How to Build an Employee Benefits Package 

Don’t let your #1 candidate pick or top-tier employee be the one who got away. Whether it’s an employer’s or employee’s market, the job market for top talent is competitive. You need a robust employee benefits package to attract and retain talent.

Offering a small business benefits package starts with building one out. You need to choose competitive, desired, and—above all else—legally required benefits. 

Learn how to create your small business employee benefits package here. 

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• What are small business employee benefits?
• Common benefits in a company benefits package [Chart]
• Do you have to offer employee benefits?
• What benefits do most small businesses offer?
• How to build your employee benefits package

What are small business employee benefits?

Benefits are the perks employers offer employees in addition to regular wages. Health insurance, paid time off, and 401(k) plans are a few examples of small business employee benefits. 

Employers may offer benefits to stay compliant with federal or state laws, attract talent, and retain employees. Benefits can set companies apart and contribute to your employer reputation. 

Savvy employers know how important benefits are to employees. Consider the following:

• 63% of job seekers look for benefits in job ads
• 81% of employees cited benefits as an important factor in whether they accept a job

However, offering benefits is expensive. According to the BLS, benefits make up about 30% of total compensation costs. This high cost is the biggest hurdle 56% of employers face when offering benefits. 

Common benefits in a company benefits package [Chart]

Use the following cheat sheet to learn about common benefits in a small business benefits package.

Benefit	Overview	Compliance
Health Insurance	Health insurance plans can cover medical, dental, and vision care. Examples include traditional group health plans and HRAs.	Employers with 50 or more full-time equivalent employees are penalized if they don’t provide health insurance.
Retirement Plans	Employees can contribute money to a retirement account, with or without an employer match. Examples include 401(k) plans and Simple IRA plans.	Several states, including California and Connecticut, have state-mandated retirement plans that require qualifying employers to offer retirement benefits.
Paid Time Off (PTO)	Time employees can take away from work for vacation, sickness, personal reasons, or holidays while receiving their regular wages.	Several states require that qualifying employers provide paid sick leave—or paid time off for any reason—to employees.
Disability Insurance	Disability insurance partially replaces a worker’s wages if they are injured or become ill (off the job).	California, Hawaii, New Jersey, New York, and Rhode Island have state disability insurance mandates for most employers.
Workers’ Comp Insurance	Workers’ compensation insurance provides medical benefits and wage replacements for employees who become injured or ill on the job.	Most states require that employers carry workers’ comp insurance.
Social Security and Medicare	Social Security and Medicare are insurance benefits Americans receive in their 60s for retirement and hospital/medical insurance, respectively.	There is a mandatory Social Security and Medicare tax that employers and employees share.
Unemployment Insurance	Unemployment insurance provides monetary benefits for qualifying workers who become unemployed through no fault of their own.	Employers are responsible for handling federal and state unemployment benefit contributions through FUTA and SUTA taxes.
FMLA (Family and Medical Leave)	FMLA benefits provide up to 12 weeks of unpaid leave each year for qualifying reasons, like the birth of a child.	Businesses with more than 50 employees in a 75-mile radius must offer FMLA to employees. Small businesses may need to offer this benefit, too.
Paid Family and Medical Leave	Paid family and medical leave is a state-mandated benefit that provides employees with paid leave for qualifying reasons, like bonding with a new child or dealing with an illness.	Several states have paid family leave laws requiring eligible employers to offer this benefit.
Commuter Benefits	Commuter benefits cover an employee’s transportation expenses, such as transit passes and parking expenses.	Some localities, like San Francisco, require that eligible employers provide commuter benefits to employees.
Childcare Benefits	Employer-provided childcare benefits cover part or all of an employee’s childcare costs.	There is no mandate requiring childcare benefits. However, some states offer tax credits to employers who offer these benefits.
Educational Assistance	Educational assistance benefits pay for part or all of an employee’s educational expenses, such as tuition, books, and supplies.	There is no mandate requiring educational assistance benefits, but there are tax incentives for employers who offer them.
Employee Assistance Programs	An employee assistance program (EAP) provides benefits such as short-term counseling, confidential assessments, and more.	There is no mandate requiring EAP benefits, but some states encourage employers to offer these benefits.

Do you have to offer employee benefits?

You must include certain benefits in your employee benefits package to comply with federal and state regulations. 

Depending on your location and employee count, mandatory employee benefits may include: 

Again, the benefits you must offer may depend on how many employees you have and what state (or even locality) your employees work in. Some mandatory benefit contributions, like Social Security and Medicare, are handled through a payroll tax. 

