Health and safety priorities, soaring medical care expenses, and labor market challenges have shifted the spotlight onto benefits programs. Amid ongoing struggles to find and retain talent, small businesses now face growing pressure to offer comprehensive benefits packages to stay competitive.
According to the NFIB’s April Jobs Report, 34% of small business owners reported unfilled job openings due to a lack of qualified applicants, with almost half of businesses stating that finding skilled candidates remains a top challenge. On top of this, many small businesses struggle to craft compelling benefits packages, leaving them at a disadvantage in attracting top-tier talent.
While small enterprises are not legally required to meet the same health coverage mandates as larger companies, the advantages of offering benefits far outweigh the associated costs. A competitive benefits program can not only help small businesses recruit skilled workers but also improve employee retention and satisfaction.
The Power of Benefits Programs in Small Businesses
Providing health coverage and other benefits fosters a sense of value and support among employees while creating a major draw for potential recruits. John Pask, co-founder of GoBenefits, said, “Today’s workforce understands the power of choice. For small businesses, meeting those expectations with benefits is essential for recruitment and retention.”
While competitive pay is important, smaller organizations often lose out to larger competitors that can offer attractive compensation coupled with robust benefits. A well-rounded benefits program, therefore, becomes a strategic differentiator for small businesses trying to stand out.
Even part-time employees, who historically placed less emphasis on benefits, are now advocating for perks like health insurance, vision, dental coverage, and supplemental options like life insurance. Clinton Wolf from the National Restaurant Association noted, “Offering comprehensive packages at all levels — not just for management — is becoming the new norm.”
Common Misconceptions About Benefits Costs
One major hurdle small businesses face when starting a benefits program is the assumption that it’s too expensive. Employers often believe they must cover 100% of health insurance costs. However, most programs typically require a 50% employer contribution, and not all employees may choose to enroll.
Surveying employees is a practical first step. By gauging interest in benefits coverage, business owners can better determine feasibility. For example, if a large portion of the workforce consists of younger employees or part-timers, they might prioritize alternative perks over traditional health coverage. On the other hand, if there’s strong interest, exploring health insurance group plans becomes worthwhile.
Leveraging Partnerships and Group Plans
Small businesses without the resources of larger firms can still access comprehensive benefits programs by joining forces with local chambers of commerce or professional associations. These groups often provide access to group health plans that offer better rates and policies by pooling small businesses together as a single entity.
Additionally, offering multiple plan designs allows employees to select coverage that aligns with their unique needs. Pask explained, “A single-plan approach doesn’t work for everyone. Much like ordering a pizza, some employees prefer anchovies while others want pepperoni. Offering a range of plans ensures inclusivity.”
Steps for Implementing an Effective Benefits Program
Wolf recommends the following steps for small business owners looking to implement a benefits program:
1. Get a quote: Work with a broker to get an accurate cost estimate. This will help you determine feasibility and understand the financial commitment.
2. Evaluate participation rates: Assess how many employees are likely to enroll. If participation rates are too low, many group plans will not qualify.
3. Understand tax advantages: Contributions to health insurance programs are tax-deductible, making them an advantageous business expense.
4. Consider timing: Unlike individual health insurance, group insurance programs can be established at any time of the year. Wolf added, “Starting your program later in the year can actually be beneficial, as competition for broker attention drops.”
By following these steps, small businesses can create a program tailored to employee needs while staying within budget.
Benefits Beyond Health Insurance
Health insurance remains a major piece of the puzzle, but additional benefits can significantly enhance the employee value proposition. Small businesses can include:
- Dental and Vision Coverage: Affordable add-ons that employees highly value.
- Life and Disability Insurance: Provides peace of mind for employees and their families.
- Retirement Savings Plans: Such as 401(k) options to help employees plan for the future.
- Financial Wellness Programs: Covering tuition reimbursement, student loan assistance, or financial coaching.
- Paid Leave and Retention Bonuses: Demonstrates long-term investment in employees.
Pask emphasizes that such add-ons drive loyalty and engagement, noting, “People always appreciate getting something extra. These perks make a difference.”
Winning the Talent Battle with Benefits Programs
For small business owners juggling limited resources, benefits programs may seem like an uphill battle. However, they’re becoming an essential tool in today’s labor landscape. Employees are looking beyond paychecks to find employers that invest in their wellbeing, both financially and physically.
By creating a structured, scalable, and thoughtful approach to benefits programs, small businesses can position themselves as attractive employers, gaining an edge in an increasingly competitive labor market.
This article was originally published August 2023. It was last updated May 2025.
