The Top 10 Employee Benefits Small Business Owners Can Offer

Why should a small business offer employee benefits?

Investing in employee benefits is a strategic decision that can significantly impact the success of your company, and a robust and competitive employee benefits package holds value for both the employer and employee.

Consider these advantages of offering employee benefits for a small business:

Advantages for Small Businesses

• Improves employee retention, minimizing turnover costs
• Helps attract top talent
• Reduces employee absenteeism
• Enhances employee morale and fosters a positive work environment
• Demonstrates to your employees you support them
• Helps maintain compliance with applicable labor laws
• Improves company reputation

Advantages for Employees

• Employees feel valued and appreciated
• Access to benefits helps improve their overall well-being and quality of life
• Employees gain access to benefits and resources for family members, depending on benefits offered
• Pre-tax deductions for some benefits can reduce an employee’s tax liability
• Employees who feel supported are generally happier at work

Offering employee benefits is also a way to stand out in the labor market. Job candidates and employees consistently rank salary and competitive benefits as their most important considerations when evaluating a job opportunity, yet not all small businesses offer benefits.

According to a 2023 survey by the NFIB Research Center, approximately 56% of small employers were offering health insurance to employees. Providing a robust employee benefits package can set you apart from other small businesses and help you compete with larger companies for top talent.

What are the top 10 benefits a small business owner should offer employees?

Several factors – such as your budget and your benefits strategy – will help you determine the best employee benefits for your small business. Employee benefits are a significant investment for any business and often one of the biggest line items in your budget. Therefore, it’s essential that you align the offerings in your benefits package with the benefits employees are actually seeking.

To help out, we’ve compiled a list of the top 10 employee benefits – options that are commonly offered by employers and highly desired by employees.

Top 10 Employee Benefits

1. Health Insurance
   
   Not only is health insurance highly desirable amongst employees, it’s also required for businesses with 50 or more employees under the Affordable Care Act (ACA). But acquiring health benefits for small businesses is often expensive and plans and networks are limited. That’s where a professional employer organization (PEO) can make a difference. When you partner with a PEO, you gain access to Fortune 500-level health benefits at affordable prices.
   
   
2. Life Insurance
   
   This benefit gives employees access to affordable group life insurance, which will provide a payout to beneficiaries in the event a covered employee passes away.
   
   
3. Retirement/Pension Plan
   
   Offering a retirement or pension plan allows your employees to build financial security for retirement, and it demonstrates to your employees that you care about their future. A retirement plan is an attractive recruiting tool, and you can boost its effectiveness by matching a percentage of your employees’ contributions. Both employers and employees can also realize tax advantages or incentives by participating in a retirement plan.
   
   
4. Paid Time Off
   
   Today’s workforce is placing more and more importance on work-life balance. And employees feel they are better able to achieve this balance when they have paid time off, away from work – such as when they are ill, need to care for a family member, or simply need time to rest and relax. As the employer, you stand to benefit as well. Providing adequate paid time off can help minimize burnout and improve employee engagement, ultimately leading to a more productive workforce.
   
   Though employers traditionally offered separate vacation and sick time, many businesses now offer paid time off that employees can manage and use for a variety of needs. Since paid time off is a highly effective recruiting tool, it’s important to continually review your policy and ensure it is in line with current trends in your region and industry.
   
   
5. Dental Insurance
   
   Dental insurance helps employees maintain good oral health and can reduce medical expenses through preventative care. It can also reduce employee absenteeism related to dental issues.
   
   
6. Flexible Spending Account/Health Savings Account
   
   Flexible spending accounts (FSAs) and health savings accounts (HSAs) are tax-advantaged accounts designed to help employees save for qualified medical expenses. Though the accounts operate differently, they provide a variety advantages, including reducing payroll taxes. FSA and HSA contributions are pre-tax deductions, which reduces tax liabilities for both employees and the employer.
   
   
7. Paid Holidays
   
   Though labor laws do not require employers to provide paid holidays, this perk ranks high amongst employers and employees. The U.S. Bureau of Labor Statistics reports that 21% of U.S. employees receive an average of 7.6 paid holidays per year. The most common paid holidays include: New Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
   
   
8. Paid Medical Leave/Short-Term and Long-Term Disability
   
   Disability insurance protects an employee’s ability to earn a paycheck in the event they become seriously ill or injured. Short-term disability provides coverage almost immediately for temporary disabilities, while long-term disability has a longer waiting period before the benefits kick in.
   
   Paid medical leave provides wage replacement for employees who must miss work for an extended period of time for a qualified reason, such as bonding with a newborn or caring for a loved one with a serious health condition. Though paid leave is not required by federal law, several states have passed or are considering legislation that mandates paid leave programs.
   
   
9. Mental Health, Wellness, and Employee Assistance programs
   
   Employees value employers that support their mental health and well-being, while many leaders understand the positive impact a happy and healthy workforce can have on their business. Employers can offer programs that encourage and incentivize overall wellness, leading to improved employee well-being and morale. For example, an employee assistance program (EAP), which is a benefit that is typically free to employees, gives your workforce confidential access to counselors and resources who can assist them through personal and work-related issues.
   
   
10. Flexibility
    
    Employees rank flexibility (which can improve work-life balance) as one of their most desired benefits, so providing this perk can help you stand out in a crowded labor market.
    
    Some examples of flexibility in the workplace include:

• Flex time, which allows employees to adjust their start/end time for the workday
• Shorter workweek, such as a four-day week
• Part-time hours
• Job sharing, which allows two employees to share job responsibilities and split the workweek
• Telecommuting, which gives employees the option to work from another location
• Remote work, such as allowing employees to work from home

Additional Employee Benefits to Consider

While the top 10 employee benefits listed above are among the most popular and highly desired in the workforce, there are additional benefits to consider as you work to build a more robust benefits package.

Some may reflect current trends – and therefore may be less desirable in a few years – while others may be more appropriate for your industry, workforce, or geographic location.

Additional benefits to consider include:

• Vision insurance
• Accident and critical illness products
• Education assistance
• Employee discounts
• Adoption assistance
• Childcare support
• Contraception coverage
• Paid parental leave
• Commuter benefits
• Pet insurance

How much do small businesses spend on employee benefits?

The U.S. Bureau of Labor Statistics reports that $14.41 is the average cost of benefits per hour worked for civilian workers in the U.S. in June 2024. For private industry workers, the average is $13.04 per hour worked and accounts for 29.7% of employer compensation costs. (View the latest BLS statistics here.) Based on the BLS’s data, a private industry employer spends approximately $2,300 per month on benefits costs for each employee who works a 40-hour week.

For a small business, employee benefits are a significant investment, but the overall cost will vary based on several factors, including (but not limited to):

• Which benefits you choose to offer: Not all benefits carry a significant cost to the employer. Some benefits may only require administrative costs, while others may cost you nothing. With voluntary ancillary benefits, for example, you can choose to contribute zero to 49% of the premium.

• The type of health insurance plan offered: Costs can vary considerably based on the type of health plan(s) you’re offering your employees. For example, a high-deductible health plan will typically carry a lower premium.

• Where you acquire your benefits: Finding quality plans that fit the budget of most small businesses is challenging, so where you acquire your benefits can significantly impact your costs. With a PEO like G&A Partners, you gain access to Fortune 500-level benefits at affordable prices. Options include health insurance with multiple plan designs and large networks and a large selection of high-quality ancillary benefits (retirement, dental, vision, and more). By partnering with G&A, you can manage the cost of employee benefits for your small business while building a more competitive and robust benefits package.