June 13, 2023
6 minute read

What Small Business Employee Benefits Should You Offer?

What small business employee benefits should you offer?

You’ve got lots of options. But you want to find the right mix of benefits that meet the needs of your employees AND your budget. Right?

In this article, we’ll show you the 7 most common small business employee benefits employers offer, explain how they work, and provide some insight to help you decide which benefits are right for you.

The 7 Most Common Small Business Employee Benefits 

Chances are pretty good you already know “health insurance” is at the top of the list of small business employee benefits most workers want. In fact, an estimated 74% of employers offer healthcare benefits.1

But health insurance isn’t the only benefit that can help you attract and keep talented employees. Some of the most common small business employee benefits include:2

  1. Health insurance
  2. Life insurance
  3. Disability insurance
  4. Vision insurance
  5. Dental insurance
  6. Retirement benefits
  7. Paid time off

Are any of these small business employee benefits part of what you offer? Thinking about adding one or more of these to your benefits package? Let’s take a closer look at each one of these small business employee benefits.

1. Health insurance 

While an estimated 74% of employers offer some form of healthcare benefits, only 57% of employees sign up.1

And cost may be the biggest reason.

  • The average premium for employer-sponsored health insurance has increased 20% over the last five years.3
  • Health insurance costs employers an average of $8,000 a year for single coverage and $22,000 a year for family coverage.3
  • Employees pay an average of $1,300 a year for single coverage and $6,000 for family coverage with employers covering part of the cost.3

Why offer health insurance? 

It’s one of the most important employer benefits you can offer. It’s an effective benefit that can help you attract and keep talented employees.

But there are other positives to offering health insurance as one of your small business employee benefits such as:4

  • Higher job satisfaction, better morale and less turnover
  • Reduced absenteeism and presenteeism
  • Lower healthcare costs by controlling or preventing chronic disease

Not sure you can afford health insurance for your employees?

Here’s another option for small businesses: an Individual Coverage Health Reimbursement Arrangement (ICHRA).14

Here’s how it works:

  • You decide how much to budget for healthcare costs.
  • You decide how the funds will be distributed (typically paycheck withdrawal or reimbursement)
  • Your employees can use the funds to pay for qualified medical expenses, including monthly premiums for health insurance, copayments, and deductibles.

2. Life insurance 

An estimated 57% of employers offer life insurance plans to employees.1

Some employers provide employees with a basic life insurance plan that pays an average of $10,000 to $25,000.5

If an employee with a life insurance plan dies, the plan pays the person’s beneficiaries a designated amount often calculated to pay for funeral expenses, debt, cost of living, and other expenses.

Supplemental life insurance. You can also offer life insurance (and other types of ) as a voluntary benefit or give employees access to buy individual policies and pay the full premium.

3. Disability insurance 

If someone gets hurt, can’t work, and needs to take an extended amount of time off, what will happen to their income?

That’s what disability insurance is for.

Disability insurance helps workers replace lost income if they end up being out of work due to a disabling illness, injury, or accident. There are two types available:5

  • Short-term disability insurance (offered by 43% of employers)
  • Long-term disability insurance (offered by 35% of employers)

If an employee gets injured and can’t work, or can only work part-time, disability insurance pays the employee a monthly rate based on their annual income for a set period of time. Disability insurance typically pays 60-80% percent of monthly or annual wages earned.

What about disability through Social Security?

If you’re thinking, “Couldn’t my employees just get disability benefits through Social Security?” The answer is “yes.”

However, keep in mind that 67 percent of first-time Social Security Disability Insurance (SSDI) applicants are denied.6

Even for those who get Social Security Disability, it may not be enough to cover the cost of living and other expenses. In 2023, the average disability payment is $1,483, and it can be even lower for younger workers.7

By providing access to additional financial resources through disability employer benefits, you may give your employees more peace of mind about meeting financial obligations if they become disabled.

4. Vision insurance 

Offering your employees vision insurance can help reduce out-of-pocket costs for eye exams, glasses or contact lenses, and other eye-care products.

The average out-of-pocket costs per year for corrective vision care in the U.S. is about $500.8

  • Eye exams
  • Glasses or contact lenses
  • Eye-care products

Vision insurance is another supplemental health insurance product you can offer your employees. Eye care isn’t usually covered by standard health insurance plans.

