Small business employee benefits to offer

Small businesses don't need to replicate what large companies offer to build a competitive benefits package. A thoughtful approach starts with understanding what you may be required to provide, then layering in voluntary options that fit your budget and your team's needs. Benefits can grow as your business grows. This article covers required and voluntary benefits, options for self-employed individuals and a few practical steps for putting a package together.

Required employee benefits for small business

Some benefits are required by federal or state law, depending on your business size and location. Here's a look at common requirements:

• Workers' compensation: Required in most states, workers' compensation helps protect employers and employees from costs related to work-related injuries or illnesses.
• Unemployment insurance: Employers are generally required to pay federal and state unemployment insurance taxes, which fund compensation for employees who are let go through no fault of their own.
• Social Security and Medicare: Employers are required to withhold Social Security and Medicare taxes from employee paychecks and contribute a matching amount.
• Health insurance: Under the Affordable Care Act, businesses with 50 or more full-time employees may be required to offer health insurance.
• COBRA: If your business has 20 or more employees and offers group health insurance, the Consolidated Omnibus Budget Reconciliation Act (COBRA) requires you to offer former employees and their families the option to continue that coverage for 18 to 36 months. Former employees generally pay the full premium cost, but administering the program is the employer's responsibility.
• FMLA: Businesses with 50 or more employees may be required by the Family and Medical Leave Act (FMLA) to offer up to 12 weeks of unpaid, job-protected leave for qualifying family or medical situations.
• State disability and paid leave: Some states, including California, Hawaii, New Jersey, New York and Rhode Island, require disability insurance or paid leave programs.

Requirements vary by employer size, location and plan type. Consider working with a qualified HR, tax or legal professional to confirm what applies to your business.

Voluntary benefits worth considering

Beyond required coverage, voluntary benefits can help attract and retain employees. You don't need to offer everything at once. Consider starting with the options that matter most to your team and adding more as your business grows.

Health and financial benefits

• Health insurance: Even when not required, offering group health insurance can be a significant draw for potential employees.
• HSAs: Paired with a qualifying health plan, a health savings account (HSA) allows employees to set aside pre-tax dollars for medical expenses.
• Life insurance: Group life insurance can be an affordable benefit for employees and their families.
• Disability insurance: Short or long-term disability coverage can help replace a portion of income if an employee can't work due to illness or injury.
• Retirement plans: Options like a 401(k), SIMPLE IRA or SEP-IRA can help employees save for retirement and may offer tax benefits for your business. Employer matching contributions can be an added incentive.
• Employee Assistance Programs (EAPs): EAPs can connect employees with resources for mental health, financial counseling, caregiving and other personal challenges.

Time and flexibility benefits

Some of these benefits, like flexible schedules and remote or hybrid work options, may carry little to no direct cost while still offering meaningful value to employees:

• Paid time off: A flexible PTO policy that covers vacation, sick leave and personal time can help employees feel valued and supported.
• Flexible schedules: Allowing employees to adjust their hours can matter a great deal for working parents and caregivers.
• Hybrid or remote work options: Even one day out of the office can be an appealing option for employees looking for flexibility.
• Volunteer time: Paid volunteer hours give employees time to contribute to causes they care about while supporting community connection.
• Caregiving and family support: Benefits like parental leave or dependent care resources can help employees manage responsibilities outside of work.

Workplace and low-cost perks

Some appreciated benefits don't cost much to offer. If a full benefits package isn't realistic yet, these options may help you start small:

• Professional development: A budget for courses, certifications or conferences can support employee growth and loyalty.
• Wellness resources: Gym membership reimbursements, mental health app subscriptions or a designated no-meetings day can support well-being on the job.
• Work gear and technology: Contributing toward a phone plan, home office equipment or work tools can be a low-cost way to show support, especially for remote or hybrid employees.
• Recognition and team perks: Team lunches, spot bonuses or a birthday day off are small gestures that can add up over time.

Before committing to voluntary benefits, a simple survey or conversation can help you understand what your team values most. 

Benefits to consider if you're self-employed

When you're self-employed, you're responsible for building your own coverage rather than selecting options for a team. That typically means shopping for individual plans, paying premiums without employer contributions and factoring those costs into your business budget. Consider these options:

• Health insurance: Health insurance products can help cover medical expenses. Options vary by plan type, deductible and cost-sharing structure.
• Life insurance: A life insurance policy can help protect your beneficiaries and your business. Term and permanent policies offer different levels of coverage and cost.
• Disability insurance: If an illness or injury keeps you from working, disability insurance can provide a portion of your income during recovery.
• Retirement savings: Options like a SEP-IRA, SIMPLE IRA or solo 401(k) can help self-employed individuals build retirement savings and may offer tax advantages.
• Business insurance: Protecting your business with the right coverage is part of a complete financial picture.
• Emergency savings: Building a financial cushion can help your business manage unexpected expenses or slower periods.

How to build your small business benefits package

Putting a benefits package together doesn't have to happen all at once. Consider these steps as a starting point.

1. Set a budget. Determine how much your business can reasonably contribute toward benefits, keeping in mind that many benefits involve a shared cost structure between employer and employee. According to the U.S. Bureau of Labor Statistics, employer costs for private industry workers averaged $14.01 per hour worked in benefits as of March 2026. Your costs will vary depending on the benefits you choose, how many employees you have and how costs are divided between you and your team. Starting with a clear number in mind can help you prioritize where to spend.
2. Identify what's required. Based on your business size, location and plan type, confirm which benefits you're legally required to offer before adding voluntary options.
3. Ask your employees. A brief survey or conversation can help you understand which benefits your team values most and where to focus your budget.
4. Start small and scale. Starting with a few meaningful benefits and adding more as your business grows is a practical and sustainable approach.
5. Get administrative support. Payroll providers, benefits administrators and HR brokers can help simplify enrollment, compliance and ongoing management.
6. Review regularly. A review at least once a year can help you confirm your package is still competitive, affordable and aligned with what your employees need.

More ways to support your small business

Building a benefits package is one part of running a strong small business. A State Farm agent can talk through business insurance options that may fit your needs as your business grows. You might also want to learn more about small business retirement plan options or group health insurance plans.