Common Small Business Employee Benefits

The small business employee benefits you can offer are endless. Benefits include common benefits such as health insurance and unique benefits such as catered lunches.

Employee benefits are an important part of compensation. You want to offer the right benefits to attract and retain employees.

So, how do you know which benefits to offer? Start by considering the most common employee benefits.

Common employee benefits for small business

There are essentially two categories of employee benefits: required benefits and optional benefits. Federal or state laws require you to offer some benefits. But, there are other benefits that you can choose to offer to employees.

Required benefits

Below is a list of legally required benefits for employees.

FICA taxes

FICA taxes might not sound like a typical benefit. FICA is a combination of Social Security and Medicare taxes. You have to subtract wages from employee paychecks to pay part of the FICA taxes, which seems like the opposite of a benefit. But, you can consider FICA to be a benefit because employees can receive assistance from Social Security and Medicare benefits.

Also, employers are required to pay half of FICA taxes. Your employer contribution means employees can receive more assistance from FICA than what you withheld from their paychecks.

Unemployment tax

You must pay federal unemployment tax (FUTA) and state unemployment tax (SUTA). Employees do not pay unemployment taxes. If one of your employees becomes unemployed, they might be able to receive state payments to assist them during their unemployment.

Workers’ compensation

Workers’ compensation is a benefit that can help employees if they receive work-related injuries or illnesses. Workers’ compensation payments are used to pay for medical expenses and lost wages.

As the employer, you have to pay for workers’ compensation insurance. Each state has its own workers’ compensation regulations, so make sure you check with your state workers’ compensation agency.

Required leave

Laws require some types of leave.

You may need to give employees sufficient time off to vote. Laws for this kind of leave vary, so make sure you review your state’s laws.

Employees should also have time off to serve on a jury. Once again, check your state’s laws to learn about their jury duty policy for salaried employees and hourly employees.

Employees are also entitled to USERRA leave for military service.


If your business has 50 or more employees within 75 miles of your worksite, your business is covered by FMLA laws. Employees can use up to 12 weeks of unpaid annual leave to tend to certain health and family issues. For specific details, check the FMLA rules.

If your business has fewer than 50 employees, it still might be covered by state FMLA laws. Check to see if your state’s FMLA laws apply to smaller employers.

Optional benefits

There are many optional benefits that you can offer. Below are the most common employee benefits you can choose to provide to employees.

Disability insurance

Disability insurance pays part of an employee’s wages if they have an injury or illness that is not work related. For most employers, disability insurance is an optional benefit. However, employers must provide short-term disability insurance if they have employees in California, Hawaii, New Jersey, New York, or Rhode Island.

Note that there is a difference between FMLA and short-term disability.

Health insurance

Under the Affordable Care Act, businesses with 50 or fewer employees are not required to offer health insurance to employees. You can still choose to provide health insurance coverage.

You can purchase small business health coverage from a health insurance company or the Small Business Health Options Program (SHOP). Offering health insurance through the SHOP marketplace could improve your small business’s health care tax credit eligibility.

According to Julie Stich, CEBS, Associate Vice President of Content at International Foundation of Employee Benefit Plans:

“Health care coverage is a sought-out benefit. One option that can be lower cost is a high-deductible plan combined with a health savings account (HSA). Typically, premiums for this type of plan are lower, and HSAs allow for tax-advantaged savings to pay health care expenses.”

Retirement plan

There are many small business retirement options that you can offer to employees. You can choose from IRAs, pensions, 401(k)s, and multiple employer plans, among other options.

“Giving employees a retirement vehicle will offer them a chance at future financial security,” Stich said. “For small employers, there are several options available that reduce fiduciary liabilities, simplify administration, and lower costs. These are payroll-deduction IRAs, simplified employee plans (SEPs), and SIMPLE IRAs.”

When considering retirement plans to offer employees, you should consider your costs, employee costs, ease of using the plan, and whether you will contribute to retirement savings.

Employee-pay-all benefits

You can set up voluntary benefits that employees entirely pay for. Employee-pay-all benefits allow you to offer benefits at a reduced rate, but at limited or no cost to your business.

“Voluntary employee-pay-all benefits offer employees the chance to buy a variety of insurance coverages like auto, homeowners, disability, life, identity theft, and long-term care at group rates rather than individual rates, making them less costly,” Stich said.

Optional leave

There are several types of optional leave that you can offer to employees.

You can provide vacation and sick leave for employees to use for personal or wellness days. Even though you don’t have to offer a paid time off policy, the majority of employers do. Different paid sick leave laws by state may even require you to provide payment for sick days.

You can provide days off on major holidays. And, you may provide bereavement time off when an employee’s family member dies.

Some states have laws that require you to give time off to employees. Also, state laws might require that you pay employees for some types of time off.

Flexible working hours

Do you offer flexible working hours to most of your full-time employees? Flexible working times let employees work around their personal schedules. Employees can set aside time for appointments, family events, and other obligations more easily without missing any work.

Incentive programs

Employees might be more productive if they have a goal to work toward. You can create an incentive program with individual or group goals to reward employees.

For example, you might offer a bonus to employees who reach a certain number of sales in a month. Or, you might reward a team’s hard work by letting them work a half day on Friday.

There are many types of incentives you can offer. You just have to pick an incentive and goal that will work with your business.

Goods or services

You can offer to employees the goods or services that your business sells. The goods or services can be at a reduced sale price.

You might also create a partnership among other local small businesses. Each business could offer discounted prices to employees within the partnership.

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What benefits should I offer?

Understanding benefits packages is no easy task. It can be difficult to figure out which small business employee benefits you should offer. You obviously need to offer the legally required benefits. But, what do you offer beyond that? You want to keep employees happy, but you also need to stay within your budget.

If you already have employees, you can survey them to find out what their most valued benefits are. Once you determine what would make your employees happy, you can offer those types of employee benefits.

You can also find out which benefits your competitors and other local businesses offer. You can try to match or outdo other businesses in attempts to attract quality employees.

You should consider the cost of the benefits you offer. The benefits should be affordable for both you and your employees.

There is no specific list of benefits your business should provide. You must determine what is right for your business by weighing laws, industry standards, benefits costs, and employee desires.

Don’t let the stress of managing employee benefits slow down your small business growth. Patriot Software’s online HR document software add-on is an easy way to manage employee history and records. Pair it with our free employee portal software for a hassle-free experience. Start your free trial now!

This article has been updated from its original publication date of October 3, 2016. 

This is not intended as legal advice; for more information, please click here.

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