Cost-Saving Strategies For Employee Benefits

Second only to payroll, a company’s benefits package is the most expensive item on the budget. Any cost-saving measures that can be applied to benefits can, therefore, have a significant impact on your bottom-line.

However, approaching the benefits package with only cost-savings in mind can be a disadvantage for your organisation. Benefits are one of the primary means that businesses use to attract top talent. A cost-saving strategy that may be saving you money on the face of it may mean you lose out on the skilled, experienced and qualified employees. At the same time, sacrificing that all-important bottom-line for the ability to attract and retain the best is not always plausible.

It’s all about achieving that perfect balance between offering an attractive benefits package while keeping the budget trimmed.

To find out how to achieve this balance, we asked the benefits experts – our employees – what a company can do to save money on their benefits package and found the following:

1. Re-consider Medical Insurance Plan Designs And The Cover They Offer

There is a wide variety of medical coverage option available that you can offer your employees that will attract and retain the best employees. Simply opting for the most expensive plan is however not necessary and can be costly.

Restructuring the different plan options available can ensure that your employees are not over-insured while offering them competitive benefits. Opting for health insurance through a local PEO (Professional Employer Organisation provides employers with access to a larger pool of plan designs from the top carriers to choose from. This is especially beneficial for small businesses or groups who would normally be subject to a community rating.

2.  Reconsider Employer Contributions

Employers offering medical insurance to their employees are required by law to pay a minimum contribution to their premiums. This is usually 50% of employee-only cover relevant to the lowest cost plan on offer.

Many employers choose to contribute more than this minimum to attract and retain talent. However, percentage-based contributions can become costly. The G&A Benefits Team suggest structuring benefits according to a set dollar amount rather than applying the equal contribution percentage strategy to every plan that is offered to employees. This way, the company will save money on contributions for employees who choose to enrol on the more expensive plans available to them. As long as the dollar amount meets the required minimum for employer contributions percentage, this is a fair and effective benefits cost-saving measure. Every employee receives instead of the same contribution to their medical plan no matter the plan they choose.

Business analysts at Credit Capital say, “no matter what plans your employees choose, the cost-to-company remains the same when you choose a set dollar contribution strategy instead of a percentage. This not only lowers medical contributions costs for the company but also makes the cost associated with the benefit far more predictable.”

3. Educate Employees About The Benefits Offering

It isn’t only employers who find benefits complicated and confusing. According to our Collective Health Poll, over 60% of respondents said that they find the benefits options confusing and that they don’t understand them.

Also, employees often feel pressured or rushed into deciding within the enrollment period which leads to them simply selecting an option that they are familiar and comfortable with. Offering multiple meetings to discuss different plan options that are available in detail throughout the year will keep employees informed and thinking about alternative plan options.

Taking the time to educate your employees on the different benefit options that are available to them will prevent them from choosing the wrong option and then complaining about it at a later date. It will also save your company money in the long run.

4. Tax Reductions

Salary sacrifice strategies, where employees are willing to forego a portion of their salary instead of non-cash benefits can provide huge cost-savings for an employer. These types of benefits often include gym memberships, travel cards, car schemes, childcare and so on.

This also has tax benefits for employers and employees. The lower their salary, the less you need to contribute towards taxes and national insurance on their behalf. You should, however, be aware that the government has introduced a tax on some benefits such as company cars and mobile phone packages. Make sure you choose salary sacrifice schemes that are tax-free to save costs for your company.

Increase your cash flow. Get your business going!

We’ll save you days of confusion and stress!

Aussem Mortgage Solutions offers you faster and easier funding from $5,000- $300,000.

TALK TO US- 0432 297 651

The 6 Most Important Tips You Need to Know

Are you looking to secure finance to help you grow your business?

Many business owners have a hard time getting approved for a business loan. But with a little education and support, you can get the funding you need without the headaches.

There are things you can do to increase your chances of obtaining a loan, some of which you might not even have thought of.

Basically, you must prove lenders that you are capable of making the repayments as scheduled.

