A guide for offering small business employee benefits

Attracting and retaining a talented workforce is about more than just compensation. A solid employee benefits package is something that employees desire and, in many cases, need. 

As a small business owner, you might think it isn’t feasible to offer robust benefits and perks due to the costs involved. However, you have some affordable options that will not only help your employees, but also improve morale and aid in recruitment. This guide will show you how you can offer small business benefits to your team.

What are small business employee benefits? 

One area where small businesses can compete with (and edge out) larger companies is how much they care about their employees. One way to show that is by offering top-notch employee benefits.

Some benefits—like workers’ compensation and unemployment insurance—are mandatory. Providing them keeps your business compliant with federal and state laws. By offering additional benefits and perks like dental care, retirement plans, and life insurance, you can increase employee engagement and boost their overall happiness at work. In fact, a study conducted by the Society for Human Resource Management (SHRM) showed that 61% of employees claimed benefits boosted their job satisfaction.

Types of small business employee benefits

In addition to mandatory benefits (more on those below), you can offer many types of optional employee benefits, which can be instrumental in attracting new hires and keeping employee satisfaction high.

Many small businesses start with the basics, like group health insurance coverage, dental insurance, and vision insurance. But for a truly appealing benefits package, a breadth of optional perks—like flexible spending accounts or tuition reimbursement—can help your employees feel appreciated and give your business a competitive edge.

Common fringe benefits

Fringe benefits are additional benefits employers offer to supplement their employee’s salary or wages. Many of these benefits are add-ons to existing mandatory health coverage and help keep your workforce healthy and productive. Some of the most common are: 

• Health insurance
• Dental insurance
• Vision care
• Prescription drug coverage
• Life insurance
• Childcare options 

Financial benefits

Financial benefits can help your employees lower their healthcare insurance costs, recharge their batteries, and plan for the future. These benefits include: 

• Retirement plans
• Paid time off
• Health Savings Accounts (HSA)
• Health Reimbursement Arrangement (HRA)
• Stock options
• Personal finance coaching
• Student loan repayment programs 
• Commuter benefits (public transportation discounts, paid parking)

Professional development benefits

Investing in employee development can lead to a more skilled and motivated workforce, directly benefiting your company's overall performance and success. Professional development benefits include: 

• Training programs
• Workshops
• Online courses
• Tuition reimbursement
• Mentorship programs
• Sponsoring conference and seminar attendance
• Cross-training programs (learning skills in different departments) 
• Covering the costs of professional association memberships 

Work-life balance benefits 

Work-life balance benefits can significantly reduce healthcare costs, boost morale, and create a positive work environment. Some examples:

• Wellness programs (discounted gym memberships, mental health days, therapy services) 
• Remote and flexible work options
• Employee Assistance Programs (EAP) 
• Pet-friendly workspaces
• Workplace fitness classes 
• Snacks and catered lunches
• Recreational areas
• Team-building activities

Mandatory small business employee benefits

In the US, small businesses are required by law to provide employees with certain benefits; failing to do so can result in legal and financial consequences—even business closure. While some legally mandated employee benefits vary from state to state, some are mandated at the federal level, like the benefits listed below:

Unemployment insurance

Unemployment insurance is a government program that provides financial support to eligible workers while they seek new employment opportunities. To be eligible for unemployment insurance, recipients need to have lost their job through no fault of their own (for example, through layoffs). The payment amount they receive is based on their previous earnings, and the duration of payments varies by state.

Family and Medical Leave Act (FMLA)

FMLA allows eligible employees of covered employers, including private and public-sector businesses with 50 or more employees, to take up to 12 weeks of unpaid, job-protected leave for reasons like illness or caregiving. State and local laws may also apply.

Health insurance plans

The Affordable Care Act (ACA) mandates that all employers with 50 or more employees provide health benefits for their full-time employees. The coverage they provide needs to meet certain standards for affordability and quality.

Workers’ compensation insurance

Workers' compensation is a state-mandated benefit designed to assist injured workers with medical expenses, lost wages, and death benefits. Eligibility hinges on the injury or illness being job-related or occurring in the workplace.

Note: The above list isn't exhaustive; you also need to consider state-mandated benefits. For example, small businesses in California, Hawaii, New Jersey, New York, Puerto Rico, or Rhode Island must offer employees long-term disability or short-term disability insurance.

While there is no federal paid time off (PTO) law, several states (Maine, Nevada, Illinois, and a few local jurisdictions) have laws that give employees PTO, which can be used for any reason. More than a dozen states and the ​​District of Columbia have paid family leave (PFL) laws on the books, although not all of them are fully implemented.

