With increasing numbers of retail cannabis outlets comes additional pressure on operators to attract and retain valued employees.
A proven method for becoming an employer of choice in any industry is to offer an appealing benefits package to employees—especially to those you have trained and who are part of the value proposition in your company. Maintaining a good reputation as an employer and supporting your hard-working employees is not only the right thing to do, but it also makes excellent business sense.
Yet, tax code Section 280E makes this proven HR axiom more complex and challenging for the cannabis industry. Non-cannabis business entities can claim employee salaries and employee benefits—such as health, dental and vision insurance, or perks such as free coffee, snacks or gym memberships—as costs of doing business. A strict interpretation of 280E dictates that most cannabis retailers cannot do the same.
If you are a very small (less than four employees) retail business, then good employee benefit packages may not be affordable. Small retailers need to find other ways to make a job attractive and to retain experienced employees.
For larger cannabis retailers, the question becomes: Can you afford not to offer benefits or perks that will help retain employees and make your business more attractive to the best candidates?
Colorado’s Native Roots, with 20 dispensary locations and roughly 635 employees between its dispensaries and cultivation facilities, is among the largest dispensary businesses in the U.S. Its communications manager, Kim Casey, says maintaining loyal and trained staff is paramount, and is an important part of the company’s overall business approach. “The industry is rife with turnover, especially in the budtender and trimmer’s occupation. We want our employees to build their career at Native Roots, so we offer a good benefits package as well as a ‘living wage’—not just minimum wage—to keep our employees,” she says. “We offer full benefits, including health, vision and dental, which the company subsidizes.”
But because of 280E, means of incentivizing employees, such as bonuses, subsidized perks and flexible benefits packages (including executive stock options) are not linked to Native Roots’ cost of goods sold (COGS) for its retail operations, thus all these costs must be paid from after-tax profits.
Most retail operations are much smaller than Native Roots, with less than 50 employees, so they are not subject to as many federal and state regulations when it comes to certain HR practices, including employee benefits. However, subsidized benefits to employees will still come from the same source—profits.
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Because employee-benefit costs directly impact your bottom line, the decision to offer them should be made with as much information as possible. The first step is to determine which insurers, if any, offer plans for your business in your locale. An insurance broker can offer advice as to the availability and costs of group and individual plans that may be offered in your area. Some industry associations may offer members access to insurance plans in a range of price ranges as well. For example, the National Cannabis Industry Association’s (NCIA) NCIAHealthAccess.com offers NCIA members and their employees access to various health, dental and other insurance options.
If you have decided to offer medical, dental and/or vision plans to your employees, the next step is to determine whether you will enable employees to purchase insurance plans or if you will subsidize the cost of the plan(s) in part or in full.
It is important to note that when it comes to medical coverage, large insurance companies may not want to provide plans because of their stances on the cannabis industry in general, not to mention the fact that it is federally illegal. Even if insurance companies say they don’t discriminate based on business type, they may impose requirements or costs that make it prohibitive to purchase group plans.
Who’s Covered?
Another consideration is whether or not to offer benefits to all employees or only a select few—perhaps those who have the most tenure or those who have reached a certain level of seniority. The size of your business likely will be a deciding factor.
For example, under the Affordable Care Act (ACA), businesses that employ 50 or more employees must pay a tax penalty if they do not offer health insurance at least as comprehensive and affordable as the ACA. Again, using the services of an insurance broker who is knowledgeable about your type of business may be helpful. Another option is to get help from a cannabis industry-focused HR management company, which can provide, for a fee, ACA management to help larger retailers remain in compliance with ever-changing health care requirements.
Before making final healthcaredecisions , consider surveying your employees to determine if they need and desire this type of benefit. You may find that employees do not value having health insurance offered by their employer—and would rather have, for example, telecommuting or paid time off instead. You might find that employees feel they do not have a need for insurance or they may be covered by outside health insurance plans, while other employees might value this benefit highly.
If your business plan calls for growth, then you will want to retain employees who want to grow with your company and can see the possibilities of a career and upward mobility. To these employees, full health benefits that the company subsidizes may demonstrate the level of investment the company is willing to make in its team.
Ultimately, the decision to offer employee benefits will be based on your current and future business plan, the competition for talent in your market(s) and the workplace environment you want to nurture. As a business owner, you must determine what is best for your business and your employees. CD
