Employee Benefits Services

Benefits are any type of perk or compensation that are offered on top of an employee's regular wages. Ranging from traditional to creative, a small business’s employee benefits can be a strategic tool that helps your business stand out among competitors and demonstrates how well the business takes care of its employees.

Employers should not underestimate the importance of employee benefits for small businesses. According to its 2022 Trends report, the Boston College Center for Work & Family attributes overwork, burnout, and a quest for more purpose and values-driven work as some of the reasons behind millions of Americans leaving or changing jobs each month. A small business employee benefits package that meets employees' needs on these issues, when added to a competitive salary, can attract job candidates, and encourage great employees to stick around, helping to ensure the longevity of the business.

What should you keep in mind when building a small business employee benefits program? Here are some questions to guide you through the process:

Do Small Businesses Have To Provide Benefits?

Some employee benefits are legally mandated by state or federal laws. As a result, there are a certain number of basic benefits for small businesses that a worker is entitled to receive.

The U.S. Bureau of Labor Statistics reported that the cost of these mandatory benefits make up a very small portion of a worker's hourly wage. As of June 2022, the median cost to businesses of private sector employees came to $2.93 for every hour worked.

All employers, regardless of size, are required to provide the following benefits to employees.

Social Security and Medicare

Social Security and Medicare are funded by the Federal Insurance Contributions Act (FICA), a federal payroll tax, and are used to provide benefits to older Americans, disabled individuals, and children. Social Security benefits are based on an employee's lifetime earnings record.

Workers' Compensation Insurance

Workers' compensation insurance is a safety net that provides financial support to people unable to work due to a workplace injury or illness. Subject to some exceptions, workers comp insurance is generally required for all employers, regardless of size.

Unemployment Insurance

Qualified full-time and part-time workers receive financial protections in the form of income for a limited period of time when they are let go due to mergers, layoffs, or termination without substantial proof of cause.

You may notice that health benefits are not part of this list. There are mandated health benefits for applicable large employers (ALEs); companies with an average of 50 or more full-time employees, including full-time equivalents, in the previous calendar year. There are no such requirements for smaller businesses.

When should a small business offer health benefits? The answer varies for each business, but health benefits should be provided by every employer, no matter the size, who wants to attract reliable workers and who cares about the overall health and well-being of their employees. Fortunately, there are several affordable health benefit options available to small employers that can help you keep your employees happy, healthy, and productive.

Why Is It Important for Small Businesses To Offer Employee Benefits?

The importance of employee benefits lies in its function as a strategic tool. While some benefits are required by law as we've outlined above, savvy small business owners recognize that simply meeting the legally required minimum benefits offerings may not be in the best long-term interests of the business. Many employees consider the benefits package a major factor in deciding whether to accept a job offer or a top reason why employees choose to leave a job. To build and keep a strong labor force, employers must be competitive in their benefits offerings.

Small business employee benefits can be personalized to fit corporate culture and workers' needs. Finding a sustainable work-life balance that protects employees' financial, physical, and mental wellness is a top priority for many workers. A small business benefits package that can help them achieve it will likely inspire loyalty and nurture positive attitudes in the workplace.

What Does a Basic Benefits Package Include?

A typical benefits package for small businesses can include health insurance, dental and vision coverage, paid time off, a retirement plan, a flexible spending account, and a health savings account/health reimbursement arrangement. Other benefits offerings may include life insurance and disability coverage (five states require that employers provide short-term disability insurance to employees). Although mandated by federal and state law, Social Security, workers’ compensation and unemployment insurance taxes are considered employee benefits as well.

What Benefits Can a Small Business Offer?

Health Benefits

Not only can healthcare costs create financial anxiety among workers, but businesses lose money and productivity when employees are sick or managing a chronic health condition.