With Rippling PEO, managing your critical compliance responsibilities is easy. For example, if an employee sustains an injury on the job, the Rippling PEO workers’ comp policy helps protect employers from potential litigation and covers employees' lost wages and medical benefits, ensuring a smooth and worry-free process.

Optional small business employee benefits

Offering statutory employee benefits is only the baseline for almost every small business. So if you’re trying to stand out, it helps to create an enticing employee benefits plan with voluntary benefits, like PTO, retirement plans, and more.

Generous paid time off (PTO)

PTO can include paid vacation, personal days, and sick days. This allows employees to take time off work to rest, recuperate, go to appointments, or care for their family without giving up any pay. In the US, paid time off (PTO) isn't legally required, although some states mandate paid sick leave.

Many small businesses now offer PTO, granting employees flexibility (subject to manager approval) to take time off as needed. This fosters a healthier work-life balance and can help reduce the risk of burnout for your employees. When deciding on how much PTO to offer, consider your organization's needs and your employees' well-being.

Employee Assistance Programs (EAPs)

EAPs support employees in handling personal challenges that impact work performance, offering everything from mental health counseling to practical services like insurance discounts. With the support of dedicated representatives, EAPs connect employees with necessary resources for both work and personal matters—like addiction counseling, family services, financial services, and more. 

When included as part of a larger benefits package, EAPs are relatively affordable. These programs are also adaptable to your business size, preferred services, and usage frequency (which ultimately determine the cost).

Retirement plans

While you must contribute to social security as an employer, offering pension plans and other retirement benefits isn't mandatory. However, retirement benefits are crucial for long-term financial stability and show employees you care about their financial well-being.

A 401(k) plan is an excellent choice. It's a retirement savings plan with tax advantages, where employees agree to a portion of each paycheck going into an investment account. Employees can choose to participate in a traditional or Roth 401(k), the former using pre-tax dollars and the latter using post-tax. Employers can decide whether and how much they'll match employee contributions, which can make this benefit even more attractive and valuable for prospective employees.

For a streamlined approach to employee benefits like 401(k) plans, Rippling makes retirement plans more accessible and easier to manage.

Life insurance

Offering life insurance gives your employees peace of mind and affirms your commitment to their well-being and their families' financial security. In the unfortunate case of an employee’s passing, life insurance guarantees benefits for their chosen beneficiaries, which can include cash, wage replacement, and other benefits.

With different types of life insurance available, you can choose the best option for your small business and employees. For example, term life insurance provides coverage for a predetermined time, while universal and whole life insurance offer lifelong coverage and potential investment benefits. 

Flexible savings account (FSA)

An FSA allows employees to use tax-free dollars to cover various out-of-pocket medical expenses, such as copayments, deductibles, prescription drugs, insulin, and medical devices. 

Here's why offering FSAs can be a win-win for both your employees and your small business:

• FSAs work with any insurance plan, allowing you to provide this benefit without being tied to a specific insurance provider.
• Offering FSAs doesn't require a separate insurance plan, making it accessible for resource-constrained small businesses.
• FSAs cover insurance deductibles and can help employees pay for surprise healthcare costs when needed.
• Employees enjoy tax savings as FSA contributions are deducted from their gross income, lowering their income taxes and increasing their take-home pay.
• FSAs follow the "use it or lose it" rule, encouraging efficient healthcare expense management. Unused funds return to your company, offsetting administrative costs.

Flexible or remote work options

Flexible or remote work arrangements are another valuable perk, especially in the digital age. A flexible schedule can allow employees to address their personal responsibilities, such as attending parent-teacher meetings or medical appointments, without fearing work-related consequences. This, in turn, can make them more motivated and productive. It also creates a more harmonious work environment where they can better focus on their tasks.

Flexible work schedules and remote work require balance—you’ll need to craft a schedule that aligns with your business needs while accommodating your employees. This could mean adopting a hybrid schedule, allowing extended lunch breaks, or instituting flexible shifts. And, if you need help simplifying HR tasks for your remote or flexible workforce, Rippling can help you efficiently hire, pay, and manage your whole team, no matter where they live or work. 

Health and wellness resources

As an employer, investing in health coverage should be strategic. Consider this: 73% of job seekers prioritize health and wellness benefits when choosing a job. And for employers, implementing wellness programs can lead to a remarkable 72% reduction in healthcare costs. 

What makes wellness resources especially attractive is their adaptability to various budgets. Whether it's providing discounted gym memberships, therapy services, or mental health days, these incentives can be tailored to your specific financial parameters. By offering benefits to support your workforce’s health and wellness, you invest not only in your employees' overall well-being, but also in your business’s prosperity.

