A small business benefits package could be the difference between your business finding employees that are valuable and talented or continuing to struggle with high turnover rates. In fact, better health, dental, and vision insurance is listed as the most valued benefit for job seekers, even more preferred than having more flexible job hours.

It’s important to find the right small business benefits package to attract employees, get your business up and running and expanding, and even have perks for your own business. That’s because a benefits package small business owners contribute to can be written off during tax season.

Learn more about benefits packages for small businesses and why you may want to consider investing in one.

Understanding employee benefits packages

Navigating employee benefits packages can be complex, yet understanding them is essential for both employers and employees. In this section, we’ll explore the various components of employee benefits packages, highlighting their importance and how they contribute to overall compensation and well-being in the workplace.

What is a benefits package?

A benefits package, as the name suggests, is a package consisting of benefits ranging from health care to life insurance for employees. These small business employee benefits packages might range widely but typically include:

• Health insurance
• Life insurance
• Disability insurance
• Vision insurance
• Dental insurance
• Retirement savings plan
• Pensions for retirement
• Paid time off

Other larger companies might be able to offer significantly more benefits, such as all-inclusive vacation packages or significantly larger pension plans. For a small business benefits plan, the above benefits are still a good starting point to attract employees and keep them motivated to work with you. Not only will you give your employees security and encourage them to stick around, you can also save money when tax season comes around.

Are any benefits required?

In some states, there are certain requirements for a small business benefits plan. For instance, in the state of California, you must have the following:

• Workers compensation insurance, often known as workers comp. This type of insurance plan covers treatment costs for injuries sustained at work, such as during roofing.
• Unemployment insurance, which is not only required through the state but also federally. This covers the costs for people who are fired or laid off from their jobs unexpectedly. If you’re a small business owner, it’s a good idea to research into getting UI to keep your employee’s minds at ease, and it is also law to pay into state unemployment insurance and the Federal Unemployment Tax Act.
• Disability insurance, which pays an employee in case they suddenly become disabled. While not every state requires this type of insurance, certain states, including California, Hawaii, New Jersey, New York, and Rhode Island, will require this type of insurance.
• Health insurance is required in small business employee benefits packages if there are more than 50 employees at your small business.

Depending on what state you operate in and the size of your business, you’ll want to look into the requirements your business must adhere to.

Health insurance in a small business benefits package

Health insurance might be the first thing an employee is going to expect out of a benefits package. You may also find that offering health insurance to your employees benefits you in many ways as a small business owner. Luckily for you, group health insurance comes in many shapes and sizes to fit your specific budget and needs. Be sure to understand the specifics for any insurance product you choose—each plan will have specific limitations, exclusions, and definitions that vary from plan to plan.

HMO vs. PPO plans

One big difference between plans is whether it’s a Preferred Provider Organization (PPO) plan or a Health Maintenance Organization (HMO) plan.

HMO plan:An HMO plan may have lower premiums than a PPO, but with those lower costs comes less flexibility. If you include this plan in your small business benefits package, your employees will probably need to have a primary care doctor that they coordinate with to get referrals for specialized care. Employees might also be required to receive medical care “in-network�, which means only working with doctors and hospitals who have a partnership with the insurance provider.

PPO plan:In simple terms, a PPO is an organization that works with contracted medical providers to create a network. You can use this provider network, but might also have the flexibility to choose doctors outside the network by paying more. With this type of plan, you typically do not need to have a primary care provider. You don’t usually need to get referrals for specialists or advanced care. This plan might have higher out-of-pocket costs than alternatives such as an HMO.

Point of Service (POS) insurance plans

A POS insurance plan, also known as a Point of Service plan, is designed to help employees get flexible healthcare options. Employees might still be able to choose a provider who then refers to a specialist for further care, where they will pay nothing. However, if they choose a provider outside their network, they might still get care, be it at a higher out-of-pocket cost. Generally, these types of plans are considered a hybrid between PPO and HMO plans.

Considerations when choosing the best small business insurance

It’s never too early to start reviewing small business health insurance terms and options for your business. Since it is required for companies that have more than 50 employees, it’s important to choose the right health insurance options if you plan on expanding your business, merging, or acquiring an existing company, and to begin to explore your options while growing your business.

Some key points to keep in mind when choosing health insurance options for your small business benefits package include:

• Budget: It’s important to consider both the cost of the insurance plan as well as the cost for your employees. How much will your employee need to pay out-of-pocket? What about routine visits or specialized care? These are all good things to keep in mind when choosing your plan.
• Network of providers: Some health insurance plans will allow your employees to remain with their existing primary care provider since they have a large network, known as PPO insurance plans, while others will offer less expensive coverage plans but will require your employee to look outside of their network for help, known as HMO insurance plans.
• Investment in technology: You want the best for your employees, so it’s good to choose a plan that you know is investing heavily into healthcare technology for your employees.