• Group health insurance plans: Safeguard the health of your workers and their dependents by giving them much-needed access to more affordable healthcare. These plans also come with tax savings for your business and can serve as a powerful recruitment tool.
• Medical flexible spending account (FSA): Pretax contributions to an employer-owned account give employees funds to use for qualified healthcare-related costs. Employers and employees can contribute to this account and enjoy tax savings.
• Health reimbursement arrangement (HRA): Fully owned and funded by the employer, this account also gives employees access to funds to use for qualified healthcare expenses. This account also comes with tax savings benefits.
• Health savings account (HSA): Like an FSA and HRA, HSAs give employees access to pretax funds that can be used for qualified medical expenses. Both employers and employees can contribute. The key difference between an HSA vs. HRAs and FSAs is that an HSA is an employee-owned investment account that accrues tax-free interest.

Financial Health Benefits

When employees fret over finances due to today's high cost of living, they are likely to come to work filled with anxiety and be distracted, making them less engaged and productive. Chronic anxiety can also increase their risk for physical and mental health issues.

• Retirement accounts: Give employees the ability to make pretax contributions to a retirement account, like a 401(k), and reap the benefits of compounding interest. Consider making a matching contribution to help workers achieve the savings goals they need. HSAs can also serve as a vehicle for retirement savings.
• Annual pay raises: Reduce the impact of inflation on your employees financial health by implementing a system that provides for regular cost of living adjustments in addition to any annual performance-related increases they may receive.
• Financial education: Financial wellness includes understanding how to manage finances. Classes and workshops in money management can empower employees to make smart decisions with their funds and give them lifelong skills for better financial fitness.
• Tuition and student loan assistance: Many college-educated employees are burdened with student debt. A benefit that helps with student loan repayments can make your business look more attractive to many Generation Z, millennial, and even Generation X workers. Another variation is to provide a tuition reimbursement program to help employees further their education.

Mental Health Benefits

Creativity, engagement, productivity, and even physical health can all take a hit when a worker is suffering from chronic or acute mental health issues. These can arise from feeling overwhelmed in the workplace or at home.

• Employee assistance program (EAP): An EAP gives employees confidential, 24/7 access to trained professionals and counselors who can help them and their dependents with a variety of life's stressors: anything from parenting teenagers to relationship issues to anxiety or dependency.
• Employee resource groups (ERGs): Giving employees a chance to bond or learn more about shared interests, characteristics, and/or experiences can help create a culture of acceptance, respect, and inclusion within your business.
• Social perks: Socializing with other employees and bonding over shared experiences can help a worker feel connected and part of a community. Such activities can also increase resiliency against depression and feeling isolated.
• Flexible work schedules: Balancing home and work obligations in today's demanding world can deplete an employee of time and energy, leading to burnout. Choices in flexible and hybrid work schedules allow employees to juggle work and home responsibilities more equally.
• Wellness programs: Encouraging behaviors that improve physical and mental health, either through classes, inclusive group challenges, or incentives can create a sense of teamwork and accomplishment, all while helping lower healthcare expenses for employees and a business.

Fringe Benefits

Additional benefits in the form of cash, cash equivalents, or services are all considered fringe benefits and can help strengthen worker loyalty. Many of these are ideal benefits for small businesses because they are often relatively affordable.

• Dental and vision: Healthcare plans typically do not cover dental or vision costs, yet both are an important and integral part of overall wellness. Without a dental or vision plan, many employees may opt to go without.
• Life insurance: Give employees peace of mind that in the event of the unthinkable, their dependents will have a financial safety net.
• Dependent care flexible savings account: Childcare and eldercare expenses can overwhelm a worker's monthly budget. Similar to a medical FSA, a dependent care FSA lets an employee set aside pretax earnings for qualified care expenses, thus reducing their annual tax obligation.
• Gift cards: Gift cards to places like restaurants, grocery stores, and gas stations are a way to recognize a job well done and can go a long way toward validating a worker's contribution while putting a little extra money in their pocket. Take care to be equitable in the use of gift cards to avoid having some staff members feel overlooked and forgotten.
• Paid volunteer days: Many workers want to contribute their time to a meaningful organization but lack the time or money to do so. A paid volunteer day lets them know your business cares about giving back to the community and lets employees fulfill a greater sense of purpose.
• Memberships and passes: Passes to museums, sports events, public transportation, or even a gym membership are all extras that can help your employees enjoy their life while experiencing a sense of gratitude to their employer for making it happen.

What Benefits Can Set My Company Apart From Competitors?

