Why you should offer small business employee benefits

By Holly Bengfort on April 27, 2026 at 2:00 PM

Investing in small business employee benefits isn’t just about offering nice perks. It’s a strategic move that can boost employee morale, improve productivity, and reduce turnover. Plus, a standout benefits package is essential for attracting talented employees.

However, offering employee benefits can feel like a balancing act between keeping employees happy and managing costs. This can be especially challenging for small business owners and their benefits brokers.

In this article, we'll explain how you can offer affordable benefits that support your organization and its employees.

In this blog post, you'll learn:

How employee benefits can help small businesses compete with larger companies that offer higher salaries.

What employee benefits matter most to your team.

Why health reimbursement arrangements (HRAs) are a budget-friendly option for employee health benefits.

Six advantages of offering employee benefits

From recruiting to business growth, let's explore the six major advantages of offering employee benefits as a small business.

1. Recruit job seekers and retain key employees

In today's workforce, employees value — and expect — an employer to offer good benefits. PeopleKeep's 2024 Employee Benefits Survey found that 81% of employees said an employer's benefits package is an important factor in whether they accept a job.

A comprehensive benefits package gives small businesses a way to compete with larger corporations that have the budget for higher salaries. Even if you can't afford to shell out a big paycheck, offering additional benefits and perks will get top candidates in the door. They’ll also help you retain them long-term.

Benefits also play a critical role in employee retention. Employees are far more likely to stay with an organization that supports their health, financial well-being, and family needs. With job seekers increasingly prioritizing stability and security, offering a strong benefits package helps reduce turnover and keeps your most valuable team members engaged long-term.

2. A healthy workforce is a productive workforce

Employee benefits can provide your workforce with resources to remain healthy and productive, serving as a win-win for your organization and employees. Wellness resources can include health benefits and other general wellness perks, such as gym memberships or mental health support.

Providing access to quality health insurance coverage options and employee wellness programs encourages employees to seek preventive care, such as annual checkups, screenings, and early treatment. This proactive approach helps catch minor illnesses before they develop into more serious conditions, resulting in fewer sick days, shorter recovery times, and a more consistently productive workforce.

3. A positive company culture increases employee satisfaction

As a small business, having close working relationships with your employees is common. When it comes to company culture and morale, employees feel this reciprocity. Knowing that their employer cares for their health and well-being boosts job satisfaction and reduces employee turnover rates.

A SHRM report found that a positive employee experience makes workers 68% less likely to consider leaving their jobs¹. Additionally, offering employee perks like remote work can further boost employee morale by offering a healthy work-life balance. A Tracking Happiness study on remote work found that employee happiness increases as much as 20% by offering the ability to work 100% remotely².

4. Employee benefits can come with tax benefits

Many employee benefits are tax-advantaged for both your organization and workers. Not just the ones you'd usually think of, either, like contributions to healthcare and retirement plans.

Several other types of employee benefits can be tax-free, including:

Healthcare reimbursement
Life insurance plans
Tuition reimbursement
Child care reimbursement
Cafeteria plans
Employee discounts
Personal use of a company-owned vehicle
Company-provided cell phones
Meals provided at the workplace

You should consult with your accountant or tax professional to determine the taxability of your employee benefits program.

5. Financial security reduces distraction and improves focus

Employee benefits don’t just support physical health — they also play a major role in financial well-being. Financial stress is one of the leading causes of workplace distraction, impacting productivity, engagement, and overall performance.

When employees worry about how they’ll pay for medical expenses or care for their families, it can be difficult to stay focused on their work. Providing reliable and valuable health benefits gives employees peace of mind that they and their loved ones are protected. This sense of security allows your team to be more present, focused, and productive throughout the workday.

6. Voluntary benefits provide a foundation for growth

A final advantage of employee benefits is that they set your organization's foundation to scale and grow. Having a unique and competitive benefits package helps you attract, hire, and keep talented employees. According to a WTW study, 40% of employees said they’d leave their employer for better benefits elsewhere, even without a change in salary³. By offering voluntary and customizable benefits, you can position your company for long-term success.

What benefits are most important to employees?

Choosing the right benefits for your employees is paramount to your organization’s overall success. When deciding which types of benefits to offer your workforce, an employee benefits survey is a great place to start. This can help increase employee engagement. By giving your employees the benefits they want most, they're more likely to use them.

