Over the last five years, reporters have written numerous articles about "human capital" and the crucial role it plays in a company's success. This became even more evident during the high-tech boom as companies harnessed the talents of employees at all levels to achieve their business goals. At the same time, employees increasingly adopted the free-agent mentality and frequently switched jobs to take advantage of offers of increased compensation and benefits.

While job-hopping can be good for an individual, it is expensive for a business owner. The Saratoga Institute Human Capital Report for 2000 estimates it costs a company an average of $4,588 to hire a single employee. Because of the cost, time spent interviewing and training, and the distraction new employees often create to existing staff, it is in a business owner's best interest to keep employees motivated and loyal. Loyal employees work harder, have longer average tenures and are less likely to be enticed by competitors.

Loyalty is one offshoot of job satisfaction, but job satisfaction is difficult to define. What has been proven is that people work for more than just a paycheck. Employees want a sense of belonging, an opportunity to contribute and the chance to make a difference within an organization. That said, salary and benefits are important elements in creating a satisfied, dedicated and loyal workforce. Employees are becoming more savvy about benefits and are reluctant to change jobs for a nominal salary increase. The total package matters most.

A comprehensive benefits package can do more for a company than build staff loyalty. It can have a positive impact on a company's bottom line. For example, an Employee Assistance Program (EAP) is a confidential counseling service that gives employees an outlet to deal with all types of problems, from stress and financial dilemmas to child rearing and family situations. Employees typically appreciate the availability of these programs and the fact that employers see the staff as more than just "workers."

The company benefits as well. Smart managers know that employees' problems are not left at the doorstep, and personal issues and stress can affect an individual's job performance, focus and quality of work. EAPs offer a way for employees to deal with their personal problems before they impact the employer's bottom line.

Another benefit that builds loyalty is a retirement savings plan. Although 401(k) plans are considered a standard benefit at large companies, a recent article in BusinessWeek noted that only 35 percent of businesses with fewer than 500 employees offer a 401(k). The same article called a pre-tax retirement savings plan "the benefit that counts." The U.S. Department of Commerce estimates that more than 90 percent of companies have fewer than 500 employees, so the number of employees without access to a 401(k) plan is substantial.

In addition to 401(k) plans offering employees a pre-tax savings mechanism, they typically include an employer match that results in added benefits for participants. Employees building a retirement fund through a 401(k) are less likely to be interested in working for competitors who do not offer this important and valuable benefit.

Some business owners view employee benefits simply as vacation days and medical coverage. From an employee's perspective, a benefit plan is an integral part of a total compensation package. In the early stages of developing a comprehensive benefits plan, a business owner will quickly learn that benefits can include a wide array of items, including dependent-care reimbursement, a 401(k) plan, long-term disability coverage, life insurance, vision care and Employee Assistance Programs.

It can be overwhelming for a business owner to select just one of these elements and begin researching and interviewing vendors, structuring and designing the program, introducing it to employees and handling the administration. He or she will soon spend considerable time on administrative tasks related to human resources.

The importance of benefits and their relation to employee satisfaction and retention has been established. But where should a company that wants to institute new programs begin?

A large company can call a broker with a network of vendors. A small business typically starts from scratch. Businesses with fewer than 100 employees often have a difficult time getting the attention of dental care plans, 401(k) providers, EAP vendors or medical insurance carriers. Even if a medical insurance company is interested in providing benefits to a smaller company, the odds are that the program will be limited, employees will not have many coverage options and the costs will increase dramatically every year.

In addition, the company will have accepted responsibility for a whole new layer of regulatory compliance and administrative burdens in managing benefits programs. What seemed like a time- and money-saving idea at the onset can become a paperwork-filled nightmare that distracts business owners from their core business.

Recruiting and retaining talented employees is always a challenge, especially in an environment of fading worker loyalty and intense competition. With human capital at a premium, a comprehensive benefits program is a valuable tool in recruiting and retaining talent. The challenges for the owner of a small or mid-sized business in developing and managing a competitive benefits program can be overwhelming.