Choosing and offering the right employee benefits for small businesses during the open enrollment period is a critical but complicated task that can significantly impact employee satisfaction, retention, and overall business success.
Open enrollment is the time when employees can select or change their benefits for the upcoming year. However, navigating the complexities of benefit options, compliance requirements, and employee needs can be daunting for smaller companies with limited resources. “It is getting difficult for employers to figure out what benefits to include,” Sera-Leigh Ghouralal, researcher at the Integrated Benefits Institute (IBI), a national nonprofit research organization and business association, told the Society for Human Resource Management (SHRM). “The decision-making process is complicated by the necessity to balance cost, relevance, and employee appeal.”
This guide provides practical advice for small businesses on how to select the right employee benefits, effectively communicate those options, and manage the open enrollment benefits process smoothly.
Before selecting the right employee benefits for a small business, it’s essential to understand what your employees value most. The benefits that appeal to one group of employees might not resonate with another. Conducting surveys, holding focus groups, or engaging in informal conversations can provide valuable insights into what your workforce prioritizes.
“What drives our strategy is what our team members are telling us, where they need help, and trying to address their needs,” says Amanta Mazumdar, Vice President of Total Rewards at Hilton. She explains that Hilton uses a lengthy survey with open-ended questions that encourage thoughtful employee responses. Their team can then review the answers to each question and determine, as she says, “Is there a benefit that can help address this [need]?”
Employers also need to understand what kind of small business benefits package will be competitive in their specific marketplace. “Traditionally, companies would approach benefits from the standpoint of, ‘What is something we can offer that benefits the most amount of people?’” says Daniel Stunes, Manager of Data Monetization with SHRM Data and Insights. “Now we’re at the point of, ‘The vast majority of companies provide health care, mental health care, some kind of leave program, and some kind of retirement program. So, how can I be more competitive in the marketplace?’”
Small businesses need to strike a balance between offering competitive benefits and maintaining financial stability. Indeed, more than half (56%) of employers struggle in balancing benefits offerings against budget.
Where you source the benefits makes a significant difference in cost, especially for smaller employers that may not qualify for Large Group Health Plans on their own. Partnering with a PEO can enable any business, even the tiniest, to access enterprise-sized benefit packages at economy-of-scale prices.
Remember also that the right benefits program isn’t going to be a sunk cost; it has the potential to produce both measurable and nonquantifiable returns through its positive impacts on the workforce, including the ability to attract higher quality candidates, reduce turnover and its associated costs, and increase employee engagement.
When in doubt, businesses may benefit from consulting with financial advisors, benefits brokers, or a PEO to understand the full scope of potential expenses—and potential rewards.
Once you understand employee needs and your budget, it’s time to select the core open enrollment benefits to offer. In general, according to the SHRM 2024 Employee Benefits Survey, the most important benefit categories to employers include:
We cannot emphasize enough the importance of offering a wide range of benefits. Beyond health, retirement, leave, and wellness-related benefits, other benefits like financial wellness, professional development, and situation-specific perks and voluntary benefits can appeal to workers. “There was a lot we heard in our focus groups around team members who were not just taking care of children, but [also] taking care of parents or elderly family members or friends, even pets,” Mazumdar told SHRM. “It was amazing how many people talked about pet care.”
Unless your organization is an enterprise, the widest selection of benefits will likely come from something like a PEO, which can usually offer value-added benefits that sometimes even enterprise-sized organizations don’t. For example, organizations that use a PEO are 56% more likely to offer mental health resources and behavioral health programs than those who don't. Other such types of benefits can include:
Once your benefits offerings are in place, the next step is to ensure that employees fully understand their options. This is a much bigger challenge than many employers realize. Nearly two-thirds (62%) of employees are “unconfident” when choosing benefits, reports benefits technology firm Nayya.
The key is communication that goes beyond just written materials (the most common and often only form of benefits communication). Instead, try to use a combination of emails, in-person group meetings, benefits guides, and even one-on-one sessions to give employees a chance to ask questions and solicit personalized advice. Then, simplify the enrollment process by using online portals and providing further step-by-step assistance.
The best tactic for a small business is to get third-party subject matter experts, like a benefits administrator or PEO, to handle employee outreach and support. An experienced, expert partner can ease the process of providing this support tremendously.
Finally, small businesses must ensure that their benefits offerings comply with both federal and state regulations. This includes adhering to laws such as:
The Affordable Care Act (ACA): Businesses with 50 or more full-time employees must offer health insurance that meets minimum standards.
COBRA: If your business offers health insurance, you must provide the option for continued coverage if an employee leaves or experiences a qualifying life event.
ERISA: This federal law governs employer-sponsored retirement and health plans and requires businesses to maintain certain standards of fairness and transparency.
Here, too, partnering with a benefits broker or consultant can help maintain compliance and prevent costly fines or legal challenges.
Ultimately, selecting and offering the right employee benefits for small business during open enrollment is a crucial task. By understanding employee needs, balancing your budget, and choosing carefully from core benefits options, you can create a compelling benefits package that attracts and retains top talent. Then, effective communication about your small business benefits package and compliance with regulations ensure that the enrollment process runs smoothly and keeps your benefits strategy on track for future success.
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