Mutual Benefit Definition: Everything You Need to Know
Mutual benefit definition is a contract or agreement in which both parties gain some type of advantage or value.3 min read
2. Creating a Benefits Package
3. Common Employer Mistakes
4. Leveraging Partnerships for Mutual Benefit
Mutual benefit definition is a contract or agreement in which both parties gain some type of advantage or value. Mutual benefit allows companies to advance their operations by obtaining resources, services, or goods from another individual or company to further their own mission in exchange for payment or another benefit. In many cases, mutual benefits are governed by a written contract, such as an employment contract.
Types of Mutual Benefit
Some common scenarios that create mutual benefit include the following:
- A company is selling resources another company needs to produce its goods or services
- An outsourcing relationship in which a company finds another individual or company to provide better service at a lower cost, allowing it to save money while the other entity turns a profit
- Human resources benefits for employees such as health insurance, disability insurance, and retirement plans, which help companies attract and retain the best employees
Creating a Benefits Package
Many small businesses struggle to compete with the benefits packages offered by larger companies. However, if you're a small business owner you can create mutual benefit by offering creative alternatives that are less expensive but still provide value. Examples include:
- Conveniences such as dry cleaning pickup and delivery or personal products like postage stamps and toiletries
- Children's activities such as classes and field trips
- Discount tickets to movie theaters, amusement parks, sporting events, and other attractions
- Discounts for products and services such as gym memberships, child care, or warehouse stores
- Discounted group insurance policies
- Informative lunch and learn education sessions
Before developing a benefits package of this kind, survey your employees to learn more about what types of benefits they would value. You can also ask for their suggestions. This information can be gathered by volunteers within the organization.
Common Employer Mistakes
When it comes to developing a mutual benefit package that will appeal to employees, companies can expect to spend up to 40 percent over the worker's salary and thus should take steps to ensure that this spending provides value. Business owners should avoid these common benefit mistakes:
- Covering the whole cost of benefits with no required employee contribution. Approximately 70 percent of companies reported requiring some health insurance contribution from employees in a survey conducted by the William M. Mercer human resources consulting firm. Not only does this reduce the overall cost of the benefits package, it discourages those who do not need the package from enrolling.
- Covering family members who are not employees in order to enroll them in group rate coverage. If this is detected by the insurer, their claims could be disallowed and the entire policy canceled.
- Errors in benefits paperwork, such as failure to sign up new employees during the open enrollment period. This is common when small businesses delegate HR duties to an employee in another role.
- Not sharing the full cost of benefits with employees. They will appreciate the benefit package more if they see a rundown of the total cost.
- Providing benefits that do not add value for employees. The least desired benefits tend to be on-site daycare and short-term disability, while medical insurance and retirement plans provide the greatest value.
Leveraging Partnerships for Mutual Benefit
Partnering with another company is a great way to develop your business by creating mutual benefit. Creating strategic partnerships can create monumental growth when done thoughtfully. Start by considering the relationships you already have and how they could provide a mutually beneficial arrangement. For example, a wedding planner may choose to develop a relationship with a popular local caterer in which you agree to provide one another with client referrals and other types of support. You could also offer their services to your clients directly by including them in packages in exchange for a 25 percent kickback payment.
Another way to leverage relationships to build your business is through guest blogging. Offer your expertise in the form of content to influencers in complementary industries, making sure to detail the value it will provide their readers.
Before diving into a partnership of this kind head-first, start with a low-risk arrangement to test the waters and identify potential issues and compatibilities.
If you need help with creating a mutual benefit agreement, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.