Best practices when offering benefits as a small business include granting easy access and clear information about the benefits, offering work perks customized to the profile of the company’s employees, and opting to offer a personalized insurance plan. The details concerning each practice are described below.
Average Benefits Package for Companies with 50 or Less Employees
- Around half (47%) of small businesses offer benefits. The most commonly provided are health benefits (69%), 401(k) and retirement plans (52%), family leave (48%), paid time off (45%), in-office benefits (33%), and student loan repayment.
- Twenty-eight percent of small businesses offer 11 to 15 days of paid time off, and only 5% offer fewer than 5 business days, while 56% are planning to offer new benefits. The new benefits they are considering are paid time off (19%), health (15%), in-office perks (14%), family leave (11%), retirement (11%), and student loan repayment (8%).
- Thirty percent are considering new benefits to fulfill employee requests, indicating that they are viewing benefits as a method of retaining and attracting new talent. Turnover reduction is the second most common reason (27%), followed by financial growth (17%) and legal requirements (13%).
- A recent survey discovered that 50% of employees can’t access their benefits in the way they prefer versus only 21% who said they can easily access their benefits. This is even a bigger issue in small business, with only one in five employees believing their employer’s benefits communication educate employees effectively.
- Research suggests that employees would like the same experience they have getting information in their personal lives to be mirrored at work, including the ability to consume information in a variety of ways.
- Simplifying communication could improve the employees’ experience, by using multiple channels, removing jargon, and making messages relevant to key life events or life stages. Employers should understand the life stages of their employees, which is more likely to affect them and tailor communications to provide the clearest possible information.
- Although technology-enabled communication methods can greatly improve the employees’ understanding and access, discussing benefits face-to-face with an employer is still the most effective way, with 46% of employees being satisfied after receiving information this way. Email and digital access were close behind with satisfaction levels at 44% and 42% respectively.
- Eighty-one percent of employees who can effortlessly access their benefits are loyal to their employers (vs 66% of small company's employees), 79% are proud to work for their company, while 77% of workers who understand their benefits said they see themselves staying with the organization for the foreseeable future.
- Common Thread Collective is one company with a transparency and communication policy. This digital marketing agency was named by Glassdoor as one of the best companies to work for, with a 4.8 grade.
- Seventy percent of employees surveyed by Zenefits agree that fringe benefits would be a major consideration in evaluating future job opportunities. With most fringe benefits being provided entirely at the employer’s discretion, small businesses could benefit by crafting special packages.
- When selecting the benefits package, employers should consider the company’s location, industry, and benefits practices of their competitors. To take one step further, an assessment of employees’ needs and values provide valuable insights.
- Most employees (68%) said they think "work perks" are just as important as health coverage, life insurance and other traditional benefits, according to a survey of 600 small and midsize businesses by Zenefits.
What to Offer
- As for the extra benefits most valued by job seekers, flexible work hours influence 88% of the respondents surveyed by Fractl. According to the Harvard Business Review, flexible hours is the most requested benefit after health insurance.
- As for other perks, they ranked in the following order: more vacation time, work-from-home options, unlimited vacations, student loan assistance, tuition assistance, paid maternity/paternity leave, free gym membership, free day-care services, free fitness/yoga classes, free snacks and coffee, company-wide retreats, weekly free employee outings, on-site gym, and team bonding events.
- Ninety percent of companies offer a traditional 401(k) plan. Under this plan, the organization can offer to equal some portion of the employee’s salary. Many businesses match dollar-for-dollar the first 3% of the employee’s salary and then 50 cents on the dollar for the next 2%. Retirement plans are a favorite employment benefit as both business owners and employees get tax breaks whenever they make contributions.
- Life insurance appeals to nearly 6 out of 10 employees, while 88% said the quality and option of health benefits were very important. Small businesses can offer health coverage without shouldering the cost of the whole premium. They can pay a portion of the monthly premium to make their expenses more manageable. Considering the annual health insurance costs, employees will most likely appreciate any assistance provided to them by their employer.
- Paid time off is important to 88% of workers interviewed by JustWorks, however, only 36% of employers offer the benefit. The benefit is particularly important to women, with 1 in 2 saying it is important, as opposed to 1 in 4 men.
- Parental leave is another benefit overlooked by employers, with only 13% offering it while 66% of employees consider it important.
- A recent study found that 80% of employees who like their benefits package also say they identify strongly with their company’s vision and values, as opposed to 40% of employees who don’t like their current benefits package.
- A Randstad survey revealed that 55% of employees left a job because they found better benefits elsewhere. Conversely, 71% of employees with good benefits feel loyal to their employer.
- Fireclay Tile offers a comprehensive package to its employees. A breakdown of the costs and implementation of its package can be found here.
- A BusinessWire survey found that 75% of employees consider benefits personalized to their needs an important factor when looking for a new job, while 72% said it would increase their loyalty to their current company.
- Health insurance premiums for small business workers are often higher, up to 18% than the premiums for the same policies carried by larger corporations. With health insurance topping the list of most employees as the number one benefit they look for, small business have a tough time competing.
- A personalized benefit allows companies to decide how much they will contribute to the employee benefit. The amount is then available tax-free to the employees, who get to use the money towards the service they choose instead of the benefits the company offers.
- Some benefits that can be transitioned into personalized methods include health, cell phone, education, transportation, and retirement.
- Personalized benefits are set up in the form of a QSEHRA (Qualified Small Entity Healthcare Reimbursement Arrangement). With a QSEHRA, the employer sets a fixed amount each month, and each employee can obtain their own plan that suits their needs the best. This is not only good for retention, but new prospects wouldn’t have to change their insurance.
- The QSEHRA can leverage small business to the same favorable tax treatments big company groups health plans get. The plan is also more manageable, as the company can set its own budget, instead of relying on market prices.
- As long as employers follow the setup requirements, and employees maintain an individual health plan that provides the “minimum essential coverage”, the reimbursements are tax-free to both parties involved.
- To be eligible, the business must have between 1-49 full-time employees. The costs are up to the maximum amount set by the IRS ($5,150 for individuals and $10,450 for families), and the employer contributions are free of the payroll tax, while employees don’t pay income tax on contributions.
- QSEHRA must be available to all eligible employees, but employees may choose not to seek reimbursements. Employers can choose to reimburse all eligible health expenses or premiums only.
- In 2017, small businesses offered average monthly allowances of $280.20 for self-only employees and $476.56 for employees with a family. Though not everyone eligible for a QSEHRA used it, those who did, collected an average of 77% of their total allowance (79% for self-only employees and 77% for employees with a family).
- Businesses typically save 7.65% in payroll taxes and employees save 20-40% in state and federal income tax on money spent on health insurance premiums and medical expenses reimbursed through HRAs.
- When a small marketing agency named Elkhart wanted to offer its 10 employees health insurance, it discovered that a group health plan was not the right choice, as the premiums would have "blown employees away because they were so high."
- The company then set out a QSEHRA, which was a success among its employees, particularly because it has younger employees, who enjoyed the flexibility of purchasing their own insurance.
To provide best practices for a small company offering benefits packages to its employees, we had to rely on a mixture of the overall information (such as the satisfaction level of employees) and small companies as a whole, since information about PR/Marketing companies was scarce. We also included the available information on the average package offered, as requested by the client.