What benefits do most small businesses offer?

Benefits offered vary greatly depending on the business. However, standard benefits typically include health insurance, paid time off, and retirement plans.

Take a look at how many private industry workers have access to these standard benefits:

• 86% have access to employer-sponsored health insurance
• 80% have access to paid holidays, 79% to paid vacations, and 78% to paid sick leave
• 67% have access to defined contribution retirement plans

How to build your employee benefits package 

Ready to put together a list of benefits to offer employees? Get started with the following six steps.

1. Know what benefits you must offer for compliance

Some mandatory benefits include Social Security and Medicare, unemployment insurance, workers’ comp insurance, and more. Mandatory benefits may depend on your location and the size of your business. 

What benefits do you have to include in your package? Review federal, state, and local mandates to find out. 

But who has the time to scour the web to learn which mandates apply to your business? 

Most business owners don’t. You may consider signing up for an HR solution to streamline your HR processes and ensure your benefits package is compliant. 

HR software for small business may have features like a compliance dashboard and law alerts to help you stay on top of your compliance obligations. You can get guidance on which mandatory benefits apply to your business.  

2. Choose what benefits you want to offer 

Mandatory benefits are a starting point for your benefits package. But for most employers, the benefits don’t end there. 

You also need to consider attractive benefits that will help you attract and retain employees.

At the same time, you likely want to be money-conscious. The cost of offering benefits—30% of total compensation costs—is the biggest hurdle for 56% of business owners. 

It’s possible to offer in-demand benefits even with a tight budget. Here are a few tips to get started: 

• Prioritize the most valued benefits, like health insurance, 401(k) plans, and paid time off 
• Take advantage of tax credits for certain benefits, like health insurance tax credits for small business owners
• Offer benefits that are employee-paid, like life insurance
• Offer low-cost benefits, like flexible scheduling or hybrid work options 

Put together a benefits budget that you’re comfortable spending. Make sure to account for annual increases and tax incentives. 

3. Shop around and select providers 

Once you have an outline of the benefits you want to offer, you can shop around to select providers. Compare quotes to get the best rates and discounts, and be ready to negotiate. 

Use payroll software? Start there. Some payroll providers have benefit integrations with exclusive pricing, streamlining benefits administration and earning you discounts. 

For example, Patriot Software offers a free 401(k) integration with Vestwell and a free workers’ comp integration with NEXT Insurance. 

4. Use a benefits documents creator and forms

When you offer benefits, you must create documents to distribute to employees. You can simplify this responsibility by using a benefit documents creator.

A benefits document creator can help you create complex documents with ease, including:

• Premium Only Plan (POP) plan document
• Summary Plan Description (SPD) plan document
• Health reimbursement arrangement (HRA) plan document
• Individual coverage health reimbursement arrangement (ICHRA) plan document
• Qualified transportation fringe benefit plan document
• Wrap plan document to meet ERISA disclosure requirement 

Look for customizable benefit notice templates. For example, you can use templates for benefits termination and COBRA, notice of patient protections (HIPAA), and more. 

5. Notify employees about benefits 

Let employees know which benefits are available to them, the employee costs of each (if applicable), and how they can get more information. 

Notify new hires about the benefits you offer. Hold regular meetings with your team to explain benefits and answer questions. 

Add your benefits information to your employee handbook. You can use an employee handbook builder to streamline the process. 

You can also distribute surveys to learn what benefits your team wants and which existing benefits don’t apply to them.

6. Handle benefit contributions each payroll 

Payroll is so much more than paying employees for their work. You must first withhold and contribute payroll taxes and handle benefits deductions and contributions. 

Understand the different types of benefit contributions. For example, Social Security and Medicare are handled through employer and employee payroll taxes. Both you and the employee may contribute to health insurance premiums.

When an employee enrolls in a new benefit, set up payroll deductions and/or employer contributions to ensure you handle the amount. 

Withhold and remit contributions and taxes each time you run payroll (e.g., biweekly, weekly, etc.). Keep detailed records for compliance.  

Build your employee benefits package with Patriot’s HR software, an optional add-on to our payroll! Take advantage of our HR software’s benefits document creator, compliance dashboard, and employee handbook builder. Plus, you can rely on our payroll software to calculate taxes and contributions each payroll run. Get your free trial of both today!

This is not intended as legal advice; for more information, please click here.