How to Build a Competitive Employee Benefits Package

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A strong retirement benefit can help you recruit employees and reduce turnover. Yet these programs are somewhat rare at private companies. Only 15 percent of companies with between five and 99 employees offer a 401(k) plan, the most common type of employer-sponsored retirement savings program.

A 401(k) is a voluntary retirement savings plan into which employees can contribute a portion of their pre-tax earnings. Employers administer and control the plan, and many companies match 401(k) contributions on a tax-deductible basis. (Fees may also be deducted, but employers can be held liable if exhorbitant fees are allowed to go unquestioned, or in the event of some other form of mismanagement.)

Employees can borrow against the value of a 401(k) plan, withdraw funds at a penalty prior to retirement, or wait for tax-free distributions when the retire. When employees move from one company to another, rollovers are common. Given the care you must take to administer a 401(k), it's a capital- and time-intensive way to reward workers. But it is appreciated by employees, largely because it offers them greater financial independence.

Dig Deeper: How to Setp Up a 401(k) Plan

Employee Benefits: Vacation Time

Providing workers with paid vacation time is extremely common, and generally considered a low-cost benefit to offer. Two weeks paid leave is fairly standard for a small business in the U.S. Many companies start workers at two weeks and reward them with additional time off as they accrue seniority. Some companies will also pro-rate vacation time, so that new hires who start on or after July 1 are only offered a week's vacation time in their first year. If you are creating a vaction policy from scratch, you should also consider rules about how much notice an employee must give before booking a vacation. You may also want to consider a use-it-or-lose-it policy. Some 66 percent of employees neglected to use all of their vacation time in 2009, according to a study released by Right Management, a consulting firm in Philadelphia. Workaholic employees may seem attractive in theory; in practice, they will likely suffer from burnout and cause stress among other workers. That's why many companies are actually requiring employees to use all of their vacation time—some even require that workers take two weeks' off at a time.

Dig Deeper: How to Create an Employee Vacation Policy

Employee Benefits: Additional Paid Time Off

Family Medical Leave

Since 1993, employers with a headcount fo 50 or more have been required by law to allow workers to take up to 12 weeks of unpaid leave to care for a sick family member. A company is required to keep the person's job open until such a time as he or she can return, and to continue to cover the employee's health benefits. Read more

Maternity Leave

Most employers offer new mothers 12 weeks of paid maternity leave, and many companies have begun offering paternity leave for new fathers as well. As an added benefit, companies usually have a designated nursing room for new moms and make adjustments to schedules to accommodate new childcare issues. Typically, a company will pay a new mom 100 percent of her salary in the period before she returns to work, although some businesses pay only a partial amount of a worker's earnings during her maternity leave. Still others place new moms on disability leave. It should be noted that, by law, pregnant women are a protected class and may not be terminated or otherwise the subject of job discrimination.

Flextime

Under a flexible work arrangement, an employee can choose to work atypical business hours so long as they complete assignments in a timely manner. These arrangements take many forms including working a 4-day week, telecommuting, and job-sharing. Flextime is considered a smart benefit particularly if you are trying to tap certain segments of the workforce such as older workers or new mothers.

Sabbaticals

Sabbatical programs, whether paid or unpaid, are fairly rare but some companies swear by them. Typically, employees who have been with a company for a certain period of time (say, five years) are allowed to take time off to travel, live in another city, or pursue a passion. A sabbatical might be an automatic period of time (say, three months) or it might be a one time opportunity for an employee to take three additional weeks of vacation on top of the three weeks he or she is awarded under a company's standard vacation policy. The payoff, advocates say, is increased retention and a sense of renewal and boosted creativity once an employee returns to work.

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