Why you should offer small business employee benefits

Written by: Holly Bengfort
Originally published on May 3, 2023. Last updated August 14, 2023.

Employee benefits are necessary for attracting and retaining talented employees. When there are multiple job offers on the table, your benefits need to be as competitive as the salary you offer. PeopleKeep's 2022 Employee Benefits Survey found that 82% of employees say that the benefits package an employer offers is an important factor in whether or not applicants accept a job.

However, offering attractive benefits can seem like a balancing act between keeping employees happy and managing costs. For small business owners, this can be especially challenging.

Amid this tight economy, you need to maintain a competitive edge. It's important to remember that investing in your employees is investing in your organization, with significant returns on employee retention, productivity, and morale.

In this article, we'll explain why offering employee benefits is essential for small businesses.

Learn how to choose and set up the right personalized employee benefits for your organization, all in under one hour.

Five advantages of offering employee benefits

From perks to the importance of health benefits for employees, 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. A Pew Research Center1 survey found that 43% of workers who quit their jobs in 2021 said poor or no benefits played a role in their departure.

A competitive employee benefits package gives 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 additional benefits 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.

Providing access to quality medical care and employee wellness programs—and contributing to the cost—removes a financial hurdle for your employees and their families. On the employer side, offering health and wellness benefits can lead to less sick time and absenteeism. That's a measurable return on your investment in your employees.

Plus, employees want health and wellness benefits. Our 2022 Employee Benefits Survey shows 87% of employees surveyed value health benefits, and 92% of employers offer them. 3. Culture and morale

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 well-being boosts job satisfaction and reduces employee turnover.

In a survey conducted by the Science of Care2, 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 survey3,22% 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 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
  • 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. 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 appealing employee benefits package helps you attract, hire, and keep the best employees.

According to studies done by LinkedIn4, 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 company benefits plan for your employees is paramount to the overall success of your organization. When deciding which benefits to offer your employees, an employee benefits survey is a great place to start. Ask your employees what type of employee benefit they'd like to be offered.

That being said, there are benefits employees desire more than others. According to a Gallup poll5, 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 popular benefit options are:

  • Healthcare benefits
  • Wellness programs
  • Remote work opportunities
  • Flexible work hours
  • Unlimited paid time off for vacation days 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 Management6, 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 medical 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 limits for employer contributions are capped by the IRS.
  • Individual coverage HRA (ICHRA). An HRA is 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. They also don’t satisfy the ACA’s employer mandate for organizations with more than 50 FTEs.

How to offer employee perk stipends for small businesses

Employee perk stipends, also known as fringe benefits, are another way small business owners can provide competitive benefits.

Stipends allow you to provide employees with monthly allowances for various expenses, like 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.

Another stipend to consider is a transportation stipend. In addition to common types of vehicle expenses, your transportation stipend could cover things like mileage, parking fees, rental cars, or rideshares like Uber and Lyft.

If your employees work from home, you can offer them a remote work stipend. Employees who work in person at the office use employer-provided equipment, internet, and amenities. However, if they work from home, they use 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.

With a professional development stipend, you can reimburse your employees for certifications, online courses, conferences, career coaching, and college courses. This type of stipend increases employee loyalty and engagement at your organization. A Linkedin Learning report7 found that 94% of employees say they would stay at a company longer if their employer invested in their career and personal development. Our 2022 benefits survey also found that 61% of employees value professional development benefits, while only 40% of employers offer them.


If you want to have a competitive compensation package, it needs to come with great benefits. Offering employee benefits is essential, especially for small businesses. Benefits are a great way to boost current employee satisfaction and attract potential new hires. Happy employees tend to stay at their jobs and even encourage others to join the team.

If you’re ready to offer affordable, personalized benefits to your employees, PeopleKeep can help. With our personalized benefits administration platform for HRAs and employee stipends, you can easily offer flexible perks that match your budget.

Get in touch with a personalized benefits advisor today to find out how employee benefits can work with your organization!

This blog article was originally published on August 11, 2015. It was last updated on May 3, 2023.








Originally published on May 3, 2023. Last updated August 14, 2023.


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