The Impact of Employee Benefits on Small and Medium-Sized BusinessesEditorial Team
Small-and medium-sized businesses (SMBs) account for 99.9% of all U.S. businesses and nearly half of the private U.S. workforce. However, SMBs are still reeling from the impacts of the pandemic and are having to balance employee retention with benefits offerings to attract and retain talent.
A recent PwC survey revealed a staggering 88% of companies are experiencing higher turnover rates than normal. That same survey notes employees rank benefits as the second reason to start looking for a new job, after wages and salary.
To gain insights into how SMBs across the country redirected and evolved their benefits throughout 2021 to combat threats such as the pandemic and the Great Resignation, HR and benefits software company, Ease, released its 2022 SMB Benefits and Employee Insights Report.
The findings in the report dive deeper into the benefits shaping company decisions and reveal how SMBs can remain competitive during increasingly difficult times.
The Smallest SMBs are Paying More and Getting Less
Data from the report shows that the smallest SMBs (those with 1-10 employees) are struggling to secure affordable benefits.
SMBs continue to shoulder the cost of COVID-19 testing, vaccine administration, and treatments.
This means they will have no choice but to pass these costs on to employees through increased insurance premiums, especially for Accidental Death and Dismemberment (AD&D) plans, Short Term Disability (STD) plans, and Long Term Disability (LTD) plans.
Employees and employers at the smallest SMBs pay more for benefits, making it harder for the smallest SMBs to attract and retain workers. In fact, employees working for companies with 101-250 employees paid 22% less than those working for companies with 1-10 employees this past year. Similarly, the report shows that larger SMBs — businesses with more employees — continue to offer more medical plan options per employee than smaller SMBs.
Flexible Benefits & Technology Are Instrumental
So how can the smallest SMBs compete for talent alongside larger SMBs as well as big businesses?
The answer lies in flexibility.
Voluntary benefits are key to providing a stellar flexible benefits package for employees, and voluntary benefits are less expensive for employers. They are also offered at a discounted group rate but are paid for (either fully or partially) by an employee. With voluntary benefits, SMBs are not shouldering any additional costs while offering employees a wider array of options.
Unlike traditional benefits, voluntary benefits do not rely on a ‘one size fits all’ mentality.
Employee satisfaction improves since not every employee will use or even need the same offerings.
The win-win design of voluntary benefits has clearly resonated with SMB employers and employees as all company sizes have increased voluntary benefits plans offered year over year, with the smallest businesses seeing the highest rate of change from 2018-2021 (about a 4% increase).
Voluntary benefits are not the only flexible offerings SMBs can take advantage of when trying to recruit and retain.
As a result of the pandemic, offering remote work flexibility can be just as effective in recruitment efforts with no additional cost to the employer.
SMBs that can offer employees remote or hybrid work opportunities should implement this benefit for added flexibility. To determine what benefits employees are most interested in, SMBs should consider conducting short surveys prior to their next open enrollment period.
Ease’s report has shown that 76% of broker agencies have changed the way they do business due to the pandemic.
Forty-five percent of agencies conduct most of their business remotely by utilizing tools like Zoom, Microsoft Teams, Dropbox, and Google Drive. These pandemic era patches are now an essential part of doing business, and adopting flexible work environments and technology to aid in remote work will help SMBs remain competitive.
The pandemic has also led to an increase in telemedicine and telehealth benefits, including self-funded plans offered by employers and embedded services included with most health providers. Like voluntary benefits, providing telemedicine and telehealth options offers mass appeal for the employee and employer. Virtual care allows employees to seek the help they need while saving employees time and money and reducing costs for employers.
Holistic Benefits & Family Plans
Employees rely on well-rounded benefits to feel wholly supported by their employer.
Must-haves like dental, vision, and life insurance top the list for SMB employees, but “non-traditional” benefits like hospital indemnity, financial wellness, cancer insurance, legal services, and pet insurance have all seen increases in preference since the onset of COVID-19. Including these unique benefits as add-on options, in addition to traditional plans, provides inclusivity and enables employers to fully meet the needs of all their employees.
In addition to unique or “non-traditional” benefits, providing family plans is essential. Employer responsibility for family premium contributions increased from 2020 to 2021. This may be in response to the ongoing pressures to acquire and retain employees — offering family coverage can make or break an offer.
According to Humana, adding dependents may diversify the group and help lower rates. Which could work out to be a boon across the board. Additionally, providing a well-rounded benefits plan can help smaller SMBs attract talent across generations.
Talent is one of the most important resources for any business, and though SMBs are still battling the pandemic, historic inflation, the Great Resignation, and larger enterprises, they can continue to remain competitive through benefits offerings. Specifically, voluntary benefits and flexible remote and hybrid work options allow employers to meet the needs of today’s employees, while remaining competitive in today’s hiring marketplace.
David Reid has 30 years of experience working in the employee benefits and group insurance industry. In 1999, David was among the first to venture into the world of online technology designed for employee benefits enrollment and communication. After working with numerous online platforms, David co-founded a proprietary application, Ease, for employee benefits communication and enrollment with unique capabilities for small- and mid-sized employers. Ease works with insurance brokers and small businesses to create seamless HR and benefits processes on an easy-to-use system. With a nationwide reach, the platform currently supports more than 1,500 agencies, 75,000 businesses, and 2 million employees.