Retirement savings in a small business benefits package

Retirement savings play a crucial role in a small business benefits package, offering employees long-term financial security and stability for their future. Including retirement benefits not only helps attract and retain top talent but also demonstrates a commitment to employees’ well-being beyond their immediate employment. When designing a retirement savings plan, several features should be considered:

• Matching Contributions:Employers may choose to match a percentage of their employees’ contributions to the retirement plan, providing an additional incentive for participation and boosting employees’ savings potential.
• Vesting Schedules:Vesting schedules determine when employees become entitled to the employer’s contributions to their retirement accounts. Understanding the vesting schedule is important as it impacts the portability of retirement benefits if an employee leaves the company.
• Investment Options:Offering a diverse range of investment options within the retirement plan allows employees to customize their investment strategy based on their risk tolerance and financial goals, promoting greater engagement and ownership over their retirement savings.

By incorporating these features into the retirement savings component of a benefits package, small businesses can provide employees with valuable tools to build a secure financial future while enhancing overall job satisfaction and loyalty.

Comparing retirement plan options

When comparing retirement plan options for your small business benefits package, it’s essential to explore a variety of choices to meet the diverse needs of your employees. In addition to defined contribution plans like a 401(k), consider options such as SIMPLE IRAs (Savings Incentive Match Plan for Employees Individual Retirement Accounts) and SEP IRAs (Simplified Employee Pension Individual Retirement Arrangements).

A SIMPLE IRA is a straightforward retirement plan suitable for small businesses with fewer than 100 employees. It allows employees to make pre-tax contributions through salary deferrals, and employers can choose to match contributions up to a certain percentage or make non-elective contributions. This plan offers simplicity in administration and lower administrative costs.

On the other hand, a SEP IRA is an attractive option for self-employed individuals or small businesses with few or no employees. SEP IRAs allow employers to make tax-deductible contributions on behalf of eligible employees, offering flexibility in contribution amounts and timing. This plan is easy to establish and maintain, with minimal administrative requirements.

By considering a range of retirement plan options, including SIMPLE IRAs, SEP IRAs, and defined benefit plans like pensions, small businesses can tailor their benefits packages to align with employees’ preferences and financial goals, ultimately fostering employee satisfaction and retention.

The other option is a defined benefit plan, or as most know it: a pension. This is a little more of a commitment on the employer’s part.  It is designed to provide a more guaranteed amount of money per month after retirement, which may appeal to some employees.

Employer contribution requirements

Assessing employer contribution requirements is crucial when selecting a retirement plan for your small business benefits package. Depending on the chosen plan, such as a 401(k), SIMPLE IRA, SEP IRA, or defined benefit plan, employers may have different contribution obligations. For instance, with a 401(k), employers may choose to match a percentage of their employees’ contributions, while in a SIMPLE IRA, they may opt for either matching contributions or non-elective contributions. SEP IRAs allow employers to make contributions on behalf of eligible employees, with flexibility in contribution amounts. Understanding these requirements is essential for budgeting and aligning the retirement plan with your business’s financial goals and resources.

Employee eligibility criteria

Assessing employee eligibility criteria for retirement plans is equally important to ensure fairness and compliance with regulatory requirements. Eligibility criteria may vary depending on the type of retirement plan and the employer’s preferences. For instance, in a 401(k) plan, employers may establish eligibility requirements based on factors such as age, length of service, or hours worked. Similarly, in SIMPLE IRAs and SEP IRAs, eligibility criteria may differ, with SIMPLE IRAs typically open to businesses with fewer than 100 employees and SEP IRAs offering more flexibility for self-employed individuals and small businesses. Understanding these criteria allows employers to determine who can participate in the retirement plan and communicate eligibility requirements effectively to employees.

Life and disability insurance in a small business benefits package

According to the Harvard Business Review , these benefits do not rank as high on employees’ wish lists for small business benefits packages as health care and retirement. But these are great benefits for employees to have as security in the unfortunate case of a major injury or a death.

There are two categories of life insurance you could choose from for your small business benefits package: term insurance and permanent insurance. Term insurance is the no-frills take on life insurance, basically only meant to cover an employee’s dependents if he or she dies unexpectedly within a specific time period. Term life insurance often has lower monthly premiums. If you expect your employees to want more benefits with their life insurance policy, you may want to consider a permanent life insurance policy—this type of policy is more expensive because it has lifelong coverage and also has an investment component.

Disability insurance is a great way to provide a safety net in case of injury or illness (physical or mental) that prevents an employee from coming into work for a period of time. Note that this is different than worker’s comp insurance, which deals more with work-related injuries.

