Small Business Employee Benefits (An Employer's Guide)




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December 17, 2018

This article is Tax Professional approved


If you’re a small business still on the fence about offering benefits, allow us to give you a push.

You probably can’t match the salaries and catered lunches of big companies. But if you don’t offer any benefits at all, you’re missing out on some talented people. So what’s a small business owner to do?

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This article is written by our friends at Gusto, the all-in-one HR, payroll, and benefits platform.

A smart approach, we think, is to first understand which benefits are correlated with employee satisfaction, and then do your best to offer those benefits.

The big three

Not all benefits are created equal. You can’t expect to put a ping pong table in your office, stock the fridge with beer and think that employees would never dream of leaving you.

A 2016 Glassdoor survey found that the trifecta of health insurance, vacation/paid time off, and retirement were the three benefits that best predicted employee satisfaction with benefits.

If you already offer all three benefits, you can skip the end of the article for more ideas on beefing up your benefits package.

But for those just starting out, we’ll start by focusing on the big three.

Health insurance (including dental and vision)

This is the big one. Health insurance means more to workers than any other fringe benefit.

Glassdoor’s survey found that health insurance was the best benefit as a predictor of employee satisfaction with benefits. And the results weren’t even close.

But, for small businesses, providing solid health insurance plans is easier said than done. It can be extremely costly and hard to keep an adequate number of employees enrolled in any plan. However, not offering it can have drawbacks too—many workers will leave their jobs for opportunities that offer better benefits (especially better health insurance).

How to offer it

Finding a health insurance plan takes work. We recommend working with a broker who can explain your range of options based on your business’s circumstances. You’ll want to shop around, and be prepared with key information about your business and your employees.

Vacation or paid time off

For decades, there was a career myth that the hardest working people get ahead by staying late at the office and never taking a vacation day. More recently, people have started coming to their senses around the importance of taking time away from work to recharge.

No one can produce at a high-level forever, and taking time away from work has cognitive benefits and boosts productivity. More productive workers tend to be happier, and more likely to stay in their jobs. The Glassdoor study cited above found that vacation and paid-time off was the second most important behind health insurance for employee satisfaction, and that 60% of the survey respondents they wouldn’t take a job that didn’t offer time off.

How to offer it

Offering PTO requires more work than you might think. You’ll want clear policies around the slew of reasons people take time away from work. Those policies spell out how to take time away from work, what happens if they don’t use all of their PTO, and whether or not your state (hello, California) has specific requirements for certain types of leave, everything from holidays to jury duty to military service.


Offering your employees a retirement plan goes a long way toward building loyalty and trust. It lets them know you’re thinking of their future.

The 401(k) is the most popular retirement plan for businesses of all kinds. They aren’t the perfect retirement vehicle for individuals, but providing one has become simpler and more affordable than ever.

Here are a few things you can do to make your 401(k) plan even more attractive:

  • Immediate eligibility— Give your employees the chance to join right away. You’re likely to increase awareness for, and participation in your plan.
  • Matching contributions— Don’t think you have to match dollar-for-dollar. Even 25¢ for $1 invested will make a difference in your employees’ long-term savings.
  • Immediate vesting— Some plans require years of service before the employer matching portion belongs to the employee. Consider offering immediate vesting of the employer matching contributions.
  • Cover the fees— Administration fees can eat up a big chunk of savings. Do your employees a favor and cover these to help boost their accounts.
  • Auto-enrollment— To encourage participation in 401(k) plans, many employers have made them “opt-out” plans, which means employees are automatically enrolled to contribute a fixed amount (e.g., 3%) unless they choose not to participate.

If you already have a plan, consider sprucing it up with some of these features. Your employees will thank you.

How to offer it

If you’re sold on providing a retirement, the first thing to do is to find a provider that can meet your business’s needs but not kill you with fees. Assuming you’re going with a 401(k) plan, you’ll need to choose what type of plan—Traditional, Safe Harbor, or SIMPLE—to offer, and you’ll want to be sure the provider can do the lion’s share of the administrative work and a portion of the fiduciary responsibility.

Additional benefits to consider

Once you’ve nailed the basics, you’re ready to move to the advanced levels of benefits. Here are a few ideas for you to think about.

Family or Parental leave

Family or parental leave has emerged as a popular new offering, especially by larger employers. It is highly sought after by younger workers who are starting families and those with aging parents. This balance will also allow for better worker productivity, healthier children, and happier employees overall.

Flextime and remote work arrangements

By allowing your people to work from anywhere and on their terms, you’re establishing a bond of trust with them. Agency in their work means they’re more likely to be loyal and engaged. These kinds of arrangements can also be a selling point when recruiting new employees.

Career development

A vital benefit that many of today’s workers are looking for is the opportunity to learn and develop new skills. Earmark funds for professional books, courses, and conferences. This benefit has the added bonus of directly helping your business too. When your employees level up, so does the company.

Commuter benefits

Commuting is a drag. By offering to subsidize either parking or the cost of a public transit pass, you’re helping ease a burden that most workers have to endure.

What else?

There are few limits to the creative and affordable benefits you can provide your employees. Onsite child care, volunteer time off, pet insurance, health & wellness perks, free lunch, discounts, and countless other ideas can all make your company unique and attractive to current and prospective employees.

But every company is different. Survey your employees regularly about your business’s benefits offering. This open dialogue will not only give you valuable information about your employees’ satisfaction with benefits and their desires for changes, but it will go a long way toward building trust.

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein.
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