2014-06-25 05:53:33 Healthcare and Benefits English https://quickbooks.intuit.com/r/us_qrc/uploads/2014/06/2014_7_14-small-AM-Guide_to_Employee_Benefits_for_Small_Business.png https://quickbooks.intuit.com/r/healthcare-and-benefits/guide-employee-benefits-small-business/ Guide to Employee Benefits for Small Business

Guide to Employee Benefits for Small Business

8 min read

As our economy rebounds, it will be more important than ever to retain your best employees. One of the most influential factors in keeping employees happy on the job is having benefits. For small businesses, this can be tricky and costly, but with a little forethought and planning, you can build a stable of employee benefits that will encourage loyalty and great work, thereby positively impacting your bottom line.

Required Employee Benefits

Before you can start building your aspirational list of employee benefits, first you must meet certain federal and state requirements. Here are the employee benefits you must provide:

Social Security Taxes

You must pay Social Security taxes at the same rate as your employees. The best source for information regarding Social Security taxes is the Social Security Association’s (SSA) website.

Unemployment Insurance

Depending on your state’s requirements, you may need to pay unemployment taxes. If you are required to do so, you must register with your state’s workforce agency.

Disability Insurance

Select states and/or territories require that businesses provide partial wage replacement insurance to eligible employees for non-work-related sickness or injury. The states/territories that require Disability Insurance are:

  • Puerto Rico

Family and Medical Leave Act

While other leave (including vacation, personal days or holidays) is often not required by federal law, employers must provide leave consideration under the Family and Medical Leave Act (FMLA). This federal act entitles employees up to 12 weeks of job-protected and unpaid leave during a 12-month period for any of the following reasons:

  • Birth and care of the eligible employee’s child or placement for adoption or foster care of a child with the employee
  • Care of an immediate family member (spouse, child, parent) who has a serious health condition
  • Care of the employee’s own serious health condition

Common employee benefits

While not required by federal or state law, it is commonplace for employers to provide some standard benefits for their employees. This directly impacts your employees’ sense of safety and well-being, which wil, in turn, impact their work performance, and that impacts your bottom line.

Here are some of the more common employee benefits:


Encompassing both health and dental insurance, medical insurance is one of the more expensive benefits, but it’s also one of the most important to your employees. Most employers only pay a percentage of the premium charged per employee, passing the rest of that cost to the employee via his or her paycheck. As further incentive, some employers elect to pay the entire health insurance premium per employee.

Obviously, there are a number of options for insurance providers, and depending on where your business is located, you may have even more regional choices. Aside from regional considerations, number of employees and number of full-time employees can affect your health insurance coverage options. Additionally, the passage of the Affordable Care Act by Congress in 2010 has added even more intricacy to healthcare coverage—learn more about it here.

Flexible Spending Accounts (FSA)

FSAs allow employees to contribute pre-tax dollars every pay period to a Flexible Spending Account. This money can often be accessed using a credit or debit card issued by the account holder. There are four common types of Flexible Spending Accounts:

  • Medical Expense: This money can be used to cover the costs of medical expenses that your health insurance does not cover (i.e. prescription or office visit co-pays or procedures). It can be used for all types of healthcare expenses, including vision, dental and, in some cases, chiropractic work.
  • Dependent Care: Pre-tax contributions up to $5,000 are allowed annually in this type of FSA. It is generally used to pay for the daycare expenses for employees with children under the age of 13.
  • Health Premiums: If you choose not to offer health insurance, you can instead offer your employees a Health Premium FSA. The money your employees choose to contribute to this account can be applied toward health insurance premiums they may elect to get on their own.
  • Adoption Assistance: Adoption costs can be very high, and allowing employees the opportunity to contribute pre-tax funds into an Adoption Assistance FSA may enable them to fulfill their dream of adopting a child.

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Paid Leave

Most employers offer their employees some type of paid leave, often in the form of vacation, personal days and national holidays. Employers tend to allow their employees to accrue vacation time and sick days based on the number of hours they have worked throughout the year, combined with the number years of service. Personal days, or floating holidays, are often set at the beginning of the year and do not change. Observance of national holidays is up to the discretion of the employer; however, it is important to remember morale when choosing to observe or not observe a particular holiday. While many employees won’t bat an eyelash if you keep your office open on Columbus Day, they might resent being forced to work or take a vacation day to observe Thanksgiving.

Retirement Savings Plan

There are a few options available to small businesses when deciding to adopt a retirement savings plan.

The most popular is a 401(k). Similar to FSAs, a 401(k) allows employees to contribute a certain amount of their pre-tax salary into an account that is managed by a 3rd-party investment company, such as Merrill Lynch or Fidelity. Unlike an FSA, though, 401(k) contributions are not eligible for withdrawal until employees meet certain requirements, such as retirement. The benefit of having a 401(k) for business owners is that you may reinvest the money that is contributed and earn dividends off of the interest. There may also be tax breaks associated with maintaining a 401(k) or any type of retirement savings plan, including IRA-based PlansProfit Sharing or Defined Benefit Plans.

In the late 1990s, it became commonplace for many organizations to offer a retirement savings plan “match” to their employees. This meant that if employees invested a certain percentage of their annual salary, the company would match part or all of that investment. As the economy and the banking and financial industries encountered hard times in the mid-2000s, this was one luxury benefit that many organizations chose to jettison. Some companies have started to gradually readopt the practice.

Tuition Reimbursement

Some of the best employees are the most curious. Offering them a tuition reimbursement incentive might be just the thing to keep their minds engaged both on and off the clock and increase their overall happiness with you as an employer. 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. Regardless, your intelligent and motivated employees will find satisfaction in furthering their education with your monetary support.

Transportation and Parking Benefits

If you are located in a major city with a terrific public transportation system, or if your location does not have access to complimentary employee parking, you might consider offering employees parking or public transportation reimbursement. Many employers have also adopted this type of benefit as a way to demonstrate how environmentally conscious they are by offering incentives to employees who frequent public transportation, bike to work or choose to carpool with colleagues.


It’s no secret that oftentimes the way to someone’s heart is through his or her stomach. It’s as true in the business world as it is on a college campus. A well-stocked kitchen or well-appointed and easily accessible vending machines give employees a sense of being cared for, while offering free coffee and beverages can imply to your employees that you and your business are not cheap or looking for ways to cut corners.

Some businesses go so far as to order in lunch on a regular basis or have fresh fruit delivered once a week. While it’s true that certain luxuries like this may be monetarily impactful for small businesses, a little goes a long way to your employees.

Discounts and Offers

As a small business owner, you may not be able to offer much clout or spending power to secure special or discounted rates for your employees; however, there are organizations, such as Working Advantage and Tickets at Work, that offer access to discounts online on a variety of entertainment, travel and other expenses.

Other types of discounts can be welcomed as well, including savings at a local restaurant that is frequented by your employees or an offer for free car detailing from a reputable auto shop near your office.

Other Little Touches

In the race to keep employees happy, employers have gone to great lengths, providing things like in-office dry cleaning pickup and drop-off to weekly masseuse visits and bring your dog to work day. In truth, the types of benefits you offer, whether formal like health insurance or informal like casual Friday, will depend on the type of work environment you are trying to cultivate and the types of employees you want on your team. It is a balance between cost and benefit, but when the payoff is the extended longevity of your business and your employees, it’s easy to offer the right perks for all involved.

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Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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