The 'B' list.

Low-cost ways to attract and retain your employees

As the economic slowdown continues, employers should consider low-cost ways to attract and retain employees. Although demand for employees may remain strong, employers may find it difficult to add perks. Attracting and retaining employees requires offering compensation, benefits and training and development opportunities in a new way.

Workplace morale: Because employees face many demands in balancing work and personal obligations, employers can start by asking employees what benefits most interest them, then design programs to meet their needs and desires. Some benefits are low cost but may make employees feel valued, recognized and respected, creating savings by reducing employee turnover.

Give employees more control over work schedules through flexible work arrangements, telecommuting, job sharing or buying/selling paid time off. Providing access to services such as dry cleaning pick up and delivery, car detailing or a company concierge may make employees' lives seem less hectic. Free flu shots and cholesterol screening could result in healthier employees and less sick time. Pizza days and tickets to sporting events or movies send a message of appreciation.

Retention tools: Stock options can be offered to all employees, allowing them to share in the potential growth of a company. Take advantage of qualified transportation fringes, permitting employees to exclude up to $65 per month for transportation in a commuter highway vehicle and for transit passes (increased to $100 in 2002), and up to $175 per month for paid or reimbursed parking.

Reduce taxes for both employee and employer by providing any of the following programs, either through a cafeteria plan or standing alone. An educational assistance plan allows tax-free tuition reimbursement for undergraduate or work-related courses up to $5,250 per year. A dependent care assistance plan allows an employee to set aside up to $5,000 of pre-tax dollars to pay qualifying dependent care expenses. A flexible spending account permits an employee to set aside pre-tax dollars to reimburse the employee for medical expenses not otherwise covered under the main medical plan. If not provided through a written plan, these perks are generally taxable to the employee.

Insurance: Through group purchasing power, an employer may offer insurance or prepaid coverage at lower costs than an employee could purchase individually. Consider expanding from the traditional choices (health, dental, etc.) to non-traditional options at group rates. For example, offer prepaid legal services, pet health insurance, auto and homeowners insurance, additional life insurance or the ability to cover a non-traditional family member like a domestic partner, a grandchild, a nanny or a parent.

Under a "defined contribution" health plan, an employee is allotted money to purchase his/her own health insurance. Although such a plan may seem to save the employer from rising health insurance premiums, it may turn out to be much more expensive because the current cost of premiums for group health insurance is typically much less than for an individual policy.

A Medical Savings Account (MSA) is a tax-exempt savings account set up in conjunction with a bare-bones, high-deductible insurance plan and may provide an affordable option for businesses with fewer than 50 employees or for self-employed individuals. MSAs will be attractive to employees who do not need current coverage, either because they are healthy or have coverage available elsewhere. Due to the high deductible, MSAs may not work for those with substantial current health-care needs.

Not every benefit idea requires thinking "outside the box" to improve the bottom line and employee loyalty. There are many win-win solutions for employers and employees without significant additional cost, but the Internal Revenue Code requires careful attention to details.

Deborah Baughman is an associate with Detroit-based Jaffe, Raitt, Heuer & Weiss. Her areas of cancentratian include employee benefits, estate planning and corporate tax planning.