All insurance plans have specific limitations and exclusions, so make sure you understand the specific terms of any plan you choose.  This article only provides general information, and does not cover all the specifics that apply to any particular policy.

Other common benefits to consider

Paid Time Off (PTO) and holidays

Paid Time Off (PTO) and holiday leave are vital components of a comprehensive employee benefits package, essential for fostering employee well-being and maintaining a healthy work-life balance. Providing PTO demonstrates a commitment to employee satisfaction and contributes to a positive workplace culture by allowing employees to recharge, attend to personal matters, and enjoy leisure time.

Similarly, offering holiday leave acknowledges and respects cultural and religious observances, promoting inclusivity and diversity in the workplace. When determining the amount of PTO and holiday leave to offer, businesses should consider industry standards, legal requirements, and employee preferences. Conducting market research and soliciting feedback from employees can help tailor the PTO policy to meet the needs of the workforce while remaining competitive within the industry. Clear and transparent policies should be established for accrual, usage, and rollover of PTO, ensuring consistency and fairness across the organization. This includes defining how PTO accrues, guidelines for requesting and scheduling time off, and rules for rollover or payout of unused PTO. Additionally, businesses should strive to balance employee needs with operational demands and seasonal fluctuations.

Implementing effective scheduling systems and fostering open communication between managers and employees can help manage staffing levels and accommodate individual preferences while maintaining productivity and morale. Ultimately, prioritizing PTO and holiday leave as part of the benefits package contributes to employee satisfaction, engagement, and retention.

Employee Assistance Programs (EAP) and wellness programs

Employee Assistance Programs (EAPs) and wellness programs play a crucial role in promoting employee health and productivity within organizations. EAPs offer confidential counseling and support services to help employees navigate personal and work-related challenges, including stress, substance abuse, financial issues, and family conflicts. By providing access to professional assistance and resources, EAPs can mitigate the impact of personal problems on job performance and reduce absenteeism and turnover rates. Additionally, wellness programs encompass a variety of initiatives aimed at improving employee well-being across physical, mental, and emotional dimensions. This may include offering fitness memberships, nutrition counseling, mental health resources such as therapy sessions or mindfulness training, smoking cessation programs, and stress management workshops. By investing in employee wellness, organizations demonstrate a commitment to their employees’ health and happiness, leading to higher levels of engagement, morale, and productivity. Moreover, wellness programs can contribute to lower healthcare costs over time by promoting preventive care and reducing the incidence of chronic diseases. Overall, EAPs and wellness programs serve as valuable resources for supporting employee health and fostering a positive workplace culture.

Flexible Spending Accounts (FSAs) or Health Savings Accounts (HSAs)

Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs) offer valuable benefits for managing healthcare expenses and promoting financial wellness among employees. FSAs allow employees to set aside pre-tax dollars to cover qualified medical expenses, such as deductibles, co-payments, and prescription medications. By contributing to an FSA, employees can lower their taxable income and save money on healthcare costs. HSAs, on the other hand, are available to individuals with high-deductible health plans (HDHPs) and offer triple tax advantages—they allow contributions to be made on a pre-tax basis, earnings to grow tax-free, and withdrawals for qualified medical expenses to be tax-free. HSAs also offer the flexibility of carrying over unused funds from year to year, unlike FSAs, which may have a “use it or lose it” rule.

Understanding contribution limits, eligible expenses, and rollover rules is essential for maximizing the benefits of FSAs and HSAs. Employers should educate employees about the contribution limits set by the Internal Revenue Service (IRS) for each account type and the eligible expenses that can be reimbursed using FSA or HSA funds. Additionally, employees should be informed about the rollover rules for each account to avoid forfeiting unused funds at the end of the plan year. By empowering employees with knowledge about these accounts and how to leverage them effectively, employers can help them make informed decisions about their healthcare finances and optimize their tax savings.

Is a small business benefits package worth the cost?

A Glassdoor survey on employment confidence found that 79% of employees would prefer more benefits to a pay increase. With this in mind, and the fact that you might save money on taxes by adding to your small business benefits package, the benefits to you can be pretty significant.

Offering a small business benefits package to your employees could help you stay competitive without raising everyone’s salaries. You can still keep prices low by choosing plans that don’t break your bank, yet offer your employees the right amount of security. You can choose between any of the policies we discussed earlier, and tailor your options for any budget or type of employee.

Find the best small business insurance for your needs with eHealth

To find the best benefits package small business owners in your area prefer, you can use eHealth to find the best group health insurance options for you and your employees. If you need further assistance, you can speak with one of our licensed insurance agents, who can help guide you toward the best solution.

This article is only for general information and is not tax, accounting, employment, or legal advice. Consult your own tax, accounting, employment, or legal advisor for guidance.