If you’re currently seeking financing opportunities for your small business, you might have already considered applying for a loan. However, what could you do to increase your odds to secure a small business loan?

Here are 6 useful tips to provide you with better chances of obtaining a business loan.

#1 – Make sure you prepare everything in advance

You won’t be ready to apply for a business loan the very moment after you make this decision.

Securing a business loan requires thorough preparation to improve your chances of success. Make sure you do everything in your power to set your company on the right track from the very beginning.

Swami Mukti of Mukti Freedom Yoga practised yoga in India for 10 years before moving back to Australia to teach. “I studied under the direct guidance of a renowned guru and while at the Bihār School of Yoga, I was able to author a book on Swara Yoga. I’ve been very fortunate to have this foundation in the practice and it has been crucial to the creation of my studio. Making sure your foundation is strong will help you secure the loan when the time is right.”

Aside from your industry expertise, there are two main things that lenders look at when it comes to loan applications: business profit and your personal finances. Start working towards:

• improving your credit score
• repaying your debts
• and organising your accounting records long before you apply for a business loan

Prepare yourself to showcase your plans for growth and to explain your financial history. The more you open yourself to lenders, the better chances that your business appears professional and solid.

#2 – Acknowledge your risk

The true reason why small businesses have a hard time at obtaining a loan is that lending money to them is riskier than lending it to large and reputable corporations. Here are a few of the factors that contribute to this risk increase:

✗ Low profit

✗ New business

✗ Poor credit score

✗ Not enough collateral

✗ Messy accounting records

According to the retail experts at Embrace, “new products are always a risk, but if you can prove that the potential of your business trumps the risks, then you can position yourself as an asset instead of a liability. This is only possible if you have a thorough understanding of the risk your business presents to lenders. It’s the only way you can build a solid defense once you’re negotiating your loan.”

By showing a good awareness of your level of risk, you’ll decrease the chances that lenders point out the weak spots of your business.

#3 – Save money before considering a loan

Getting a loan and not being able to make repayments is a situation you should avoid at all costs.

One of the best small business loan tips is to save money for loan payments. Consider opening a business savings account and start saving, in order to be able to manage your first repayments. Putting together a repayment plan will show how you will use the loan and earn money to repay it.

Pearl Toh, the creator of Peal’s Creations, spent years building profitability and saving money before setting up shop. “I started selling jewelry through markets and shops on consignment. It was only after I’ve built up enough capital through my profits that I was able to set up my own website and shop online.”

Many lenders want to know where repayments will come from before approving a small business for a loan. Non-cash collateral can be a good way to prove you can repay the loan.

Beware, though, you might lose some of your personal assets such as your car or even your home, should you fail to make repayments. Saving for repayments ahead of time protects you from using your personal assets as collateral.

#4 – Understand the different types of loans to choose the right one for your business

Always assess all of your available small business loan options.

The more you can learn about the different types of business loans, the more chances you have to get the right one for you. The best way to get a business loan is sometimes a matter of pursuing the right type of loan.

Long-term loans are larger sums you must pay back over very long periods of time with lower interest rates than short-term and term loans.

Have you measured the pros and cons of each loan type? Chat to an expert from Aussem to make better financial decisions.

Here are some additional factors to take into account:

• Business lines of credit are loans you won’t have to repay unless you use the money.
• Equipment financing is a loan aimed at purchasing new or used equipment.
• Alternative financing solutions include sources of funding that don’t come from the bank.
• Crowdfunding, cash advances and peer-to-peer loans are among the best examples of such financing solutions.
• Car loans can be quick and come with varying repayment options.

#5 – Build relationships

Getting a startup business loan as a new business can be extremely difficult. You are a risk to lenders, as you can’t prove that your business will be profitable.

Building relationships with lenders long before considering a loan may increase your chances to obtain this loan. Take advantage of everything banks may be willing to offer you, including credit cards and business bank accounts. The more you work with the bank, the more their employees will trust you.

