The importance of small- business employee benefits

Small business owner working in her kitchen

One of the biggest challenges small-business owners face is attracting and retaining top talent. While some companies will always be able to offer more in terms of salary, you may find that employee benefits is an area where you can give yourself a competitive edge. In fact, a 2024 poll from property, casualty, and benefit consultancy NFP found that the majority of workers would accept a reduction in pay in exchange for increased benefits from their employers.1 So whether you’re looking for high-caliber workers, or fighting to keep those you already have, small-business benefits are essential for making your staff feel valued and supported.


Create a cost-effective employee benefits package

If money is tight, as it often is for small businesses, it’s important to focus your limited resources on the types of benefits that matter most to your workers. While free food can be a nice perk, it’s low on the list of what influences an employee to join a company. Instead, employees are most interested in benefits that provide protection, flexibility, and support. For example: Did you know that healthcare and life insurance were recently named the two most important workplace benefits by employees and employers in a recent Forbes Advisor survey?

67% of employees and 68% of employers believe employer-provided medical insurance to be the most important benefit.

Health, dental, and vision insurance

Of all workplace benefits, health insurance is by far the most valued by current and prospective employees. Not surprisingly, it’s also the most commonly provided.3 Dental and vision insurance are sometimes included, but the high cost of health insurance alone can be prohibitively expensive for many small-business owners.

On average, employer-sponsored health insurance costs rose 7.8% for employers with 50 to 499 employees in 2023. And the average per-employee cost was $16,464 for those smaller companies, compared with $15,640 from workplaces with 500 or more employees.4

It’s not easy to create an employer benefits package while meeting all the other financial obligations you face. If medical insurance is too great an expense for your company, you can look for other ways to reward your employees or build the cost of medical insurance into your future business goals.


Life insurance

While life insurance is a less common employer-provided benefit than medical insurance—it’s valued highly by employees. Forty-five percent of employees—and 43% of employers—named life insurance a top company benefit.2 And life insurance is more than just an attractive offering that employees want—it’s a promise to shield and protect your staff and their loved ones. Like medical coverage, life insurance serves both a practical and symbolic function by showing employees that you care about their well-being and future. Best of all, there are a wide variety of life insurance solutions available, so it should be easy to find one that fits into your budget. If you would like to know more, a financial professional can walk you through all your options.


Short-term and long-term disability insurance

If you would like to make your benefits package even more attractive, you may want to consider including some type of disability insurance. While life insurance gives your employees financial protection in case they pass away, disability insurance helps replace some of the income that would be lost if they became disabled and were unable to work for an extended amount of time.

The Social Security Administration reports that 1 in 4 adults will become disabled before reaching age 67.5

Short-term disability coverage, which is usually the most affordable, pays a benefit that typically lasts up to 12 months, while long-term disability coverage pays benefits over multiple years. By adding one, or both, of these products to your benefits package, you can set yourself apart from the competition and let your employees know that you have their best interests at heart.


Retirement benefits

While it may seem difficult for a small business to offer a retirement savings plan, there are some relatively easy ways to help employees set money aside for retirement. Here are just a few options highlighted by the U.S. Department of Labor:6

Simplified Employee Pension (SEP) – A SEP allows small employers to set up an IRA for themselves and their workers. It has low start-up costs and can be established using a two-page 5305-SEP form. Best of all, employers are free to change the amount they put into employee IRAs each year (even $0), so it’s easy to adjust as business conditions change.

SIMPLE IRA Plan – With this plan, employees contribute a percentage of each paycheck and employers are required to contribute either a fixed 2% of total compensation (even if the employee does not contribute), or a dollar-for-dollar match up to 3%. A SIMPLE IRA plan is also easy to set up and administration costs are low.

Payroll Deduction IRA – As the name suggests, this plan allows employees to set up their own IRA and use payroll deductions to fund it. Since there are no employer contributions or administration costs (once the deduction is set up), it is probably the easiest way to enhance your company benefits package.


Create a competitive benefits package

No matter the size of your business, a New York Life financial professional can guide you in structuring a benefits package that attracts top employees and helps you keep the high performers you have. Connect with a small-business professional to learn more about how New York Life product solutions can play a key role in your business’s benefits package.

Certain products may be available through one or more carriers not affiliated with New York Life Insurance Company, dependent on carrier authorization and product availability in your state or locality.


Frequently asked questions

Perks are generally nonfinancial incentives or rewards—such as half-day Fridays or designated parking spots—that help make the workplace experience more enjoyable. Benefits, on the other hand, are usually financial in nature or provide a valued service, such as an employer-sponsored retirement plan or paid healthcare.

This is a very important—but difficult question to answer. Since every business is different, it really comes down to what you can afford, and which benefits are the most meaningful to the people you are trying to attract. You may want to do a little research to see what your competitors are offering, and be sure to speak with a New York Life small-business professional to explore your options.

In general, employee wages, employee benefits, and payroll taxes are all considered operating expenses.

There are lots of ways to educate your employees about their benefits. A good place to start is by making it a part of your onboarding or new-hire orientation process. Ongoing communication is also important, so you may want to schedule quarterly meetings so that you can answer any questions and gather feedback. If you want, you can even have a small-business professional distribute information and meet with employees one-on-one to explain their options. If that is something you’re interested in exploring, just let us know.

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1”Employees are Prioritizing Benefits Over Salaries, Taking Cues from Europe,”, February 2, 2024.

2“Best Employee Benefits in 2024,”, February 26, 2023.

3“25 Types of Employee Benefits to Look for in 2023,”, September 29, 2023.

4“Average Per Worker Cost of Health Benefits Rose by 5.2% in 2023: Survey.”, November 22, 2023.

5“Disability Insurance Awareness Month 2023,” LIMRA Newsroom, May, 16, 2023.,disabled%20before%20reaching%20age%2067.

6“Choosing a Retirement Solution for your Small Business,” Employee Benefit Security Administration, U.S. Department of Labor PDF, November 2021.