Health savings accounts (HSA)

Employees with high-deductible health plans (HDHP) can set up health savings accounts as a hedge against future medical expenses. HSAs are offered by banks, credit unions, and other financial institutions. Contributions and growth are not taxed, and the employee owns the account. HSAs allow individuals to save money for qualified medical expenses through automatic payroll deductions. 

Funds in an HSA carry over from year to year. They can be invested for future growth and they stay with the employee even if they switch jobs. After the holder of the HSA turns 65, they can use the funds in the account without penalty. 

HSAs are invaluable tools for managing future healthcare costs and unexpected medical expenses.

Health Reimbursement Arrangements (HRA)

Health Reimbursement Arrangements, or Health Reimbursement Accounts, are group health plans funded by employers. These plans allow employees to receive tax-free reimbursements for qualified medical expenses, up to a specified annual limit. Any unused funds can be carried forward. The employer both funds and maintains ownership of the arrangement.

Dental and vision benefits

Dental and vision benefits are part of most comprehensive health insurance plans and benefits packages. Dental benefits cover basic care and preventative procedures, while vision benefits cover eye exams, glasses, contact lenses, and other vision-related care

How to offer a competitive small business employee benefits package

With so many benefits choices, putting together an attractive benefits package can seem daunting. That’s why you need to take a strategic approach and balance employee wants and needs with your small business’s financial limitations.

Keep the following steps in mind as you curate a competitive benefits package for your employees.

1. Determine your budget

Your budget is your compass in the world of employee benefits offerings. First and foremost, you’ll want to factor in the cost of mandatory benefits into your budget—along with some PTO. Then, you can consider the addition of any voluntary or fringe benefits, provided you have the capital for them. In the beginning, it’s better to offer less and gradually add more benefits as your budget increases—remember, it’s easier to add than to take away. 

2. Create a balance between salary and optional benefits

A hefty salary isn't the only way to attract talent. Many employees are equally—if not more—enticed by a well-crafted benefits package. Offering PTO, flexible hours, and wellness resources, for instance, can sometimes offset the desire for higher base pay, especially among employees with families.

If you aren’t sure how to strike the right balance between pay and benefits, you can always ask. Solicit feedback from your employees and job candidates to help you fine-tune your benefits program over time.

3. Consider opting for a PEO

As a small business owner, you have a lot on your plate—hiring and managing employees, running day-to-day operations, thinking strategically about future growth and how to scale, and much more. The administrative demands of your business’s HR functions can really add up. That’s why a Professional Employer Organization (PEO) can be a great choice for a small business.

A PEO is a strategic partner that co-employs your workforce and specializes in administrative HR tasks. The PEO can take on tasks like securely running payroll, enrolling employees in benefits, managing compliance with labor and employment laws, and other employee-related administrative duties. Meanwhile, that frees up your time and resources to work on strategic and higher-value work, like growing your revenue.

What’s even better, though, is that PEOs can help small businesses offer way better benefits at lower costs. Since a PEO “co-employs” the workforces of up to thousands of businesses, it has the purchasing and negotiation power to access big-company benefits at affordable prices–so your small business can offer the kinds of benefits that attract and retain top talent.

4. Choose the right employee benefits program

After determining your budget and deciding which benefits you want to offer, it’s time to do your research. 

First, your benefits program must include the mandatory benefits required under federal, state, and local regulations. This includes benefits like health insurance (if applicable), unemployment insurance, FMLA leave, and workers’ comp. Add your preferred optional small business benefits (PTO, retirement plans, life insurance, etc.) from step two and canvass providers and carriers for quotes and options. 

Lastly, compile the quotes and compare what benefits the packages include and how much they cost. Do they offer what you want? Does the cost match your budget? If it sounds like a time-consuming process, it is. 

5. Look for outsourcing options to save resources

As mentioned above, a PEO (like Rippling) can make the process of finding and offering a competitive small business employee benefits package much easier. Another way to ease the burden is to outsource the process to a benefits consultant, payroll service provider, benefits administration platform, or an insurance broker. By using an external resource, you’ll save time and money and be certain that you’re not making any costly mistakes. 

Benefits of Hiring PEO Services

As a small business owner, you know that managing employees, operations, and your company’s growth is a daily challenge. A PEO like Rippling makes it easy for startups and small businesses to provide premium HR services and access benefits that are affordable and locally compliant—all while allowing you to focus on strategic initiatives that help grow your company. 

With Rippling PEO, you can effortlessly manage all your employee benefits in one convenient and modern platform, streamlining your HR and payroll processing, simplifying compliance, and saving you time and money. Ready to explore the benefits of the best PEO for your small business?

This blog is based on information available to Rippling as of July 1st, 2024.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.