Small business employee benefits guide for 2024

To build a great team, you'll want to attract (and keep) your top employees. One of the most influential factors in keeping employees happy is offering employee benefits. 

Managing benefits can be tricky and costly for a small business. However, with a little forethought and planning, you can build an employee benefits package that will encourage loyalty, which can positively impact your bottom line. Let’s explore the various employee benefits you can offer: 

• Social Security and Medicare
• Workers' compensation
• Disability insurance
• Family and Medical Leave Act
• Unemployment insurance
• Health insurance
• Retirement savings
• Paid time off
• Tuition assistance
• Fringe and ancillary small business benefits
• Flexible work schedules
• Professional development programs
• Catered lunch or free snacks
• Wellness and assistance programs
• Transportation
• Child care
• Employee discounts
• Dental
• Vision
• Flexible spending account (FSA)
• Health savings account (HSA)
• Health reimbursement arrangement (HRA)
• Gym memberships
• Paid time off to volunteer
• Pet insurance
• Other interesting benefits

How small business employee benefits work

Many small business employee benefits are items you can offer employees to encourage them to work for your company. However, you must provide certain benefits—regardless of your size. You can group small business employee benefits into two types:

• Required benefits are those mandated by law, such as Social Security, unemployment insurance, and workers' compensation insurance.
• Voluntary benefits are those that businesses can offer to employees as part of their benefits packages. These include health benefits, retirement accounts, and paid time off.

Government agencies tightly regulate required employee benefits and protect the rights and well-being of employees. By providing these benefits, small businesses ensure compliance with labor laws and demonstrate their commitment to employee welfare. Here are the employee benefits you must provide:

Social Security and Medicare

Your business has to pay Social Security and Medicare taxes, also known as Federal Insurance Contributions Act (FICA) taxes. The employer is responsible for paying 7.65% of each employee’s pay in FICA taxes and withholding the employee’s share (also 7.65%) from their paycheck. The employer's portion of the payroll tax payment is a business expense.

Workers' compensation

Workers’ compensation is a form of insurance that protects employers and employees in the event of a workplace accident or illness. It covers medical costs and the partial replacement of lost income. You generally have to buy workers’ comp before hiring any employees.

Disability insurance

Disability insurance provides partial wage replacement for nonwork-related injuries. Certain states require you to carry disability insurance for employees. There are two types—short- and long-term disability insurance. Short-term covers up to six months, while long-term can cover years.

Family and Medical Leave Act

Employers must comply with the Family and Medical Leave Act (FMLA). The act entitles workers to up to 12 weeks of job-protected and unpaid leave during a 12-month period for certain insurances, such as caring for their serious health condition or the birth of a child.

Unemployment insurance

Unemployment insurance covers workers whom a business has let go. States and the federal government manage unemployment programs. You, as the employer, fund unemployment insurance with tax payments, also known as Federal Unemployment Tax Act (FUTA) and State Unemployment Tax Act (SUTA) taxes.

Financial benefits you can offer

Financial benefits are a crucial aspect of attracting and retaining top talent in small businesses. Financial benefits go beyond ensuring employees' well-being by addressing their financial security and long-term goals. Here are several financial employee benefits that small businesses can consider offering:

Many organizations offer a retirement savings plan “match” to their employees. This means that if employees invest a certain percentage of their annual salary, the company matches part or all of the investment.

Health insurance

Medical insurance is one of the more expensive benefits, but it’s also one of the most important to your employees. Many employers only pay a percentage of the premium per worker, passing the rest of that cost to the employee via their paycheck. Some employers elect to pay the entire health insurance premium per employee.

The Affordable Care Act requires businesses with 50 or more full-time employees to provide ACA-approved health insurance to employees.

Retirement savings

Retirement savings plans allow employees to save money for retirement on a tax-deferred basis. A few options are available to small businesses when deciding to adopt a plan, but the most popular is a 401(k). 

401(k) plans allow workers to contribute a certain amount of their pretax salary into a retirement account. Many organizations offer a retirement savings plan “match” to their employees. If employees invest a certain percentage of their annual salary, the company matches part or all of the investment.

Paid time off

Most employers offer their employees paid leave, often in the form of vacation, personal days, and national holidays. Employers may allow workers to accrue vacation time and sick days based on the number of hours they have worked throughout the year and the number of years of service. Others may offer an unlimited paid time off policy.