Research and determine what other firms in similar industries are offering their employees — perhaps the local Chamber of Commerce or a local HR association have benefits survey results for the local area. Your insurance and tax professionals are also good resources for getting information on "what everybody else is doing." It may also be helpful to talk with employees and determine what they would most like to have — and there may be an affordable way to get them what they want.

For example, employers can open an IRA or 401(k) plan without a company contribution. In the case of health coverage, they can set up a high-deductible health plan and fund a portion of the deductible through a health reimbursement arrangement — there are numerous options available, and it's worth having a conversation with your CPA or insurance broker. It makes the most sense to think about starting or expanding benefits that will mean something to your workforce, and maybe provide tax savings for the business.

How Much Do Benefits Cost a Small Business?

Depending on what's being offered, some employee benefits don't cost small businesses anything. Some benefit plans do not need any funding from an employer (other than administrative costs to manage the plan), such as a flexible spending account for dependent care expenses as well as dental and vision insurance, which can be paid completely by the employee who enrolls in the plan. Depending on the size of your business, you may also be eligible for a small business health care tax credit if you offer healthcare to employees.

To further minimize costs associated with your small business employee benefits program, consider non-traditional benefits, such as flex scheduling, employee assistance programs, or telecommuting. You can also include low-cost benefits such as paid time off enhancements, free meals, or rewards for a job well done (like gift cards for a local coffee house, gas station, etc.) to incentivize employees.

How Do I Show Employees the Value of the Benefits I’m Offering?

Create and distribute a total compensation summary for each employee. These statements illustrate, in dollars and cents, the value of not only the employee's salary but also the employer's contribution toward both mandatory and voluntary benefits. Seeing these figures in black and white can help employees understand the real value of these benefits.

If you've previously offered benefits and are changing or updating your benefits package, develop a communication plan (scroll down to Establish a Communication Plan) for delivering this information. A well-thought-out plan can help ensure that employees thoroughly understand the reason for the changes, the impact of new and updated benefits offered, and where to go for additional information or questions.

How Can I Minimize the Work Involved With Managing an Employee Benefits Program?

Technology now makes it possible to integrate your benefits administration with your payroll processing. While offering a benefits package is important to your business, it doesn't need to add additional administrative burden onto your HR team. Solutions like Paychex Flex^® can handle the heavy lifting while still allowing you to do what you do best — run a successful business.

How To Offer Benefits as a Small Business

You may be wondering, how can a small business offer benefits that can compete with larger corporations? Making strategic choices that personalize your offerings to your employees' needs can help ensure you develop a benefits package that works to support your brand and business objectives. In addition to researching employees' needs, ask them what they want. You can also research your competitors to make sure your benefits stand apart from the competition.

Seeking assistance from a third-party HR services provider can help you organize the most comprehensive and advantageous benefits package. With a reputable, outsourced benefits provider like Paychex, you can save time, money, and headaches by reducing administrative overhead and the associated potential risk of errors, all while staying ahead of ever-changing state and federal regulations. See Paychex's employee benefits package options and discover how you can offer more to your employees than you may have thought possible. Your business and your workers will be glad you did.

Insurance sold and serviced by Paychex Insurance Agency, Inc., 225 Kenneth Drive, Rochester, NY 14623. CA License 0C28207.

The building you rent or own as well as the equipment you use to operate your business are integral to keeping your doors open. But when a disaster impacts these assets, it could be difficult for a business to recover. Hazard insurance for small business can help cover the costs of repairing or replacing the physical structures and equipment that your business relies upon. Another name for this coverage is commercial property insurance.

What Does Business Hazard Insurance Cover?

Business hazard insurance, also known as commercial property insurance coverage, helps protect the building your business owns or rents, as well as the equipment you use. Depending on your policy coverage, this type of insurance covers the cost to repair or replace:

• Personal property
• Tools and equipment
• Inventory
• Furniture
• Computers
• Accounts receivable
• Documents
• Outdoor landscaping

A hazard insurance policy generally covers losses due to unexpected events such as:

• Fire and smoke damage
• Theft and vandalism
• Some weather-related events such as hail, lightning, snow, sleet, or ice
• Explosions
• Damage caused by aircraft or vehicles
• Sprinkler leakage
• Building collapse
• Certain types of water damage
• Civil unrest or rioting

Items typically excluded from a hazard insurance policy are damages due to flooding, earthquakes, acts of terror, nuclear attacks, or damage from war. Protection from these events would require a separate insurance policy.

