James R. Balmforth: Offering Employee Benefits

Employers are not required by law to offer benefits such as health insurance coverage, pension plans, and paid vacations. These types of benefits can be quite costly for small businesses, at least at first glance, so why do employers offer them? Since payroll is already the largest line item on most employers’ balance sheets, and recruiting new employees costs time and money, you want to make sure you’re able to attract and retain the best talent possible. This is particularly relevant in competitive fields where workers have multiple options. Employers who can afford to offer benefits usually have a wider selection of candidates from which to choose.

But small businesses must manage expenses and cash flow wisely, so business owners must approach these considerations cautiously and prudently. After all, great benefits only go so far if the company spends more money on them than it takes in. Also, employers who offer benefits also are bound by certain laws and regulations. Regardless of whether there are violations, employers often need to pay advisers and attorneys to help them create benefit plans that comply with the law.

Below are some considerations to weigh when deciding if providing employee benefits will also benefit your business.

Some Pros For Offering Employee Benefits

• A benefits package, especially one that offers good health insurance coverage (including dental and vision), helps attract and retain quality employees.
• Businesses get the tax advantage of deducting plan contributions, including health insurance, life insurance, and pension plans.
• Employees often will accept better benefits in lieu of a higher salary, which can be a savings to the business.
• Offering benefits to employees also can be advantageous to a business owner, who may be able to get personal benefits for less money than if he or she purchased them privately.

• Offering health insurance has been shown to decrease absenteeism and improve employee health and morale; those with coverage are more likely to seek preventative care and live overall healthier lives.

Reasons Not to Offer Benefits

• Providing benefits costs more for small employers than for large ones, both in terms of higher prices because of lesser buying power, and due to relatively higher costs of administration.
• Small businesses have less choice in designing a retirement plan because of administrative costs.
• The more benefits a business offers, the more it must pay for administrative overhead.
• The cost of health insurance has steadily risen, making it less and less affordable to employers, and making financial planning difficult from year to year (although the small business provisions of the Affordable Care Act have altered this balance by incentivizing employer-funded benefits).
• Offering benefits creates concerns regarding legal compliance, which in turn causes a company to incur legal fees.
• Mistakes made in benefit plans can lead to costly lawsuits, or to regulatory fines.

Construction Contracts

Whether you’ve rented a car, leased an apartment, or signed up for a credit card, chances are you’ve signed many contracts as an adult. However, you might not have encountered a construction contract yet, and it may seem rather foreign when you first start to read through it. While it’s best to have an experienced construction law attorney advise you on the particulars, below are a few special considerations to think about when you’re getting ready to sign a construction contract.

Construction Contracts in General

A contract is a legally enforceable agreement between two or more parties. Each state has its own laws regarding the requirements for and enforcement of contracts, but many contracts must be in writing. For example, contracts for construction that could take more than a year to complete must be in writing. Similarly, construction loan financing and contracts involving the sale of improved real estate must also be written down.

While some construction contracts may be oral, it’s always best to have your contract in writing so that it’s clear what each party is responsible for, what the payment terms are, and what happens if something goes wrong. If there’s a dispute down the road, a court can more easily decide what’s fair under a written agreement.

An important consideration with regard to construction contracts is determining who the parties are and what their obligations are to each other. While some agreements may be straightforward – an understanding between you and a handyman – other construction contracts can be more complicated with the addition of a general contractor, subcontractors, architects, designers, and even government entities.

For example, if your construction contract only mentions some obligations between you and a general contractor, you could face serious problems if the general contractor fails to pay any of its subcontractors. In these situations, a subcontractor may come after you for payment (even if you’ve already paid the general contractor for the work), and could place a mechanic’s lien on your property to enforce payment. However, if your contract had anticipated these types of situations, you would have been better protected against this whole ordeal.

Because construction projects can involve so many different people, it’s important for the contract to articulate who these actors are and the aspects of the project for which each is responsible. That way, if something goes wrong, such as a construction defect issue, the contract can help guide the parties to some sort of equitable resolution.

Types of Construction Contracts: Allocating Risk and Making Payments
Another important consideration in construction contracts is the way payments are made and the work is completed. There are many types of contracts, and each one carries its own benefits as well as inherent risks. Below are some common types of construction contracts.

• Lump Sum or Fixed Price Contract: In these contracts, the owner pays a total fixed price to the contractor for the whole construction project. This puts much of the risk on the contractor since he or she may underestimate the cost to complete the project.

• Time and Materials: Here, the owner pays the contractor on an hourly or daily rate, plus an amount to cover materials used. This allows you to pay for the time worked, but may encourage the contractor to take more time with the project.

• Cost Plus: In these arrangements, you pay all of the allowed, actual construction expenses, plus an amount to cover the contractor’s profit. With cost plus contracts, the owner should include limits on the amount a contractor can bill.

Regardless of the exact type of construction contract you use, there are many issues to anticipate, and it’s important to know exactly what you’re paying for, how changes will be handled, and what the timeline for completing construction will be.