Tuition assistance

Small businesses can support their employees' career growth and development by offering tuition assistance or reimbursement programs. This benefit helps employees further their education and acquire new skills, which can benefit both their personal and professional growth.

Some employers have restrictions on tuition reimbursement, such as only reimbursing for coursework directly related to the employee’s job; some are a bit more open with the requirements. Another option to consider is student loan repayment assistance.

Fringe and ancillary small business benefits

In addition to financial benefits, small businesses can also offer fringe or ancillary benefits to enhance their employee package. These benefits go beyond monetary considerations and focus on creating a positive work environment and improving employee experience. Here are some common fringe and ancillary benefits that small businesses can consider offering:

Flexible work schedules

Offering flexibility in when and where employees work can greatly improve work-life balance and job satisfaction. This benefit allows employees to better manage their personal commitments and increase productivity.

Professional development programs

Investing in employees' professional growth through training or workshops can increase employee engagement and loyalty. For example, small businesses can sponsor seminars or online courses to help employees enhance their knowledge and skills.

Catered lunch or free snacks

Providing meals or snacks during the workday can save employees time and money while also fostering a sense of community within the workplace. This benefit promotes employee well-being and can contribute to a more positive and collaborative work culture. For example, some businesses go so far as to order lunch regularly or stock a break area with snacks.

Wellness and assistance programs

Wellness programs can include things like health screenings, fitness classes, and stress management workshops. Employee assistance programs offer confidential counseling and support services to employees facing personal or work-related challenges. These programs can help employees improve their health and well-being and provide valuable resources for managing stress and improving mental health.

Transportation

If you are in a major city with a terrific public transportation system, or if your location does not have access to complementary employee parking, you might consider offering employees parking or public transportation reimbursement. Environmentally conscious and green businesses can incentivize employees who frequent public transportation, bike to work, or carpool with colleagues.

Child care

On-site child care can greatly benefit employees with young children. It can save them time and money and give them peace of mind knowing that their children are well cared for.

Employee discounts

This can include discounts on products and services from the company or other businesses. It can help employees save money and show that the company values its business.

As a small business owner, you may not be able to offer much clout or spending power to secure discounted rates for your employees. However, some organizations offer access to discounts online on a variety of entertainment, travel, and other expenses.

Fringe and ancillary benefits enhance the overall employee experience and demonstrate a commitment to employee well-being and work-life balance. Offering a range of appealing benefits can help small businesses better compete with larger companies.

Additional health benefits 

In addition to the standard health and medical insurance offerings, small businesses can provide their employees with additional health benefits. These additional benefits can contribute to the overall well-being and satisfaction of employees.

Dental

One popular additional health insurance benefit is dental coverage. Dental insurance helps cover the costs of preventive and restorative dental care, including routine checkups, cleanings, and procedures such as fillings and root canals. Many small businesses offer dental coverage alongside medical insurance to promote good oral health and overall wellness.

Vision

Another important additional benefit is vision coverage. Vision insurance helps cover the costs of routine eye exams, prescription glasses or contact lenses, and even surgical procedures such as LASIK. By providing vision coverage, small businesses can support their employees' visual health and ensure access to necessary eye care services.

Flexible spending account (FSA)

FSAs allow employees to contribute pre-tax dollars every pay period to an account, which they can use to cover eligible out-of-pocket health expenses, such as insurance copayments, deductibles, and certain prescription drugs and medical devices.

Health savings account (HSA) 

A health savings account (HSA) provides tax benefits by allowing employees of high-deductible health plans (HDHPs) to set aside their own money on a pre-tax basis to cover qualified medical expenses. Unused funds carry over to subsequent years, and any individuals leaving to pursue another opportunity can take their HSA with them to their new employer.

Health reimbursement arrangement (HRA) 

Businesses that offer group health insurance and participate in health reimbursement arrangements (HRAs) reimburse employees tax-free for qualified medical expenses up to a limit they determine each year.

If employers don’t offer group health insurance, they may partake in an individual coverage HRA. These savings accounts help employees offset some of the costs of plans they purchase themselves through the marketplace or elsewhere.

Unique employee benefits

In today's competitive job market, small businesses are increasingly turning to unique and unusual employee benefits to attract and retain top talent. Here are some examples of unique employee benefits that small businesses can consider implementing:

Gym memberships

Providing employees with gym memberships or on-site fitness facilities can promote a healthy lifestyle and encourage physical well-being. Regular exercise can boost mood and improve focus—both useful in the workplace.