Why Do I Need Hazard Insurance for a Small Business?

While many states do not require business owners to carry hazard insurance, it's a good idea to have to help cover the costs of damages you would otherwise have to pay out-of-pocket for. You may also need a specific hazard insurance policy if you're planning to secure business funding from a lender. Loans from the U.S. Small Business Administration (SBA), for example, may require proof of business hazard coverage (see below for more details).

Hazard Insurance for Home-Based Small Businesses

If you're looking to protect a business you operate out of your house, your homeowner's insurance policy might not provide adequate coverage for business property stored in your home. Hazard insurance may offer added coverage for your home-based business property that would otherwise not be covered by a homeowner’s policy or be covered at lower limits under a homeowner’s policy.

How Much Does Business Hazard Insurance Cost?

The cost of a hazard insurance policy will differ for every business. Primary factors that can influence the cost of hazard insurance include:

• Property age and value: The more property you have, the more that coverage will cost.
• Replacement value vs. cash value coverage: Replacement value is the cost to purchase a new version of the damaged property, while actual cash value is based on how much the covered item cost before it was damaged. Given depreciation, cash value coverage is usually less expensive than replacement value coverage.
• Coverage limits: As with most insurance policies, your premiums will increase for more coverage.
• Lender requirements: Before granting a loan, a lender may stipulate that you have a specific amount of property coverage.

Hazard Insurance for an SBA Loan

As part of granting a loan, the SBA outlines that proceeds from insurance coverage, which may include hazard insurance, can be deducted from the eligible loan amount. Additional location-related coverage (such as policies that protect against floods or earthquakes) may also be required. This includes economic injury disaster loans the SBA granted to businesses that were negatively impacted due to COVID-19.

What Type of Hazard Insurance Does the SBA Require?

The SBA will require a business to obtain adequate insurance coverage to qualify for a loan. This may mean general liability coverage and/or commercial property insurance that includes hazard coverage. Keep in mind that the SBA may require other insurance coverage (e.g., workers' compensation), depending on the type of loan you're looking to secure.

Specifically, the SBA will be looking for hazard insurance that meets the following criteria:

• The amount of coverage must equal at least 80% of your loan amount.
• The insurance must be listed under the name of the business.
• If you operate under a doing business as (DBA), it must be listed on the policy.
• If the business doesn't currently have the necessary insurance, it must provide proof of coverage within 12 months of receiving a loan.

Is Hazard Insurance Tax-Deductible?

When it comes to business insurance in general, the IRS stipulates that it's a part of the cost of doing business and therefore tax-deductible. In the case of whether hazard insurance is tax-deductible, there are some additional points to consider.

The IRS allows you to deduct home office expenses if you run a home-based business. While this includes items such as utility expenses and home office equipment, it can also include your insurance premiums. For instance, if 50% of your home is used solely for the purpose of operating your business, you can deduct 50% of your yearly hazard insurance premiums.

You may also be able to claim deductions in the event that your business experiences losses in federally declared disaster areas. For example, if you file a claim on your hazard insurance and your insurance company only pays a portion of the amount, you can deduct the remaining amount minus $500 per incident.

If you're unsure whether hazard insurance for small business is tax-deductible, it's a good idea to work with a professional who can help ensure that you're taking advantage of all the tax deductions your business is eligible to claim.

Protect Your Business With Ample Insurance Coverage

Adequately protecting your business is a crucial part of success. That means securing a business insurance policy that protects the business, its assets, your employees, and other important aspects that keep operations up and running. Get the ultimate peace of mind with complete business coverage for your organization, or get in touch for help with policies that match your needs.

A recent announcement by the OregonSaves program adds an additional group size for businesses to register while also establishing new deadlines. Businesses with 3-4 employees have until March 1, 2023 to enroll in the state-facilitated workplace retirement plan, while employers with 1-2 employees have a deadline to register by July 31, 2023 to comply. 