#6 – Don’t rush into accepting the first offer that comes your way

There are multiple types of business loans. Check out the offers of multiple lenders to find the right one for you. Compare the terms and conditions of all these options to choose the best one.

Keep track of lenders who have granted loans to businesses like yours. Always do your research in relationship to your own industry, size and profile of the business. Apply to three or four lenders that best suit you.

Ready to secure the small business loan you need? Speak to the experts from Aussem and get the fast, experienced help you need.

Author Bio: Fiona White

Are you looking to secure a mortgage on your dream home or investment property in 2023?

While mortgages are one of the most significant purchases you’ll make in your life, there are many ways to streamline the process and save money.

Still, mortgage mistakes are often made by borrowers despite many ways that they can be avoided. Whether you’re just getting started in the property market, or looking to add to an existing property portfolio, it pays to be educated.

So if you’re looking to secure a mortgage without any added headaches (or financial mistakes) here’s what you need to know.

Start By Figuring Out What Type of Borrower You Are

Before borrowing any money for the purchase of a property, questions should always be asked first.

You must determine which borrower type you are first.

This can be done by looking at the circumstances of your life. Taking into account whether you are buying a home for the first time, investing in a new home, or even refinancing will reveal a borrower type and will lead you to question what the goal you plan to accomplish is.

In 2019, the mortgage market is currently full of mortgage products. Your chosen broker should be able to find a product to suit your needs if you know your borrower type.

The following six mistakes are ones that are often made by borrowers.

1. Sticking With A Bank And Forgetting The Mortgage

You should never force yourself to only use products from one lender, and you shouldn’t forget to review your mortgage regularly. Robinson Accounting, an accounting team who have experience managing the finance of home buyers, says that loyalty to one bank is something that people think they have to practice. Often times, these banks may only have a limited selection of products.

They explain “brokers on the other hand, have a wide variety of products that can be useful for your particular situation. Finding out just how competitive your mortgage is in the current market is something that should be done regularly.”

Lenders will often have different costs for refinancing, but it can be possible to get a lower interest rate and get that money back as time passes.

2. Going With A Mortgage Just Because of The Interest Rate It Has

Interest rates for home loans are looking pretty attractive these days. The rates are lower now than they’ve ever been, but that doesn’t mean you should instantly jump on them. There is a downside associated with simply selecting a mortgage that looks better than the others.

The circumstances for which the loan needs to be applied and the loan’s features are the most important things to think about. For a better comparison of mortgage interest rates, comparison rates should be looked at because they include fees, discounts, and other rates.

3. Not Taking The Time to Prepare

When it comes to mortgages, those who have knowledge and their paperwork in order have all of the power.

Around 16,000 brokers are part of the mortgage broking industry, and those who have a faster and easier time getting a mortgage are often the applicants that have well organised documents.

That paperwork with all of your financial details should be ready when applying for a mortgage.

The value of preparation is emphasised by entrepreneur Pearl, who runs cake making business Pearl’s Creations. She explains, “my home is also my place of work. For this reason I had to make sure the process of finding the right property and applying for a mortgage did not receive setbacks – otherwise I risked setting back my business. By asking your broker upfront how much paperwork you’ll need, you can avoid any last minute missteps.”

4. Ignoring The Structure of A Mortgage

There are some mortgages that are simply bare bones with no additions. Others come with additional content, such as credit cards, redraw facilities, and even offset accounts.

You have to choose a product that fits your needs. The broker or bank who is guiding you can help you choose between interest only and interest and principal structures.

Choosing the wrong structure is a common mistake that can affect tax deductibility in more ways than one.

5. Going With A Fixed Term Without Knowing If It’s Needed

If you have to break a fixed-term interest rate mortgage for any reason, you may be faced with costs in the thousands. Only get a fixed-term mortgage when it necessary.

For those who need to stick within a certain budget, fixing the interest rate of a mortgage will be a preferred option. For some, it is a good choice, but for others, it’s not a wise decision, because a period of five years is a long time to be stuck on a fixed term.

