| Blog

Health Benefits - Are They Really That Important?

Written by: Christina Merhar
May 10, 2016 at 12:00 PM

When asked why health benefits are so important, most small business owners say Health Benefits - Are They Really That Important?something like this: “Health benefits are important to my business and employees.” This is spot on - health benefits are the number one type of employee benefits employees value. But, why exactly are they so important?

There are clear, measurable business advantages that make the investment inot health benefits worth it. At the same time, there is usually a tipping point for small businesses when it makes sense, financially and otherwise, to offer health benefits.

This article discusses three reasons health benefits can be an important business strategy, and how to tell if your business is ready to take the benefits leap.

Advantages of Health Benefits

1. Recruiting and Retention

The first advantage to offering health benefits - even on a small business budget - is that employee health benefits are a valuable tool in recruiting key employees and retaining top talent.

While the importance of this for your small business may depend on industry competition in your area and the age and demographics of your workforce, health benefits stand out as an important factor in the overall compensation package you offer employees.

2. Tax Advantages

By offering a traditional group health plan or tax-free dollars to employees’ healthcare, small businesses can offer employees a tax-advantaged health benefit.

These tax advantages increase the overall compensation package and allows the business an income tax deduction for the contribution. In other words, the value of the health care benefit to the employee is greater than your business expense.

3. Employee Wellness

Lastly, health benefits keep employees healthy, productive, and working. For example, preventive care and more affordable access to healthcare prevents employees from taking extended periods of sick leave, allowing your small business to be more productive and profitable.

To summarize these advantages, health benefits can help a small business attract and keep loyal, happy, and productive employees. That being said, health benefits can be a significant cost investment. New and growing small businesses may not be in a position to offer health benefits. So, just where is the tipping point when it makes sense to offer health benefits?

Are We Ready to Offer Health Benefits?

As we wrote about previously, there are three steps to evaluate if health benefits make sense.

Step 1 - Determine if the business is financially ready to add health benefits. For most small businesses, offering health benefits only makes sense when the business is turning a profit and is consistently covering overhead and personnel expenses.

Step 2 - Understand how offering health benefits impacts the business’s hiring and personnel goals. The right benefits package can lower overall HR costs, especially if the business operates in a competitive labor market. In other words, there may be a time when not offering health benefits costs the business more than offering them.

Step 3 - Evaluate small businesses health benefit options. For example, most small businesses evaluate the pros and cons of individual health insurance reimbursement and different group health insurance options.

Read More: How to Start Offering Employee Health Benefits


Health benefits offer small businesses important advantages in recruiting and retaining key employees, tax savings, and employee wellness. For businesses who are financially stable, offering a cost-effective health benefits program can be an important boost to business growth and achieving human resources goals.

Why do you think health benefits are so important to small businesses and employees? What questions do you have? We’d love to hear from you. Leave a comment or question below.

Topics: Health Benefits, Small Business

Additional Resources

Trying to decide which HRA is best for you? Take our quiz to find out.
Get our guide on how to offer health benefits with a small budget.