Small Business Benefits: Your Guide to Getting Started

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


What are 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 employees 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 benefits should I consider?

First, you must determine which benefits you are legally required to provide. Depending on the size of your business, these 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


It’s important to note that employers who opt out of offering these benefits can face significant penalties, civil charges, and/or criminal charges. And without these programs in place, employees may be unable to qualify for social security, Medicare, or unemployment benefits. Be sure to speak with an employment attorney to understand your benefit obligations.

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.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. Common small business benefit offerings include:



The Affordable Care Act states that employers with 50 or more full-time equivalent employees are required by law to provide health insurance for at least 95 percent of their personnel. However, many small business owners choose to offer dental, medical, and/or vision plans to their employees to support their recruitment and retention strategies. To learn more about private group or individual insurance policies for your employees and the breadth of options you might consider, read our article, Your Go-to Guide to Setting Up Healthcare Benefits.

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


Important note: It’s isn’t necessary to provide your employees with health insurance, especially if doing so would cause your business a financial hardship. Employees who can’t attain healthcare coverage through their employers are eligible for individual health insurance policies or government-sponsored insurance through

As an alternative to offering insurance, you may choose to offer your employees a small healthcare allowance to help them cover the costs of attaining a policy. You could offer a stipend, which is treated as a taxable raise for your employees, or a monthly tax-free reimbursement for coverage 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 value the opportunity 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.

To learn more and attain quotes, visit an insurance platform such as Policygenius, which offers life and disability plans for individuals.


Retirement savings plans

Retirement savings plans are one of the most highly requested small business benefits 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, and others are strictly for employer contributions.

You can learn about the options and the considerations you should keep in mind in our article, Retirement Plan Selection: How to Find the Right Option for Your Business.


Paid time off

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

Before establishing paid time off policies, you should weigh a few important considerations:

  •  Can you find coverage for employees who take time off?
  • How many days can you afford to operate without an employee on the job?
  • What kinds of paid time off packages do your competitors offer?
  • What kinds of paid time off packages do other firms offer employees with commensurate levels of experience?
  • Do you feel comfortable offering new employees paid time off upon hire, or would you prefer that they accrue those days after a probationary period of performance (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 may set up a formal program that offers monthly, quarterly, or annual incentives, or you may offer incentives at your discretion, such as upon the receipt of an important contract or the completion of a major business milestone.

Speak with your accountant to determine the best way to allocate incentive money to your employees.

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.Another method of compensation you might consider is a stock-option or profit-sharing plan. Both options incentivize your employees to help the business perform at its best and rewards 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). Speak with an attorney to learn how you might implement 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 consider offering your employees. Other popular options include:

  •  Educational 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


While these options are the most popular, there are many others you might consider. Be creative and mindful of what matters most to your employees.


Which should I choose?

Start by assessing how much money you can set aside to implement a benefits program. Then, ask your employees which options they’d value the most. You may choose to select a costly option and pair it with other nice-to-haves, such as flexible work arrangements and discount programs that will cost little to nothing to start up. Or you may choose to start simply and build up your program over time. The course you choose should align with what you can afford and what the majority of your employees would find the most valuable.

With a set of options in mind, consider working with a small business benefits broker who can help you find and purchase the right plans for your business.


What is a small business benefits broker?

A small business benefits broker is a firm that specializes in helping businesses source and select benefits for their employees.

Brokers vary in quality, fees, and specialization, so it’s important that you take time to find one who will be a good fit for you and your business. Some questions you may ask of brokers you consider include:

  •  What size of business do you most often work with?
  • Do you specialize in one benefit area, or can you help me set up multiple kinds of benefits for my employees?
  • What is your approach to helping businesses 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 like mine that you’ve helped through the benefit selection process?
  • How do you ensure that you are in compliance with emerging federal and state legislation and will help me stay in compliance as well?
  • 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 human resource 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 consider one of the following options:

  • Mercer provides a range of options to meet your business's budget and goals. Use this link to explore their services.
  • Trustmark can help you design a budget-smart plan to attract and retain your employees. Use this link to browse their offerings.


.If the broker you choose doesn’t offer a software package to help you manage your benefits program, you may want to purchase your own. Simple solutions like Zenefits (starting at around $8/month) can help you set up a single portal for administering your plan and generating reports that will help you stay on top of the costs and usage of the various benefits you offer.


Final tip

Be sure to include a description of the perks and benefits you choose to offer in your employee handbook. For more information about creating an employee handbook, read our guide, Why You Need an Employee Handbook for Your Small Business.


What’s next?

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