6. Going in Without Getting A Pre-approval Done

When borrowing money for a property purchase, it shouldn’t be assumed that a pre-approval has already been given unless the lender specifically writes it.

Although borrowing calculators and other tools can be used to create borrowing figures, banks will want to know more before they lend out their money.

Chiropractor Keith Maitland recommends factoring in your income to ensure your pre-approval process is a success. He says “your income will impact both your pre-approval chances and your ability to successfully pay your repayments, so it should be central to your mortgage process. If you have a promotion in the future it may even be worth your while to wait until your income changes if it helps your application process.”

Did we miss any valuable mortgage mistakes to avoid in 2023?

Write in the comments below about any mortgage mistakes you’ve made in the past and how to avoid them.

Author Bio

Fiona White is an Australian freelance writer and Sydney-based university student. As an accounting student, she has a passion for learning about global changes in business culture and specialises in entrepreneurship and innovation-related topics. When Fiona isn’t at her desk, you’ll find him exploring National Parks.

Home loan health check

You may be losing thousands of dollars which can be used for a family holiday. I know you are surprised, as simple as an annual home loan review from a mortgage broker could help you save this money and it is completely free.

The reasons for losing thousands of dollars can vary and depends on the individual circumstances. A home loan health check can help you find these reasons as well as having various other benefits;

1. Find out whether you are paying too much on interest rate and how much you could save by switching to another Bank.
2. Maybe you have other debts like personal loan and balance transferred credit cards and you are struggling with home loan repayments. Your mortgage broker may be able to help you with debt consolidation into your home loan.
3. You may not be taking advantage of your home loan features, particularly if your own circumstance will or has as of late changed, for example, beginning a family, renovating your home or purchasing an investment property.
4. If you are planning to for example buy an investment property, a family holiday, purchasing new furniture, a Mortgage broker can help you to find out the property value and let you know whether you are in a position to access your equity or not.
5. Regardless of whether you began in a variable rate or a fixed rate, a home loan review can enable you to make an informed decision.
6. If you are paying higher interest rate because of low doc, bad credit or specialist home loan, a home loan health check can find out whether you are in a position to refinance with other lenders who provide a better interest rate.

Not an Aussem Mortgage Solutions Client? Don’t worry

We are still able to give you a free home loan health check. Contact us today on 0432 297 651 or PM me.

How to calculate your borrowing power

One of the most important factors in your home ownership journey is the amount of money you can – or should borrow. You want to borrow enough that you can purchase the right property for your needs, yet you don’t want to end up out of your depth in debt.

Most lenders rely on their own variation of a basic formula to calculate your borrowing power. They look at six elements of your financial situation – gross income, tax, existing commitments, new commitments, living expenses and buffer – to calculate your monthly surplus. This formula gives a good overview of your level of financial security, and tells lenders how much you are able to pay back each month. If you assess yourself based on a similar formula, you can have a realistic idea of how much you can borrow and whether you need to save and prepare a little more first.

So how do all these elements combine to assess your borrowing power?

Gross income

The lender will look at all your sources of income to calculate your gross income. Sources include your base income, overtime, a two-year history of any bonuses, commission (if you have been receiving a regular ongoing amount for at least one or two years), any regular payments from a family trust and any rent derived from investment properties. If you have children under the age of 11, the lender will also include any Family Tax Benefits A & B.

Tax and Medicare

Your tax and Medicare expenses will be calculated to assess how these costs reduce the amount of your gross income.

Negative gearing benefits

If you already have investment properties and incur benefits through negative gearing, the lender tend to increase the amount of the potential loan.

Your new mortgage

When calculating how much your new loan repayments will cost, the lender will slightly increase the interest rate by about 1% to 3% to create a buffer against future interest rate rises. If you are purchasing an investment property, they will sometimes calculate an even higher interest rate, depending on the current market.

