Offering Benefits a Matter of Economics for Small Businesses

Paychex found the more revenues a business earned, the more likely it was to offer retirement and health benefits to employees.

The majority of small- to mid-sized businesses (SMBs) do not offer health, retirement or other ancillary benefits, Paychex found in a survey of 318 such companies. Only 38% offer such benefits.

“While this contrasts national levels, it does reflect in part the absence of legal requirement for businesses with less than 50 employees to offer benefits—most notably, health insurance,” Paychex says. “Providing benefits is also a matter of economics for many SMBs. Of businesses earning less than $500,000 in revenues, 78% reported that they do not offer benefits. This is in contrast to responses from businesses with revenues of more than $1 million, where 74% confirmed that they do offer benefits to their employees.”

Similarly, 66% of businesses that have been in operation for 10 years or more offer such benefits. However, this drops to 42% for businesses between six and up to 10 years in existence. Likewise, 77% of companies that say they are experiencing stagnant growth do not offer benefits, but 51% of companies that are experiencing fast growth do offer them.

Among the companies offering benefits, the top values they cited from offering these benefits were improved employee morale and ability to attract and retain talent.

For health insurance benefits, the top reason for offering was split between attracting talent (23%) and supporting healthier employees (22%). Only 2% of respondents who offered health benefits reported that they didn’t see a need to offer these benefits.

When considering retirement benefits, minimizing turnover was reported as the most important reason (23%) for offering this benefit, followed closely by the individual need for the benefit (20%). Attracting talent remained important (18%), but 17% of respondents said they did not see the need to offer retirement benefits to their employees.

Among the companies offering health and retirement benefits, they said they found them to be a positive addition to their businesses, with 89% saying a health insurance plan was beneficial and 72% saying a retirement plan was beneficial.

As Paychex concludes, “For businesses, offering benefits to employees can be a challenge. This is especially true the smaller the business is and the business’s economic environment. However, the value of offering benefits to employees, especially health insurance, is unanimously understood and appreciated. This survey showed that the majority of businesses that do offer benefits find them beneficial to their businesses and they see value in the benefits they offer. As largely perceived, if a business doesn’t offer benefits to its employees, a competitor will. As the size of a business grows and revenues increase, the value of benefits becomes clearer, as well as more achievable.”

The full findings of Paychex’s survey can be downloaded here.