want to come to work. How do we engage them and help them have a good home life so that they can have a good work life? Right, and I think that's where more employers are going. It's a lot more of that touchy-feely stuff and especially for the folks that don't have that deep bench of HR, it's hard, right.
Speaker 1:You know I was talking to somebody else that said you know, I have folks that you know are formerly incarcerated employees. The biggest thing they can't get to work because they don't have a license. Okay, I drove someone to the DMV. I helped them fill out the paperwork because he didn't know what to do. But they have a great housekeeper now, right, and she shows up every day and things are great and that all worked out well and you had to put a little extra effort in the front end to get that back on the back end.
Speaker 1:But certainly just different ways of figuring out. You know it's again. It's. It's not the good old days where you'd put an ad in the newspaper and 20 people would show up on your doorstep. You have to really recruit and attract and build a culture that people want to work for. I mean, we see most states have best companies to work for, right. I'm excited we finally hit the 15-employee threshold. I've already paid my fee this year to get included in that and try to be nominated one of those, just because I think it's important in our recruiting efforts for, you know, our employees I I have great retention here at Paper Trails, which, I'm wonderful, have an amazing team, but it's trying to keep that. And then now grow. You know, grow us and continue to service our clients, as all of this stuff keeps changing and our clients come to us for more of this. So you know it, it keeps changing and our clients come to us for more of this. So it's an interesting world to be an employer today.
Speaker 2:I think the retention piece is an important one, especially nowadays and I hate this stereotype but I think it is probably true Millennials, which I fall under, are not probably as loyal, potentially, as past generations, and you do see a lot more turnover and people jumping jobs and so any ability to sort of build that loyalty and to keep somebody, because, especially nowadays, when it's so difficult to hire anybody that you know you want to hold on to your good people Absolutely Like an iron fist. And I think there's two elements to this benefits discussion. Right, it's designing a great benefits package, which we've talked about, you know, might be you know your sort of your big ticket items, but also, you know, peppering in some things that are sort of hyper relevant to your group. But I think a piece that gets lost, especially nowadays, is how do you best communicate that benefits package to your employees, especially right now, recognizing that you know you have people Gen Z, millennial, gen X, baby boomers. The way those people interact and consume information might vary quite significantly.
Speaker 2:Right, we still have, you know, we go to clients who want paper enrollment forms. A lot of people look at us when we go to give them a paper enrollment form like we have two heads they want a mobile app or they want to do it on the internet, and so my point being is you have to be thoughtful not just with what benefits you offer, but how are you communicating them such that your employees are going to understand them, because they'll never value your benefits if they don't understand them and if they don't use them right. Every single health insurance broker and program talks about their EAP, right? We have this awesome EAP for mental health and for financial wellness and all these things, and you look at the participation it's like 3%.
Speaker 1:Yeah, nobody does that, nobody ever, ever does.
Speaker 2:And so, again, it's just being very intentional with how you communicate these benefits and be mindful that different people want to take in information in a different way, and so you have to be very multi-channeled with how you're communicating that and getting that information out. Plus, we have a saying in our office. It's you've got to message everything seven times. Seven times Because you'll have employees that'll swear you never told them about a benefit, even though you can pull up six emails, and so, again, it's just constantly reinforcing the benefits you provide.
Speaker 2:And I guess the last piece is the amount of conversations we've had with plan sponsors around this topic and we said well, you know what do your surveys say, what do your employees say? And you go. What do you mean it's like? Well, if you think about designing a benefits package that's relevant for your people, you might want to ask them what's most important to them, and I know it's kind of a crazy concept. But we so often assume we know what our employees want and we forget to just ask them what they want.
Speaker 1:Awesome. So this is some really great information for folks that are trying to figure out how to maintain their employees. Really, like you said, we don't see folks who are staying with companies for 40 years anymore. It's very rare. Now Certainly, you've been with your company for a while. I've been here. I'm a business owner, so I'm a little more tied to your partner now. Congratulations, by the way. You know so. Certainly you know building that staff longevity is really important and attracting folks. I think that these are just a few ideas that we can finish up. So thank you very much for joining us today. I really, really appreciate it. You always have such good pearls of wisdom for us. And don't forget, please like, subscribe, share all those fun things, comment. You can email us smallbusinessbigworldpodcast at gmailcom. Follow us on all the socials. We'll be there. Otherwise, we'll see you right back here next week. Thanks for listening to this week's episode of Small Business Big World. No-transcript and thoughts expressed are the hosts and guests alone.
Speaker 1:The material presented in this podcast is for general information purposes only and should not be considered legal or financial advice. By inviting this guest to our podcast Paper Trails does not imply endorsement of or opposition to.