If your business uses a Professional Employer Organization (PEO), the registration deadline is July 31, 2023.

Businesses with 100 or more employees, as well as those with 50 to 99, 20 to 49, 10 to 19 and 5 to 9 had been registering since 2018.Self-employed individuals also can take advantage of OregonSaves and sign up through the program’s website.

OregonSaves is the nation’s first automatic-enrollment, payroll-deduction IRA program for private-sector workers. Legislation created the program in 2017 because of the retirement crisis in the United States. In 2019, one of the frequently asked questions to the program’s website had to do with the “average savings for those nearing retirement.” It was $12,000¹.

At that time, about one million workers in Oregon still lacked access to a retirement savings plan at work.

What is OregonSaves?

OregonSaves is a retirement savings program sponsored by the state of Oregon, facilitated by employers and funded by employee investments via payroll deductions. OregonSaves is a Roth IRA retirement account with automated enrollment. Employee participation is completely voluntary, and money in workers' accounts is 100 percent fully vested and portable if they change jobs.

Standard elections:

• 5 percent of employees' gross pay is contributed to a Roth IRA.
• Automatic annual 1 percent increase until savings rate reaches 10 percent.
• Employees' first $1,000 will be invested in the OregonSaves Capital Preservation Fund.
• Savings over $1,000 will be invested in an OregonSaves Target Retirement Fund based on an employee's age.

Employees have a choice of investment options, and employees may change their automatic contribution rate or opt out of the program at any time. Federal IRA limits apply.

Why are Oregon and other states sponsoring their own retirement plans?

America faces a retirement crisis, as many people find themselves financially unprepared for their non-working retirement years. In response, states such as Oregon have begun establishing their own retirement plans.

Did you know that when taking into account all working individuals, the average American has no money saved for retirement? Even those who have retirement accounts have only managed to save about $40,000. When accounting for an individual’s net worth, 77 percent of Americans still fall short of meeting what would be considered conservative retirement savings targets for their age and income based on working until age 67². Financial experts recommend that by age 67, a worker should have between five and eight times their annual salary saved for retirement.

Do businesses have to use the state-sponsored program?

No. Registering for the OregonSaves program is one way to fulfill the requirement that every employed Oregonian have access to a retirement plan. Businesses can also establish their own employee retirement plan, such as a 401(k) or SIMPLE IRA, to satisfy this requirement. You should consider all available options before making a decision.

However, a report by the National Institute on Retirement Security (NIRS) found that Americans find state-based retirement plans appealing³.

• 90% liked that you can take the plan from job to job
• 86% liked that the plan would provide higher returns than other safe investments in the market

Nearly three-quarters of those surveyed would participate in a state-based retirement plan, with 36% very likely to participate and 38% somewhat likely.

What are the differences among state-run IRAs, SIMPLE IRAs and 401(k) plans?

A state-run sponsored IRA is one way to satisfy requirements and help employees save for retirement. However, it's in businesses’ best interest to compare it with other financial options and decide which option best fits their needs and those of their employees.

The chart below shows key characteristics of a state-run IRA compared to a SIMPLE IRA and 401(k) plan, both of which Paychex offers. The biggest differences are the option for a company to match a portion of savers' contributions, and the maximum amount employees can contribute.

How can my business establish its own employee retirement plan?

Retirement plans don't have to be expensive or difficult to manage. As the nation’s No. 1 provider of 401(k) services with more than 100,000 plans, according to PLANSPONSOR Magazine, Paychex is well-positioned to help Oregon employers meet their retirement needs, as well as provide information to help them meet state requirements. Paychex offers many plan options, exceptional customer service, and minimized administrative tasks by fully integrating payroll with our recordkeeping platform.

¹ OregonSaves, 2019, OregonSaves Frequently Asked Questions

² “Retirement in America: Out of Reach for Working Americans?” National Institute on Retirement Security, 2018

³Retirement Insecurity 2019, National Institute on Retirement Security (NIRS)

⁴ Setting Every Community Up for Retirement Act of 2019. New plans may be eligible for up to $5,000 a year over three years and an auto-enrollment credit of $500 a year over three years, for a total tax credit of up to $16,500.