Why you should offer small business employee benefits

Written by: Chase Charaba
Originally published on March 22, 2022. Last updated March 30, 2022.

Employee benefits are important for attracting and retaining employees. However, offering competitive benefits can seem like a balancing act between keeping employees happy and managing costs. For small businesses, offering benefits can be especially challenging.

Despite the costs, employee benefits are essential. According to Aflac, 49% of employees will look for a new job within 12 months of starting if they aren’t satisfied with the benefits you offer.

Additionally, with people leaving jobs in record numbers thanks to the Great Resignation, offering competitive benefits is more important than ever.

With this tight economy, offering benefits is essential for recruiting and retaining talent, especially for small businesses. It’s important to remember that an investment in your employees is an investment in your organization, with significant returns on employee retention, productivity, and morale.

From perks to the importance of health benefits for employees, let’s look at why offering employee benefits is essential for small businesses. In this article, we’ll cover:

Five advantages of offering employee benefits

Let’s explore the five major advantages of offering employee benefits.

1. Recruit and retain key employees

In today’s workforce, employees value—and expect—an employer to offer good benefits. Results from Glassdoor’s Employment Confidence Survey show that 4 out of 5 employees would rather have new or additional benefits than a pay raise.

This can give small employers a way to compete with larger organizations that have the budget for higher salaries. Even if you can’t afford to shell out a big paycheck, offering an attractive benefits package will get top candidates in the door and help you retain them 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.

For example, providing access to quality healthcare and employee wellness programs—and contributing to the cost—removes a financial hurdle for employees and their families. On the employer side, offering health and wellness benefits can lead to fewer sick days and absenteeism. That’s a measurable return on your investment in your employees.

3. Culture and morale

As a small organization, it’s common to have close working relationships with your employees. When it comes to culture and morale, employees feel this reciprocity. Knowing that their employer cares for their health and wellbeing creates employee loyalty and retention.

In a survey conducted by the Science of Care, 60% of workers who reported feeling cared for by their employer also said they planned to stay with their organizations for three or more years, as opposed to only 7% of those who reported they didn't feel cared for by their employers.

Additionally, offering employee perks like remote work can further boost employee morale. According to an Owl Labs survey, 22% more workers said they’re happier with their remote job than those who didn’t work remotely.

4. Tax advantages

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

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

  • Healthcare reimbursement
  • Life insurance
  • 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

5. A foundation for growth

A final advantage of employee benefits is that they set your organization's foundation to scale and grow. As you hire more employees, having a unique and attractive employee benefits package helps you attract, hire, and keep the best employees.

According to studies done by LinkedIn, organizations rated highly on compensation and benefits by their employees saw 56% lower attrition than organizations that were rated poorly.

What benefits are most important to employees?

Choosing the right benefits for your employees is paramount to the success of your benefits package. When deciding which benefits to offer your employees, an employee benefits survey is a great place to start. Ask your employees what they’d like to see implemented in your benefits package.

That being said, there are benefits employees desire more than others. According to a Gallup poll, well-being is the top workplace want among younger employees. This includes health and wellness perks, as well as flexible work hours.

Some of the most-desired workplace benefits are:

  • Healthcare benefits
  • Wellness programs
  • Remote work opportunities
  • Flexible work hours
  • Unlimited paid time off and sick leave
  • Parental leave
  • Retirement benefits
  • Career development
  • Tuition reimbursement
  • Disability insurance

Let’s dive into how you can offer a few of these top benefits in the sections below.

How to offer employee health benefits on a budget

According to the Society for Human Resource Management, 90% of employers view healthcare as the most important employee benefit. While the importance of health benefits to employees can’t be overstated, it can be challenging for many small businesses to implement an affordable plan.

The costs of traditional group health insurance plans are often too expensive for small businesses, and rising healthcare costs have made group health policies more difficult for companies to manage.

Health reimbursement arrangements (HRAs) are a great health benefits option for small and large businesses alike. With an HRA, you provide your employees with a monthly allowance for healthcare expenses. Your employees submit their qualified expenses for reimbursement and then get reimbursed tax-free.

You can choose the allowance amount available to your employees each month. 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 actually use.

There are three popular types of HRAs available to small businesses. These include:

  • Qualified small employer HRA (QSEHRA) - An HRA created by the Affordable Care Act (ACA) that’s specifically designed for employers with fewer than 50 full-time equivalent employees (FTEs). Annual allowances are capped by the IRS.
  • Individual coverage HRA (ICHRA) - An HRA available to businesses of all sizes. Employers can customize employee classes and offer any allowance amount without any caps. Employees must have individual health insurance that meets minimum essential coverage (MEC).
  • Group coverage HRA (GCHRA) - Also known as an integrated HRA, this HRA is designed for use with a group health insurance plan, such as a high-deductible health plan (HDHP).

Additionally, a health stipend is a flexible way to help employees with healthcare costs. Health stipends work similarly to an HRA in that you can set monthly allowances for employee reimbursement. However, unlike an HRA, health stipends are taxable.

Like with an HRA, health stipends can be used for health insurance premiums and out-of-pocket expenses. With fewer regulations than HRAs or medical insurance, health stipends give your employees more control over their health affairs.

How to offer employee perk stipends for small businesses

Employee perk stipends, also known as fringe benefits, are another way to provide competitive employee benefits for small businesses.

Stipends allow you to provide employees with monthly allowances for various expenses, including wellness and remote work. Just like with a health stipend, your employees submit a request for reimbursement for the expenses that you allow.

You can reimburse employees for their gym memberships, fitness classes, fitness trackers, meditation and mental health apps, and more when you offer an employee wellness stipend. These flexible employee perks help contribute to your workforce’s overall health, leading to more productivity.

Remember, wellness is the most-desired perk among young workers. Offering a wellness stipend allows you to compete for talent against larger businesses that may not provide flexible wellness benefits.

If your employees are remote, you can also offer them a remote work stipend. When employees work in-person at the office, they use employer-provided equipment, internet, and amenities. However, if they work from home, they’re using their internet connection, bandwidth, and space for their work. Employees can use these monthly reimbursements for home office expenses, such as phone and internet bills.

Offering a remote work stipend ensures that your employees are adequately equipped for working from home, and it can be an enticing offer for potential employees.


Offering benefits to employees is essential, even for small businesses. With the Great Resignation inspiring millions of people to leave their jobs in search of better opportunities, benefits are a great way to attract and retain employees.

Finding the right benefits to offer your employees can be a hassle. With PeopleKeep’s WorkPerks personalized benefits platform, you can easily create flexible stipend benefits for your employees.

Get in touch with a personalized benefits advisor today to see how employee benefits can work with your organization.

This blog article was originally published on August 11, 2015. It was last updated on March 22, 2022.

Originally published on March 22, 2022. Last updated March 30, 2022.


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