Paid time off to volunteer

Paid time off to volunteer, also known as paid volunteer time or volunteer time off, allows employees to volunteer their time for a cause they care about. It can be a great way to give back to the community and show employees that the company values its commitment to social responsibility.

Pet insurance 

Many employees are pet owners, and offering pet insurance as an employee benefit shows compassion and understanding for their furry family members. This benefit helps alleviate the financial burden of veterinary expenses.

Other interesting benefits 

When offering unique employee benefits, you can get creative and cater to your workforce. For example, consider these other interesting benefits that might work well for your business: 

• Yoga classes. 
• Pet-friendly locations at work. 
• On-site laundry. 
• Backup care. 
• Referral bonuses. 
• Legal assistance. 
• Free ebooks.
• Tax preparation help.

When implemented effectively, unique benefits can contribute to employee satisfaction and loyalty, offering something competing employers can’t (or haven’t thought of).

Importance of small business employee benefits

While small businesses may face limitations on salary compared to larger corporations, they can make up for it by offering a comprehensive benefits package. This strategy helps attract top talent and plays a key role in retaining employees.

According to MetLife’s Employee Benefit Trends Survey, over 40% of employees say they don’t feel cared for by their employers. These employees report being less engaged and less productive than those who feel cared for. 

Remember, pay isn't everything when it comes to caring for your employees. Less than 50% of employees believe compensation is the most important factor in employee experience. 

Employees are more likely to stay loyal and committed to a company that values their well-being and provides benefits. Here are some of the key advantages of offering a benefits package:

• Helps attract top talent: Perhaps the biggest benefit, at least to your business, is getting sought-after employees—and keeping them. Employees tend to stay with a company that offers good benefits.
• Reduces employee stress. Benefits can help reduce employee stress and increase productivity by removing the worry about key things like health insurance and retirement.
• Improves employee morale. Offering benefits can help to improve employee morale by showing that the company cares about the well-being of its employees. Greater morale leads to a more positive work environment and an engaged workforce.
• Boosts your brand image. Offering benefits can improve the company's image as a good place to work. This can make it easier to attract employees, customers, and partners.

In today's competitive business landscape, small businesses cannot afford to neglect the importance of a solid employee benefits program.

How to implement a benefits program

Providing strong employee benefits helps you attract top talent and helps ensure your current employees are engaged. Here are the key steps to effectively implement a benefits program:

1. Assess your needs: Start by evaluating your employees' needs and preferences. Consider conducting surveys or holding meetings to gather feedback on the benefits they value the most. This will help you tailor your benefits program to meet their needs and increase its effectiveness.
2. Research your options. Once you know your needs, you can start researching your options. Research different benefits options available to small businesses. Common benefits include medical, paid time off, types of 401(k)s, and work/life balance perks. Compare costs, coverage, and the potential value they can bring to your employees. You can also talk to other small businesses to get their recommendations.
3. Set your budget: Determine how much your business can allocate toward the benefits program. Consider factors such as your financial capacity, industry benchmarks, and the benefits you want to provide. Balancing cost-effectiveness and the potential productivity boost with meaningful benefits is crucial.
4. Implement your plan: Develop a timeline for the rollout of your benefits program. This includes determining the start date and outlining the communication strategy to inform employees about the new offerings. Clear and timely communication is key to ensuring a successful implementation.
5. Communicate with your employees: Once your benefits program is in place, take proactive steps to educate employees about the available benefits and how to make the most of them. Conduct training sessions, provide written materials, and have an open line of communication to address any questions or concerns.

Even after having your benefits plan in place, you’ll want to set a timeline to evaluate it to ensure it's meeting the needs of your employees. This includes getting feedback from employees and making changes as needed.

Keeping your employees happy and productive

In the race to keep employees happy, employers have gone to great lengths, providing things like dry cleaning pickup and bring-your-dog-to-work days. In truth, the types of benefits you offer, whether health insurance or certain unique benefits, will depend on the type of work environment you are trying to cultivate and the types of employees you want on your team.

Building a benefits package and payroll functions is a balancing act, but one that gets easier if you leverage payroll software like QuickBooks with built-in human resource functions.