Construction: Can Better Benefits Save on Taxes?
Better Benefits May Save on Taxes for Construction Companies
Like so many other industries, having skilled, qualified labor readily available to do the work is a challenge. Construction companies in particular have unique demands of ongoing projects, sequenced projects moving labor to and from jobsites and a backlog ready to begin once other projects are completed.
Offering highly competitive compensation and benefits for your employees is a business reality. Beyond a salary that tops out from your competitors, a creative and bolstered benefits package can help make the difference. And, these benefits come with tax advantages.
Educational assistance programs
Education and training the next generation of construction managers and other related skilled professionals is an excellent benefit. Currently, employers can provide up to $5,250 per employee per year as a tax-free fringe benefit for undergraduate, graduate and continuing education courses. And, it often helps with retention as well.
Savings accounts for health care
There are different accounts that allow employees to set aside dollars earned for medical expenses on a pretax basis, lowering the employee’s taxable income and the employer’s payroll taxes. These include:
- Health Savings Accounts, which generally must be offered in conjunction with a high-deductible health plan,
- Flexible Spending Accounts; and,
- Health Reimbursement Arrangements.
Creating a strong benefits package has become a competitive necessity for most construction companies.
Health care insurance and wellness programs
Employer contributions toward employee medical, dental and vision insurance are generally tax-deductible as business expenses. Offering wellness programs and gym memberships can help employees stay healthy and productive, reducing sick days and increasing job satisfaction.
Qualified retirement plans
In general, employee contributions to qualified plans are considered pretax. By offering a certain type of retirement plan — such as a 401(k), IRA or Simplified Employee Pension — your construction company can take tax deductions for contributions up to specified limits. You also may be able to qualify for a tax credit of up to $5,000 for launching a new retirement plan.
Life and disability insurance
Premiums paid by employers for group life and disability insurance policies are usually tax-deductible.
Employee assistance programs (EAPs)
As awareness for mental health and its connections to more productive lives become more mainstream (and not just for substance abuse, or other addictions), employers are finding ways to include treatment and access as a benefit. EAPs offer participants access to free assessments, professional counselors and other services. Employers’ costs are generally tax-deductible.
Other Low-Cost Benefits
Although they don’t necessarily generate tax breaks, other types of benefits may help your construction company lower payroll costs.
- Flex Work Arrangements: Flexible work arrangements — such as telecommuting, part-time work or job-sharing — can cut payroll and overhead costs by decreasing the time certain types of employees spend on the clock. Restructuring some jobs into part-time and job-sharing positions also may ease the financial burden of providing an extensive benefits package, which you can reserve for full-time employees.
- Unlimited paid time off (PTO) is another enticing employee recruitment tool that may save your construction business time and money. Under this policy, employees can take as much time off as they want or need as long as it doesn’t interfere with their ability to fulfill their job duties. In turn, PTO administration becomes much simpler and job satisfaction tends to rise. Setting clear guidance on how and when to request time off helps prevent abuse of unlimited PTO policies. In fact, employers often find it helpful to mandate a minimum number of days off annually to help employees nervous about taking too much PTO. (Note: There may be state and local laws that address unlimited PTO.)
A Competitive Necessity
Creating a strong benefits package has become a competitive necessity for most construction companies. That doesn’t mean you have to offer everything. Find a strong balance, understand its tax implications and have us help weigh the cost versus tax impacts so you can do what is best for your company, employees and your bottom line.