Your current financial commitments

Your ability to pay off your loan will be affected by your other financial commitments, such as ongoing debts and living expenses. Lenders will look at your existing mortgages, credit cards and personal loans to determine your financial status. Credit cards will be assessed as if you owe the maximum limit, not on how much you currently owe. And the lender will also calculate on a slightly higher interest rate. If you are living rent-free with a family member, the lender will calculate in a hypothetical rental payment to allow for a change in your circumstances.

You can present your lender with your own estimate of your living expenses; your lender will compare this amount to their own calculation of the minimum expenses for a family of your size. They will use the higher figure to make their estimation.

The buffer

The lender will add a hypothetical expense as a buffer against any unexpected expenses that could affect your ability to repay the loan. The purpose of the buffer is to ensure that you are borrowing slightly less than you can currently comfortably afford.

Surplus or shortfall? 

Once the lender has calculated each expense, they will deduct these expenses from your gross income. If the expenses are greater than your gross income, the result will be a shortfall. If you are living within your income, the result will be a surplus – extra money that can be used to pay off a loan. A surplus is a good first step to securing a loan, although the lender will also take into account factors such as your employment history, your credit score, and your savings before making a decision.

You can use this method yourself to calculate your own surplus so you have a good idea how you can manage loan repayments once you purchase a property. This is an excellent exercise in getting a strong grasp on your budget and working out ways you can make your money work for you more effectively.

For assistance in calculating your borrowing power, contact us today.

Which is the right home loan for you?

There are a bewildering variety of home loans available, and it can be confusing to figure out which type of home loan is the best for your circumstances. However, when you know the pros and cons of each type of loan, you can make a decision that will fit best with your financial situation.

Fixed rate home loan

A fixed home loan offers an interest rate that is fixed for a set period of time – usually 1, 3 or 5 or 10 years. The key benefit is the ability to budget, knowing exactly how much your repayments will cost each time. However, a fixed loan doesn’t have the same flexibility as other loans – you will encounter restrictions if you want to make additional repayments, such as fees or capping to a low amount. You might also be disappointed if interest rates drop dramatically and you are still paying the same fixed rate.

This is a good option if you want to make steady regular payments and you intend to stay in your current home throughout the term of the loan. It is not such a good option for someone who wants to move to another property in the foreseeable future, or who wants to cut down on the term of their loan.

Variable rate home loan

A variable home loan is far more versatile, with the option of making extra payments at no extra cost, enabling you to pay the loan off sooner. Your loan might also offer unlimited redraws, so you can access money in an emergency. Another positive feature is the offset account, a transaction account linked to your mortgage account which reduces your interest payable.

This is a good option if you want to invest the maximum into your mortgage, with the freedom to redraw in an emergency. However, as the interest rates will vary from payment to payment, it is not such a good option if you struggle to budget for unpredictable changes in the loan repayments.

Split loan

The split loan offers the advantages of both fixed and variable loans. You can split your loan into any proportion you wish – 50/50 or 80/20. One of the benefits of the split loan is that payments will gradually decrease, as the steady fixed rate payments lower the amount of the loan, so that the variable payment is proportionally lower at times when interest rates rise.

Interest only loan

With an interest-only loan, you pay only the interest on the loan for the initial term, usually from one to five years. Your monthly repayments are considerably lower, although this is because you are not reducing the principal of the loan. At the end of the interest-only term, your repayments will rise as you must start paying both interest and principal.

This can end up being an extremely expensive option if you are not sure what you are doing. However, investors tend to choose interest-free loans, as they can take advantage of low repayments over a set period before they resell the investment property.

Low Doc

The low doc loan has lower requirements for proof of income and credit rating, yet they also require a higher deposit and charge higher interest rates.  For someone with an unstable credit history or employment background, the low doc loan will be difficult to pay off. While this option can be popular with self-employed people, who don’t have the same level of documentation to prove their income, the excessively high-interest rate generally makes it a bad long term choice. If this is your only option for a loan, your best alternative might be to wait until you can be approved for a different type of loan.

If you need help figuring out the best home loan option for your circumstances, contact us today.