Paying for Employees' Health Insurance With Rewards — Business Success Story
Quick summary
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Ken Jacobus, the CEO of New Hampshire-based Good Start Packaging, saw in credit card rewards an opportunity to give his small company a competitive advantage in hiring.
So instead of using the cash back to fund his own vacation travels or otherwise reward himself, Jacobus put the rewards he earned last year back into the company and paid for his employees' health insurance. All of it.
"We're paying the entire premium for our employees," Jacobus says. "That most likely would not have been able to happen if we had not had that additional subsidy from the card."
If they don't already, the company's nine employees soon will know how their health insurance is being paid for. Jacobus is featured in national Capital One advertisements rolling out this month explaining how he's used his company's rewards. Some of them had been struggling with Cobra payments before Jacobus unveiled his company's health insurance plan.
"I'm always trying to look for an edge," Jacobus says. "How can I provide something effectively for nothing? And this was kind of like free money that was on the table for the business."
A 'Mission-Based Company'
Jacobus founded Good Start, a supplier to restaurants and food trucks of sustainable and compostable takeout containers, nine and a half years ago in California. He later moved the company to its current home in Bedford, New Hampshire. Jacobus says he was looking to "do something that made a big impact on the environment and was a little more spiritually fulfilling to me."
The business has seen explosive growth in recent years of 60% or more, which has led to increased credit card spend, as well. "We have a lot of loyal clients around the country," he says.
Good Start is primarily an ecommerce-driven sales and marketing company delivering sustainable packaging manufactured by its suppliers. "We buy a lot of product, like millions of dollars of product, every year," he says.
Approximate Annual Spend
Good Start Packaging puts about $2.5 million in spend on its business credit card annually, Jacobus says. The company uses its credit card most often to make supplier purchases, but Good Start also has shipping costs of between $600,000 and $700,000 annually. The firm ships its products via the big package delivery services like FedEx.
Credit Card Used
The company opened a Capital One Spark Cash for Business card in 2015 and uses it exclusively for its business spend. Jacobus says he researched other cards, but settled on this small business credit card because it offered the best return for his business with no hassles.
"2% is just like the best out there," he says. "You don't have to think about which categories to spend it on."
The Spark Cash for Business currently offers an up to $2,000 welcome bonus; $500 cash bonus when you spend $5,000 in the first 3 months and earn $1,500 when you spend $50,000 in the first 6 months of your account opening. The card pays a flat 2% cash back on all purchases. It charges a $95 annual fee, waived the first year.
Cash Back Earned
In 2017, Jacobus says his company earned about $36,000 in cash-back rewards. This year, he expects the return to climb to $45,000.
Anyone with the card can redeem earned cash back in any amount, either in the form of a statement credit or a check. You can also set up automatic redemptions at a set time each calendar year or when you hit a specific dollar figure in earned cash back. You can also redeem for credits for previous purchases or for gift cards, although redemption values vary.
Jacobus redeems the rewards for statement credits "at least weekly. It goes right to our balance," he says. "It's a nice feeling to make $1,000 with a click when you have a little extra time on your hands."
Redemption
Because Good Start is spending more on its card this year, Jacobus says he's had to plan for where to put the extra money in his business' budget. Again, it's going to his employees.
"This year's spend, because it's exceeded the amount that we use on our health insurance this year, I now have $12,000 more this year in cash back that I can now use in our bonus program," Jacobus says. Along with paying for the full insurance premiums and increasing the bonus pool, he's also used the rewards to invest in computer software "that ultimately saves me money."
Being able to offer insurance has been a big deal to his employees, several of whom wanted to work for the company "because they believe in our mission."
Takeaways
Credit card rewards are a way for small companies to eke out an advantage over competitors, Jacobus says. "It's trying to do more with less. That is the game for a CEO."
He sees finding the best rewards as one more way to ensure his company's success. "You are successful because you are constantly looking for edges," he says. "This is the way to do it."