Fortunately, a supplemental vision insurance plan can help pay for things like:9

  • Regular eye exams with an optometrist
  • Prescription glasses or corrective lenses
  • Corrective contact lenses (in place of glasses)
  • Discounts on corrective eye surgery

Vision insurance can help your employees save money, and protect their vision. The average monthly premium for vision insurance is $5 to $35 per person.9

5. Dental insurance 

Did you know an estimated 29% of adults in the U.S. don’t have dental insurance.10

Without dental insurance, your employees are more likely to skip routine exams and avoid getting needed dental work because of the cost. Here’s what dental care costs out-of-pocket for common services:11

  • Exams (including x-rays and cleaning) = $75 to $200
  • Fillings (amalgam and composite) = $150 to $450
  • Tooth extractions (non-surgical, gum-erupted) = $219 to $4,000
  • Crowns (single resin) = $500 to $3,000
  • Root canals (single, exposed) = $300 to $2,000

Offering your employees dental insurance options can help offset the cost of dental care, depending on the service.

Most dental insurance plans cover all or part of dental services based on three different levels of care:

  • Preventive care like routine exams and cleanings
  • Basic procedures like fillings
  • Advanced procedures like crowns, bridges, and other surgeries.

6. Retirement benefits 

About 69% of employers offer retirement benefits, and have about a 52% participation rate.1

There are two primary ways you can offer retirement benefits.

Through a:

  1. Defined benefit plan, which is a pension
  2. Defined contribution plan such as a 401K

With a pension plan, your business puts in all the money. But with a defined contribution plan, employees put in most of the money, and you make a matching contribution up to a certain amount.

A type of pension plan that may be a good fit for your small business is the Simplified Employee Pension.12

  • This type of plan allows employers to set aside money in retirement accounts for themselves and their employees.
  • It does not have the start-up and operating costs of a conventional retirement plan.
  • It allows for a contribution of up to 25% of each employee’s pay.

If considering a defined contribution plan, there are a few that may work best for small employers because they can offer more cost-savings.

These include the following:

  • SIMPLE 401K for businesses with 100 or fewer employees
  • Small business owner 401K for companies where all the staff are part owners
  • Savings incentive match plan for employees (SIMPLE IRA) designed for firms that have 100 or fewer employees and don’t currently offer another type of retirement plan.

Should you offer retirement benefits?

In a recent survey by the Society of Human Resource Management, 82% of respondents said retirement and savings is an important benefit they want from employers.13 And it’s a big shift, jumping 27% since 2020 as a benefit employees want.

7. Paid time off 

In the Society of Human Resource Management survey, respondents also ranked paid time off as a very important benefit.13

In the U.S., 77% of employers offer paid leave for sick days, 79% of employers offer paid vacation days, and 81% of employers offer paid holidays.1

Some employers also offer paid time off for:

  • Maternity leave
  • Paternity leave
  • Jury duty
  • Bereavement leave
  • Mental health days

Employee benefits required by law 

There are some small business employee benefits that you may be required to provide.

These benefits typically come into play depending on the state you’re in and the size of your workforce.

These are the 5 employer benefits required by law:

  • Matching Social Security and Medicare Taxes: Your small business must pay Social Security and Medicare taxes at the same rate as employees. These employment taxes fall under the Federal Insurance Contribution Act (FICA).
  • Family and Medical Leave (FMLA): You must offer FMLA if you have a private firm with 50 or more workers. FMLA ensures that an employee won’t lose his or her job for taking an unpaid leave of up to 12 weeks in a 12-month period for qualified family or medical issues.
  • Unemployment Insurance: Paying unemployment insurance taxes to both the state and the federal government may be required if certain labor laws apply to your business. It’s mandatory that your business registers with your state’s workforce agency if paying these taxes is required in your state.
  • Workers’ Compensation Insurance: In most cases, you need to buy workers’ compensation insurance to cover your employees. But because workers’ compensation laws are regulated differently in each state, there may be some that don’t require you to provide this benefit.
  • Disability Insurance: This is typically an optional employee benefit. But there are a few states that require you to give eligible employees a partial replacement of their wages for off-the-job disabilities.

Need Help Choosing Small Business Employee Benefits?

Our team of licensed insurance agents who specialize in employer benefits can help you choose the benefits that best meet the needs of your workforce, and your budget.

Call (800) 827-9990 for more information, or find a licensed insurance agent in your community

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© 2023 HealthMarkets Insurance Agency. All rights reserved.

* Medicare Advantage, Medicare Supplemental Insurance, and Part D options can be explored.

We do not offer every plan available in your area. Any information we provide is limited to those plans we do offer in your area. Please contact Medicare.gov, 1-800-MEDICARE, or your local State Health Insurance Program to get information on all of your options.

