Growing numbers of Long Island’s small businesses are offering health benefits as a way to attract and retain employees in a tight labor market, according to local executives and benefits experts.
A Bohemia tech services company, after 13 years in business without health benefits, began offering them on Oct. 1 to attract more experienced workers. A Ronkonkoma truck repair company, facing a shortage of technicians, began offering some fully paid health benefits this year. A Hauppauge bakery that opened in May has offered paid health benefits and a 401(k) match for full-time employees from the beginning, anticipating it would have trouble attracting workers without the perks.
“There is definitely more interest” in offering health benefits, said Sharon Davis, president and chief executive of S.J. Edwards Inc., a Freeport company that provides human-resource support, insurance and employee benefit services.
The local trend mirrors a nationwide rebound in private-sector health care coverage after years of overall declines. The percentage of private employers offering health benefits rose in 2017 for the first time since 2008, to 46.9 percent, according to a report released in August by the nonprofit Employee Benefit Research Institute in Washington, D.C. Between 2008 and 2016, the percentage had declined to 45.3 percent, from 56.4 percent.
Some of the biggest increases in 2017 occurred at smaller companies. They have concluded that offering the benefit outweighs its considerable cost.
Companies with fewer than 50 employees aren’t required to offer health insurance under the federal Affordable Care Act, which mandates that larger companies offer it. Most of the law's provisions took effect in 2014. The percentage of those small companies offering benefits fell from 43.2 percent to 28.6 percent between 2008 and 2016 because of the recession, cost and confusion over ACA, the institute's study shows. In 2017, that number rebounded to 30.2 percent, the study said.
Ninety percent of Long Island’s companies have fewer than 20 workers, according to census data.
A key reason for the increase in the number of employers offering benefits is the low unemployment rate, experts said. The national jobless rate fell to 3.7 percent in September, the lowest since December 1969, the Bureau of Labor Statistics said earlier this month. Long Island’s unemployment rate for August, the most current data available, fell to 3.8 percent, the lowest for the month since August 2007. (Unlike national data, Long Island's unemployment rate is not seasonally adjusted.)
“In today’s tight labor market, employers must increasingly compete for workers,” said John A. Rizzo, economics professor at Stony Brook University and chief economist for the Long Island Association trade group. “And evidence suggests that the strong majority of employees value increased benefits more highly than a raise in salary. This is especially true of health insurance and paid vacation and time off. So by offering more benefits instead of raises, employers can more easily attract the workers that they need.”
The payroll company ADP believes the labor shortage is encouraging more small companies to offer benefits, said Bob Lockett, division vice president, global human resources. ADP, based in Roseland, New Jersey, has 740,000 clients, worldwide, including 500,000 with fewer than 50 employees.
“The primary reason small-business clients are offering benefits is to attract talent in a competitive marketplace, especially if competitor compensation is comparable,” he said.
Local small businesses are also boosting benefits to attract workers. Of the estimated 12 small-business accounts her business has added so far this year, three were clients offering benefits for the first time, said S.J. Edwards CEO Davis.
Michael Capaldo, owner of Michael Capaldo Employee Benefits in Coram, said that even local startups with fewer than five employees are inquiring about benefits.
“They are saying consistently to me that they feel they have to [offer benefits] to acquire the level of talent that they need,” he said.
John Powers, Long Island-based district manager for BenefitMall, a Dallas-based company that provides employee benefits, payroll, human-resource and employer services, said he sees the same pattern.
“If you are a startup and want to attract the best people, you have to compete as if you are going to be big, and that includes benefits,” he said.
Offering benefits represents a brave new world for some small employers, which are less likely to offer benefits because of the costs, experts said.
“Many times this is something they have never done before,” said Marc Eisenshtat, a Woodbury benefits broker affiliated with BenefitMall. “They are stepping into a new realm of expenses and responsibilities.”
One of his recent clients is Nerds That Care, a Bohemia a company that provides outsourced information technology services such as managed cloud services and cybersecurity. The company, in business since 2005, began offering medical and dental benefits on Oct. 1 to attract people with experience. The benefits are 50 to 60 percent paid by the company. “It’s given me the ability to attract a really different echelon of candidates, a little bit older and a little bit more experienced,” said James Rocker, chief executive of the company, which has 16 employees.
The lack of benefits was a “deal breaker” when he attempted to hire an experienced candidate several months ago. The candidate didn't accept the job, Rocker said: He has a family.
Angel McCabe, president of K&M Truck Repair in Ronkonkoma, in March began offering employees company-paid long-term disability and life insurance. She also began offering fully paid employee-only health and dental insurance that workers can upgrade to family plans. Before, she offered a dental plan that employees paid for and an employee-only health plan for which workers bore much of the cost.
With the new benefits, McCabe said, she has been able to recruit two employees, including a technician from California who was looking to relocate to New York. He is scheduled to start Monday .
“He said we had good benefits, and he liked that we are a family-run business,” said McCabe, who has 10 employees.
“Health insurance is a huge expense,” McCabe said. “It’s not only worth it, but necessary in order for me to attract employees to come to work for me rather than someone else.”
Veronica Bencivenga, owner of the Duck Donuts franchise in Hauppauge, which opened in May, offered benefits from the beginning “to attract and retain good employees.”
Full-time employees get company-paid, employee-only health benefits, which they can upgrade to a family plan; a 401(k) match; and paid time off. The company has five full-time employees and 41 part-timers.
Benefits can also help retain employees, a recent survey shows. Thirty-two percent of employees who were unlikely to look for another job cited their benefits package as a key reason, according to the 2018 Employee Benefits report from the Society for Human Resource Management, an Alexandria, Virginia, trade group.
Mark Gajowski, founder of the 19-year-old Magii Group of Cos., a Hauppauge financial services firm, believes benefits help create loyalty. His company offers employees a variety of benefits that include 90 percent employer-paid medical and dental coverage, a 401(k) match and a defined benefit retirement pension, which is based on years of service.
“We have a very good staff and low turnover,” said Gajowski, whose company has 15 employees.
In fact, he said, just one employee has left in the past two years, and that was because she changed industries.
Jennifer Tammany, director of operations, has been with the company for a little over five years.
“My husband is self-employed, so benefits are a huge thing for me,” said Tammany, a mother of two teenagers. “The security of knowing I have benefits while I work means a lot.”
Yvonne Roode, director of business development, has been with Magii for seven years.
“I am supporting myself, and benefits are essential in any job I have,” she said.
Nicole Pardee, a compliance officer, has been with the company for four years and provides benefits for her 9-year-old son.
“We have a very good insurance package,” she said. “I do have a family that relies on me.”
As someone who worked for branches of large financial firms on Long Island, Gajowski said he had access to good benefits and wanted to continue that tradition in his own company, which has 15 employees.
“I wanted to have a small-firm feel with big-firm benefits,” he said.