Some of the most popular employee benefits include:

Health insurance benefits
Dental insurance
Paid time off (PTO) for vacation days, mental health days, and sick leave
Retirement plans
Vision insurance
Paid family leave
Remote work options, including flexible work arrangements
Flexible work schedules
Wellness programs
Tuition reimbursement
Disability coverage
Pet insurance
Employee assistance programs

How to offer employee health benefits on a budget

Health benefits consistently rank as the top employee benefit you can offer. Our survey found that 92% of employees consider them important. You can't overstate the importance of offering health benefits to employees. However, implementing an affordable plan can be tough for many small businesses.

Traditional group health coverage is often too expensive for small employers, and rising healthcare costs continue to make group health plans difficult for companies to manage.

Stand-alone health reimbursement arrangements (HRAs) are a great health benefits option for small and large businesses alike. With an HRA, you reimburse your employees for the cost of their individual health insurance policies instead of buying group coverage for them. This allows them to find plans that match up with their individual preferences instead of getting stuck with a one-size-fits-all group plan.

You simply offer your employees a monthly allowance for their healthcare needs. They make healthcare purchases using their own money and submit their qualified medical expenses for reimbursement. Once approved, you reimburse your employees tax-free up to their allowance amount.

Some examples of HRA-eligible expenses include:

Monthly health insurance premiums, including for vision and dental insurance plans
Doctor visits
Prescription drugs
Over-the-counter medication

Best of all, with an HRA, any unused allowances at the end of the benefit year stay with you. That way, you're only spending money on health expenses your employees use. An HRA gives employers complete control of their health benefits budget. There are no annual rate increases or minimum participation requirements.

Three of the most popular HRAs are:

The individual coverage HRA (ICHRA): An ICHRA offers the most flexibility for employers. They can offer any allowance amount without any caps. They can also customize allowances using 11 employee classes, such as full-time employees and part-time employees, as well as by age and family size. Eligible employees need their own individual health insurance plans that meet minimum essential coverage (MEC) to participate in the ICHRA. They're also a great solution for applicable large employers (ALEs) that need to satisfy the Affordable Care Act's (ACA) employer mandate.
The qualified small employer HRA (QSEHRA): The QSEHRA is only for employers with fewer than 50 full-time equivalent employees (FTEs). The IRS also sets annual contribution limits for the QSEHRA. However, unlike the ICHRA, eligible employees only need plans with MEC to participate. This means your workers with Medicaid, CHIP, or insurance from a parent’s or spouse’s plan can take part in the QSEHRA.
The group coverage HRA (GCHRA): The GCHRA, also known as an integrated HRA, works differently from the ICHRA or QSERHA. Instead of using it as a stand-alone health benefit, employers pair the GCHRA with a group health insurance plan, such as a high deductible health plan (HDHP). This can help employees afford their out-of-pocket expenses before they reach their deductibles.

How to offer employee stipends for small businesses

Taxable employee stipends, also known as fringe benefits or lifestyle spending accounts (LSAs), are fixed amounts given to employees to cover various expenses.

With a stipend, you can easily offer the following benefits to employees:

Health insurance benefits. A health stipend is a flexible way to help employees with their medical bills and other healthcare costs. Small businesses might consider a stipend instead of an HRA if they have employees with premium tax credits. However, health stipends don't satisfy the ACA's employer mandate for organizations with more than 50 FTEs.
Wellness benefits. A wellness stipend can go toward gym memberships, fitness classes, and mental health counseling.
Remote work. If you offer remote work options at your organization, you can provide a stipend that helps cover internet access and office essentials for your employees.
Dental care. You can offer your employees additional money to cover their dental care expenses, such as routine cleanings, fillings, or orthodontia.
Vision care. A vision stipend can help your employees with the cost of eye exams, glasses, or contact lenses.
Commuter benefits. With a commuter stipend, you can help your employees afford the price of gas, tolls, and parking.
Professional development opportunities. You can offer your employees money for professional development opportunities such as online courses, conferences, and career coaching.

Conclusion

If you want a competitive compensation package, it needs to come with great benefits. Offering employee benefits can change the game for your small business. By prioritizing employee satisfaction and well-being, you can cultivate a motivated workforce that's genuinely invested in the success of your business.

If you're ready to offer affordable, personalized benefits to your employees, PeopleKeep by Remodel Health can help! With our HRA administration software, you can easily offer personalized health benefits that match your budget.

Get in touch with one of our HRA specialists today to find out how health benefits can help your organization thrive!

This blog article was originally published on August 11, 2015. It was last updated on April 27, 2026.