To send a complaint to Medicare, call 1-800-MEDICARE (TTY users should call 1- 877-486-2048), 24 hours a day/7 days a week). If your complaint involves a broker or agent, be sure to include the name of the person when filing your grievance.

Attention: This website is operated by HealthMarkets Insurance Agency, Inc. and is not the Health Insurance Marketplace® website. HealthMarkets Insurance Agency, Inc. is licensed as an insurance agency nationwide except in MA. Not all agents are licensed to sell all products. Service and product availability varies by state. Sales agents may be compensated based on a consumer’s enrollment in an insurance plan. No obligation to enroll. Agent cannot provide tax or legal advice. Contact your tax or legal professional to discuss details regarding your individual business circumstances. Our quoting tool is provided for your information only. All quotes are estimates and are not final until consumer is enrolled. Medicare has neither reviewed nor endorsed this information.

HealthMarkets Insurance Agency offers the opportunity to enroll in either QHPs or off-Marketplace coverage. Please visit HealthCare.gov for information on the benefits of enrolling in a QHP. Off-Marketplace coverage is not eligible for the cost savings offered for coverage through the Marketplaces.

This information is not a complete description of benefits. Call the Plan’s customer service phone number for more information.

HMIA003675

© 2023 HealthMarkets Insurance Agency. All rights reserved.

* Medicare Advantage, Medicare Supplemental Insurance, and Part D options can be explored.

We do not offer every plan available in your area. Any information we provide is limited to those plans we do offer in your area. Please contact Medicare.gov, 1-800-MEDICARE, or your local State Health Insurance Program to get information on all of your options.

To send a complaint to Medicare, call 1-800-MEDICARE (TTY users should call 1- 877-486-2048), 24 hours a day/7 days a week). If your complaint involves a broker or agent, be sure to include the name of the person when filing your grievance.

Attention: This website is operated by HealthMarkets Insurance Agency, Inc. and is not the Health Insurance Marketplace® website. HealthMarkets Insurance Agency, Inc. is licensed as an insurance agency nationwide except in MA. Not all agents are licensed to sell all products. Service and product availability varies by state. Sales agents may be compensated based on a consumer’s enrollment in an insurance plan. No obligation to enroll. Agent cannot provide tax or legal advice. Contact your tax or legal professional to discuss details regarding your individual business circumstances. Our quoting tool is provided for your information only. All quotes are estimates and are not final until consumer is enrolled. Medicare has neither reviewed nor endorsed this information.

HealthMarkets Insurance Agency offers the opportunity to enroll in either QHPs or off-Marketplace coverage. Please visit HealthCare.gov for information on the benefits of enrolling in a QHP. Off-Marketplace coverage is not eligible for the cost savings offered for coverage through the Marketplaces.

This information is not a complete description of benefits. Call the Plan’s customer service phone number for more information.

HMIA003675

© 2023 HealthMarkets Insurance Agency. All rights reserved.

* Medicare Advantage, Medicare Supplemental Insurance, and Part D options can be explored.

We do not offer every plan available in your area. Any information we provide is limited to those plans we do offer in your area. Please contact Medicare.gov, 1-800-MEDICARE, or your local State Health Insurance Program to get information on all of your options.

To send a complaint to Medicare, call 1-800-MEDICARE (TTY users should call 1- 877-486-2048), 24 hours a day/7 days a week). If your complaint involves a broker or agent, be sure to include the name of the person when filing your grievance.

Attention: This website is operated by HealthMarkets Insurance Agency, Inc. and is not the Health Insurance Marketplace® website. HealthMarkets Insurance Agency, Inc. is licensed as an insurance agency nationwide except in MA. Not all agents are licensed to sell all products. Service and product availability varies by state. Sales agents may be compensated based on a consumer’s enrollment in an insurance plan. No obligation to enroll. Agent cannot provide tax or legal advice. Contact your tax or legal professional to discuss details regarding your individual business circumstances. Our quoting tool is provided for your information only. All quotes are estimates and are not final until consumer is enrolled. Medicare has neither reviewed nor endorsed this information.

HealthMarkets Insurance Agency offers the opportunity to enroll in either QHPs or off-Marketplace coverage. Please visit HealthCare.gov for information on the benefits of enrolling in a QHP. Off-Marketplace coverage is not eligible for the cost savings offered for coverage through the Marketplaces.

This information is not a complete description of benefits. Call the Plan’s customer service phone number for more information.

HMIA003675