Which Employer Benefits Do Small Businesses Offer the Most?

healthmarkets.com: When deciding how to structure your employer benefits, it may be helpful to know what other small businesses are doing on a national level. You can find out what the most common small business employee benefits are, and choose the ones that will be best for your business needs and budget.

Most Common Small Business Employee Benefits

Health insurance has been a hot topic since Obamacare rolled out, so it may be the first type of coverage you think about offering your employees. You may also think about other health-related employee benefits, like dental and vision. But surprisingly, these supplemental health benefits are not what most small employers offer. Based on the percentage rate at which small businesses with fewer than 50 employees offer employer benefits, the following are the most common:

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

Health Insurance

Although the Obamacare employer mandate to offer health insurance or pay a fee doesn’t apply to companies with fewer than 50 employees, many of these companies still choose to offer health insurance. The following are the percentage rates at which small firms offer health coverage, according a 2015 Employer Health Benefits Survey from the Kaiser Family Foundation:

• 82 percent for firms with 25 to 49 employees
• 63 percent for firms with 10 to 24 employees
• 47 percent for firms with 3 to 9 employees

The survey also noted that nearly all companies that provide group health insurance to employees offer coverage for dependents, such as a spouse or child.

Why Offer Health Insurance?

Health insurance is one of the most important employer benefits you can offer, because it can have many positive effects on your employees and your business. Eighty-seven (87) percent of small business owners say attracting and retaining employees are important reasons to offer health coverage.

The ability to help increase employee job satisfaction and productivity are among the reasons why health insurance is one of the top employee benefits. Studies show that employees who are happy with their health insurance benefits report up to 96 percent job satisfaction, and satisfied employees are twice as productive at work. You can find out more reasons why you should offer health insurance by checking out this article on 6 Reasons Why Offering Group Health Coverage Is the Right Thing.

Paid Time Off

Paid vacation and holidays are the most popular time-off benefits—66 percent of small businesses with fewer than 50 workers offer these employee benefits. Many of these small companies also offer paid time off (PTO) for sick time (50 percent), jury duty (44 percent), and funerals (42 percent). Knowing how much PTO small employers across America are offering can also be helpful when creating an employer benefits package. A Society for Human Resources Management (SHRM) article posted the results for a 2015 national survey on paid time-off for vacation and sick days among small businesses with less than 100 employees. The following chart shows the results.

Retirement Benefits

Among small firms with fewer than 50 employees, 46 percent offer a retirement plan and have about a 35 percent employee participation rate. There are two primary ways you can offer retirement benefits: through a defined benefit plan, which is a pension, or through a 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.

Because defined benefit plans cost companies more money, many have cut back or have done away with offering pension employer benefits. However, this trend doesn’t mean you shouldn’t consider a pension as an employee benefits small business plan. A type of pension plan that may be a good fit for your small business is the simplified employee pension (SEP-IRA) because the Department of Labor reports that this plan has low startup and operating costs. You can set up an SEP-IRA if you have at least one eligible employee.

If considering a defined contribution plan, there are a few that may work best for small employers because they 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, and the
• 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.

Why Offer Retirement Benefits?

In a survey comparing how employees feel about retirement benefits and health insurance, retirement benefits was a close runner-up for the reason workers were attracted to and are still at their current jobs. The draw of retirement benefits could be that the convenience of a job-based retirement plan, where funds are automatically deducted from employees’ paychecks and have the ability to get matching contributions, makes it easier to save.

According to an SHRM article, employees are strongly in favor of their employers taking a more active role in “helping them save for retirement … more than 4 in 5 employees surveyed said they would consider taking their employer’s advice when determining their contribution to a 401(k) plan.”

Life Insurance

Life insurance is one of those things that many people put off, usually because of the thought of dying or because they don’t think they need it. In fact, LIMRA reports that “ownership of individual life insurance has hit a 50-year low.” For this reason, it’s possible some Americans only have life coverage because it’s one of the employee benefits they get at work. Employees at 36 percent of small companies have access to life insurance employer benefits. This benefit is typically offered through a group term life policy, which you can provide as a “free benefit” or require that employees pay a part of the premium. Often, employer-sponsored life insurance pays an average death benefit of $50,000.

You can also offer life insurance (and other types of supplemental insurance) as a voluntary benefit or give employees access to buy individual policies. With these options, employees pay all the premium. With life insurance and other types of small business employee benefits, you can work with an insurance agent who can help you determine the best way to offer coverage that fits your budget and meets your employees’ needs.

Disability Insurance

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: short-term disability—offered at 26 percent of small firms, and long-term disability—offered at 20 percent of small firms. If you’re thinking, “Couldn’t my employees just get disability benefits through Social Security?” the answer is “yes.” However, keep in mind that 65 percent of first-time Social Security Disability Insurance (SSDI) applicants are denied.

Plus, SSDI benefits may not pay enough to cover employees’ monthly expenses. For 2016, the average SSDI paymentis $1,166 a month. For younger workers, a Forbes article reported that SSDI benefits can be about $700 a month. By providing access to additional financial protection through disability employer benefits, you’ll give your employees more peace of mind about meeting financial obligations if they become disabled, and they’re likely to be more satisfied with their jobs.

Dental Insurance

About a quarter (26 percent) of small businesses with fewer than 50 employees offer dental coverage. Why isn’t this number higher? It could be that many small companies aren’t aware of how much employees value this benefit and how important oral health is to their employees’ productivity. A study on small business employee benefits from MetLife revealed that dental coverage is the most desired medical benefit behind health insurance—74 percent of employees who don’t currently get dental benefits are interested in receiving it.

The study also mentioned that about 30 percent of employees at small firms reported a decline in their productivity because they had to put off getting medical or dental care due to the cost. Research from the Centers for Disease Control and Prevention also “found that more than 164 million work hours are lost each year due to dental problems alone.” Plus, more than 38 percent of employees at small firms report that having dental coverage is one of the main reasons why they stay with their employer.

Vision Insurance

Vision coverage is much less commonly offered among small businesses compared to major medical and dental—just 14 percent of small firms with fewer than 50 workers offer this employee benefit. Like health and dental coverage, offering vision insurance also helps with employee retention, as 34 percent of workers at small firms said having vision benefits is a key factor in their decision to stay at their current jobs. Your business is also likely to have fewer lost work hours when you offer vision coverage. This is because employees who find out about serious medical conditions through a comprehensive eye exam are less likely to go to the emergency room and be hospitalized.

You may be wondering, what serious medical conditions can a comprehensive eye exam detect? Cancer, diabetes, and high cholesterol are just some of those conditions. You can visit the following link to find out the signs of these and other medical conditions that can show up in an eye exam and learn how vision insurance works.

Employer Benefits Required by Law

There are some employer 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:

1. 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).
2. 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.
3. 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.
4. 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.
5. 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.

Choosing Small Business Employee Benefits

We can help take the burden of choosing small business employee benefits off your hands so you can focus on running your business. We'll meet with your employees one on one to assess their needs and provide you with innovative cost-saving solutions for offering employee benefits—all at no cost to you or your employees. We're available to help enroll employees, answer private insurance benefit questions, and provide on-site support. Let us help you choose the right employer benefits. Call us at (888) 803-0364.

As a licensed agent/broker with HealthMarkets IA, I (Robert Morgen) am sharing this article with my LinkedIn community. I serve Nevada, California, Arizona, & Texas as a Licensed Insurance Agent.