Small Business Benefits: Your Guide to Getting Started

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Katie Fleming

Co-founder and COO of Owner Actions

A team of people celebrate when hearing about their small business benefits

One of the best ways for your small business to attract and retain an employee is by offering them benefits. In this article, you’ll learn about the small business employee benefits you might offer and how to choose the right options.


What are small business employee benefits?

Employee benefits are a form of compensation you provide to your employees apart from their wages or salaries. Some benefits, such as Social Security and Medicare payments and time off for voting and jury duty, are mandated by law. Others, such as life insurance or retirement savings plans, are voluntary.


Why do businesses offer benefits?

Put simply, benefits benefit businesses and those who work for them:

1.Benefits provide employers with a means to care for their people without offering more monetary compensation. This move can save the employer money, and it can help both the employer and the employee realize tax savings.
2.With 63 percent of job seekers looking for jobs with benefits, they’re an important tool for attracting talent.
3.According to this study, benefits also improve overall job satisfaction, morale, and loyalty to the business that provides them.
4.This study reports that nearly one-third of employees seek out other opportunities because their current roles don’t provide benefits.

Which small business employee benefits should I consider?

Before enrolling in benefits plans, take time to learn what you’re legally required to provide. Depending on the size of your business, mandated benefits may include:

Social security contributions

Required of all employers

Medicare contributions

Required of all employers

Unemployment insurance

Required of all employers

Workers compensation insurance

Required of all employers

Disability insurance

Required of employers in certain states and territories

Family Medical Leave Act (FMLA) benefits

Required of employers with 50 or more full-time equivalent employees

Health insurance

Required of employers with 50 or more full-time equivalent employees


Employers who fail to offer these benefits can face significant penalties, civil charges, and/or criminal charges. And without these programs in place, employees may not qualify for social security, Medicare, or unemployment benefits. Be sure to speak with an employment attorney to understand your benefit obligations.

Would you like to connect with an employment attorney? Start here:

.Other benefits are voluntary, so you can determine which—if any—you’d like to offer based on what you can afford and what your employees would value.

Take a look at these popular small business employee benefits:



The Affordable Care Act states that employers with 50 or more full-time equivalent employees must provide health insurance for at least 95 percent of their personnel. However, lots of smaller business owners choose to offer dental, medical, and/or vision plans to their employees to support their recruitment and retention strategies. You can learn more about private group or individual insurance policies for your employees here:


If you’d like to attain quotes, visit an online insurance platform such as eHealth which offers healthcare, vision, dental, and other benefit programs.


If insurance costs are too high but you still want to contribute in a meaningful way, consider this option. Offer your employees a small healthcare allowance to help them cover the costs of attaining private or government-sponsored insurance. You could offer a stipend, which is treated as a taxable raise for your employees, or a monthly tax-free reimbursement to cover some of the costs.


Speak with an accountant to learn more about each option before proceeding.


Health insurance isn’t the only benefit you might consider. Your employees may appreciate the chance to enroll in life insurance and/or disability insurance (for employers in states that don’t mandate this offering) that would provide them or their beneficiaries a payout to cover related expenses or long-term care.


Retirement savings plans

For a small business, retirement savings plans are one of the most highly requested employee benefits. This is true among job seekers and job holders concerned about sustaining their future.

Many employers offer plans to help their employees save up for their retirement years, either by setting up 401(k) accounts or another form of savings. Some plans are arranged for employees to contribute on their own behalf. Some allow both the employee and the employer to make contributions. Others are strictly for employer contributions.

You can learn about the options and the considerations you should keep in mind in this article:


Paid time off

One easy-to-arrange benefit is paid time off (PTO). PTO can take many forms, including vacation days, sick days, personal days, and days for job-related training. You might also offer PTO for maternity or paternity leave, bereavement, volunteering or community service projects, or other events that reflect your business’s values.

Before signing off on any PTO policies, be sure to weigh a few important considerations:

  • What am I legally required to provide?
  • Can I find coverage for employees who take time off?
  • How many days can I afford to operate without an employee on the job?
  • What kinds of PTO packages do my competitors offer?
  • What kinds of PTO packages do other firms offer employees with the same levels of experience?
  • Am I comfortable offering new employees PTO upon hire, or would I rather they accrue those days after a probationary period (e.g., six to twelve months after hire)?



Additional compensation

Cash incentive programs, which may include bonuses, commissions, awards, and gifts, can help you show your employees your appreciation. You can set up a formal program that offers monthly, quarterly, or annual incentives, or you could offer incentives at your discretion (such as upon the receipt of an important contract or the completion of a major business milestone).

Work with your accountant to find the best ways to allocate incentive money to your employees.

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.Another form of compensation you might offer is a stock-option or profit-sharing plan. Both options incentivize your team to help the business perform at its best and reward them directly for their efforts. The plan you choose will depend on how your business is structured. Profit-sharing plans can be implemented by any small business, but stock-option plans are only available for C corporations (C corps). Be sure to speak with an attorney to learn how you might set up one of these options.

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Health insurance, life insurance, retirement plan savings, paid time off, and additional compensation are only a few of the options you might offer your team. Other popular options include:

  •  Education allowances or tuition reimbursements
  • Adoption assistance
  • Childcare assistance
  • Flexible work arrangements (such as working from home or working a modified schedule)
  • The use of company vehicles
  • Commuter allowances (which may include bus fares or mileage reimbursements)
  • Food provisions
  • Gym memberships
  • Cell phone plans
  • Employee discounts
  • Free parking spaces


These options are the most popular, but there are many others you might consider. Be creative and mindful of what matters most to your team.


Which small business employee benefits should I choose?

Start by taking two steps:

  1. Decide how much money you can set aside for a benefits program.
  2. Ask your employees which options they’d value the most.


From there, you can explore your options. For instance, you could choose a higher-end option and pair it with nice-to-haves that will cost little to nothing to start up. Flexible work arrangements and discount programs might fall into this category. Or, you could choose to start simply and build up your program over time.

The course you choose should work within what you can afford and what your team members value.

With a set of options in mind, find a small business benefits broker who can help you set up the right plans for your business.


What is a small business benefits broker?

A business benefits broker helps owners source and select benefits for their employees.

Brokers vary in quality, fees, and specialization. Take time and find one who will be a good fit for your business. Here are some questions you could ask of brokers you’re considering:

  •  What size of business do you most often work with?
  • Do you specialize in one area or can you help me set up multiple kinds of benefits?
  • How do you help a business like mine select the right set of benefits?
  • How can you help me control the costs of my benefits plan?
  • What is your fee schedule?
  • Can you provide references of businesses you’ve helped through the benefits selection process?
  • How do you ensure that the businesses you work with stay compliant with new federal and state laws?
  • What will the enrollment process look like for my employees?
  • How much support do you offer after benefits have been selected?
  • Do you offer any tools to help me manage my benefits plans or other HR processes?
  • Are you licensed to provide this service?
  • Do you have liability coverage?


If you’d like some help finding a small business benefits broker, you might look into one of these options:


.Some brokers don’t offer a software package to help you manage your benefits program. If you find that this is the case, look into buying your own. Simple solutions like Zenefits (starting at around $8/month) can help you set up a single portal to administer your plan and create reports that’ll help you stay on top of the costs and usage.


Final tip

Be sure to include the perks and benefits you choose to offer in your employee handbook. Want to learn more about creating an employee handbook? Check out this guide:


What’s next?

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