“The thing to remember is that most employees really do expect benefits because these benefits help them maintain their overall economic security,” said Jason Entsminger, Ph.D., at a Maine Organic Farmers and Gardeners (MOFGA) workshop.

Entsminger is the state specialist for small business with University of Maine Cooperative Extension and assistant professor of entrepreneurship and innovation at the Maine Business School.

Citing data from the U.S. Bureau of Labor Statistics, Entsminger noted that non-wage benefits typically make up 30% of total compensation paid to employees. “If an employer is below that average, we can expect that most employees are going to think of other places where they’re receiving greater benefits,” Entsminger said.

The challenge for the farm employer then is to try to piece together a benefits package to get closer to those offered by larger and non-farm businesses.

Healthcare Options

Health insurance is often a top priority for potential employees. There are four major mechanisms that farms can consider beyond traditional employer-paid health insurance plans. The first is called the Small Business Health Options Program (SHOP), which is administered by the federal government. SHOP offers a set of health insurance options that are affordable, flexible and convenient for both small business owners and for their employees. The eligibility criteria are dependent on having at least one employee enrolling in coverage who isn’t the owner, business partner or spouse of the owner or business partner.

Other criteria are that the business must have between one and 50 full-time equivalent workers and SHOP coverage must be offered to all full-time employees.

Additionally, SHOP tax credits are available to small business owners to help subsidize the cost of employee healthcare. “Utilizing a SHOP healthcare option could actually provide your business with a tax credit that can be worth up to 50% of the costs that you pay toward your employees’ premiums,” said Entsminger.

Another option for providing healthcare benefits is a health reimbursement arrangement or health reimbursement account (HRA). HRAs are employer-funded group health plans from which employees are reimbursed tax-free for qualified medical expenses up to a fixed dollar amount per year. Many financial institutions are able to set up HRAs.

With an HRA, the employer owns the funds and determines which expenses are eligible. Often, employees can use HRA benefits to purchase their own health insurance from the Affordable Care Act marketplace or they can be utilized for other eligible healthcare expenses.

A third healthcare vehicle is a health savings account (HSA). An HSA is a type of savings account that allows employees and their employers to set aside money on a pre-tax basis to pay for qualified medical expenses. Unlike an HRA, the employees must be enrolled in a high deductible healthcare plan.

“An HSA, unlike HRAs, puts the money in the hands of the employees themselves. The employer doesn’t control or own it anymore. But it allows the employer to provide some sort of fixed benefit,” Entsminger said.

The final healthcare option is a flexible spending account (FSA). FSAs are similar to HSAs but are for employees who are not using a high deductible plan. An FSA is simply a savings account that lets employees and their employers set aside money on a pre-tax basis to pay for qualified medical expenses. Unlike HSAs, however, FSAs’ unused contributions are lost at the end of the year.

Entsminger acknowledged that the nuances between HRAs, HSAs and FSAs are complicated. “The nice thing is you have a partner in managing them, which is your banking relationship. You’ve got a financial institution that should be there to help you understand because they have to be compliant,” he said.

Direct & Indirect Benefits

Beyond healthcare, direct benefits include paid leave, life insurance, disability insurance, retirement savings and child and elder care supplements.

Because of the costs associated with direct benefits, Entsminger suggested offering them as a group of farms, such as part of a cooperative organization. For example, a group of farms could work together to hire a childcare provider. Similarly, a group could discuss disability insurance plans with an insurance provider to obtain economies of scale in the way that a large employer is able to.

Indirect benefits include mechanisms like bonuses, housing, meals, transportation subsidies, professional development and farm credits. According to Entsminger, housing is becoming increasingly important, especially for seasonal workers.

Finally, many farms are setting up emergency fund accounts for employees as a security measure. Perhaps an employee has a car repair they can’t afford. By using the emergency fund, the employer can ensure that the employee gets to work and potentially avoids having to take action against them, such as firing.

If an employer chooses to implement any of these direct and indirect benefits options, Entsminger encouraged them to understand the benefit’s equivalent monetary value. In doing this, employers become empowered to communicate with employees about the overall monetary value of the benefits package.

by Sonja Heyck-Merlin