Successful entrepreneurs recognize that great employees drive positive corporate results. In order to build a small to medium-size enterprise (SME) with above-average industry growth rates, an entrepreneur must create an “employer of choice” culture.Today, this means developing a Total Rewards competitive model with salary, retirement, performance incentives, paid and/or unpaid time off, and employee benefits. After salary, employees value health care as the number one component of a comprehensive employee benefit program. Based upon the current tax laws, employees are permitted to shift dollars among different components into a section 125 plan and a 401(k) plan.
In her July 13th article, “Sick and Getting Sicker,” Simona Covel of The Wall Street Journal treats health care not as a key component of a total rewards program, but rather as a burdensome expense for employers. She identifies health care costs as a cause of business failure, especially small business failure, and says:
At some businesses…health care is the highest expense after salaries —with devastating consequences. Owners must skimp on vital investments like marketing and research. Some can’t hire the people they want because top candidates demand premium coverage. Or they end up under-staffed because of the high cost of insurance — and lose potential clients as a result.
This small paragraph sets the tone for what she will spend the rest of the article doing: that is, positing a non sequitur argument which cites the high cost of health care as the principal cause of decline for four small businesses. The article appeals to emotion, perhaps in the hope that the reader will sympathize with the featured business owners rather than recognize the obvious: while health care proved unaffordable in these examples, their competitors have somehow figured out how to offer it to their employees. Furthermore, these particular business owners appear to have other issues contributing to their business failures.
The article points out that for an Oregon-based Web design company called Media Mechanic LLC, a health plan costing just $400 per employee per month was too expensive. The owner, who was looking for a health plan for new hires, chose to offer two-thirds coverage as a compromise. However, if he had been thinking of health benefits as a part of a total rewards program rather than as his “highest expense after salaries,” he could build an employee cost-sharing plan that is competitive in the market. Does an employee value $60,000 per year in taxable salary more than $55,000 per year with great health benefits?
In another example, the president of M2 Health Care Consulting in Washington D.C., claims that health care costs are keeping her not only from providing coverage, but also from making her staff members full-time employees! “Since the business was created in 2005…[the owner] has relied on local contract workers — currently, five of them.” Normally, a business must pay a higher hourly rate to an independent contractor than to a full-time employee to compensate for not providing a health care plan. Moreover, she says that her inability to afford health benefits has discouraged potential workers from working for M2. Is this a fair example of health benefits costing too much money or is it the failure of an owner to build a culture and manage a rewards program to motivate candidates to join and remain with M2?
Contrary to what Ms. Covel’s article suggests, it seems that the cost of health care is not the key driver to these entrepreneurs’ inability to provide competitive rewards. That these businesses are struggling to hire and retain good employees seems the result not only of high perceived health care costs, but financial difficulties in general, a lack of vision, and a reluctance to invest in human capital.
The article states, “It appears that we are at a stage in business where the US will fail due to health care costs.” I would argue that any entrepreneur who cannot overcome the challenge of building a comprehensive total reward program will not be successful. An entrepreneur will have far greater challenges with sharing a vision, building and maintaining an “employer of choice” culture, establishing authority, making employees part of the solution, and developing great products or services. Simona, health care cost is but one of a hundred challenges that employers deal with every year. Interview one of the many who has overcome them and built a great company.
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