Beefing Up Benefits May Save Tax Dollars for Construction Businesses

Kirsch CPA Group

Apr 10, 2023

Construction companies continue to find themselves embroiled in a protracted battle for skilled labor. One fundamental way to recruit the best talent and retain valued employees is by offering competitive compensation and benefits. Let’s focus on the latter, which may also help lower your tax bill.

 

Popular Options to Consider

The term “benefits package” is widely used for a reason. One or two perks generally aren’t going to get the job done these days. Here are some of the most popular employee benefits to consider:

Health care insurance and wellness programs. Employer contributions toward employee medical, dental and vision insurance are generally tax-deductible as business expenses. Additionally, offering wellness programs and gym memberships can help employees stay healthy and productive, reducing sick days and increasing job satisfaction.

Tax-advantaged 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: 1) Health Savings Accounts, which generally must be offered in conjunction with a high-deductible health plan, 2) Flexible Spending Accounts, and 3) Health Reimbursement Arrangements.

Qualified retirement plans. 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. (Various rules apply; contact us to learn more.) Generally, employee contributions to qualified plans are considered pretax.

Life and disability insurance. Premiums paid by employers for group life and disability insurance policies are usually tax-deductible.

Employee assistance programs (EAPs). A growing issue for employers is finding ways to help employees who are in recovery because of substance abuse, other addictions or mental health issues. The construction industry is no stranger to these problems. EAPs offer participants access to free assessments, professional counselors and other services. Employers’ costs are generally tax-deductible.

Educational assistance programs. If you want to help educate and train the next generation of construction managers and other related skilled professionals, one of these programs could be just the ticket. 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.

 

Other Low-Cost Benefits

Although they don’t necessarily generate tax breaks, other types of benefits may help your construction company lower payroll costs.

For instance, 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 businesses. But that doesn’t mean you have to throw caution to the wind and offer everything under the sun. Kirsch CPA Group can help you choose benefits that suit your company’s size and budget and then assist you in claiming tax deductions for them.

 

We can help you tackle business challenges like these – schedule an appointment today.

 

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About The Author

Kirsch CPA Group is a full service CPA and business advisory firm helping businesses and organizations with accounting,…

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