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The Pros and Cons of Offering Benefits as a Small Business

November 12th, 2021 | 5 min. read

By Gia Rolen

Cooking is my favorite thing to do. I love watching friends and family enjoy the comfort of a delicious soup, the satisfaction of cutting into a perfect filet, or the delight of scooping up a fluffy homemade cake. 

But the quality of the food isn't what invites your guests back in the future. Instead, it's how welcoming of a host you are, the comfort of your kitchen, and that sense of warmth and belonging that they feel. 

In the same way, paying your employees isn't always enough to keep them coming back to work. But creating a welcoming environment encourages them to stay. A huge piece of this begins with offering employee benefits. 

After all, Aflac reports that 60% of employers said it improves retention, and 50% said it enhances employee recruitment. You relieve immense pressure off your work environment by reducing turnover, recruiting better employees, and saving time and money when considering a compensation package that includes medical benefits, fringe benefits, FSA, and HSA plans.

But if you're a smaller business, it can be costly to administer employee benefits to your team. Not only that, but benefits expectations have changed over the years, and some potential hires may reject your job offer if it doesn't suit their needs. 

At Whirks, we strive to provide the best resources for small businesses that want to grow and get one step better every day. This begins with knowing what you need, so you don't pay for a service you can't utilize right now. 

If you're a small business that wants to provide the best for your employees, this article will guide you through the pros and cons of benefits administration so you know if it's the right choice for you and your team.  

What do employee benefits cover? 

Under the ACA Act, you are legally required to offer medical benefits if you have over 50 full-time employees or 50 full-time equivalents. Full-time employees qualify when they work 30 hours a week or 130 hours a month.

We will explain what full-time equivalents are and if you are legally required to offer medical benefits to your employees under the Affordable Care Act in a different article. For now, we'll explain what types of benefits you could offer. 

Employee benefits can cover the following: 

  • Health Insurance 
  • Life Insurance
  • Vision Insurance
  • Dental Insurance 
  • Short-Term Disability Insurance
  • Long-Term Disability Insurance 
  • Retirement Plans
  • Paid Time off, sick time, and other vacation policies
  • Additional Compensation (commissions, bonuses, and incentives)
  • Gift cards
  • Tuition Reimbursements, Sign-on Bonuses, and Moving reimbursements 

PTO includes bereavement leave, paid personal days, sick days, vacations, and paid holidays. Recently, many companies began offering unlimited PTO to ensure their teams feel appreciated and refreshed. 

If you want to pay your employees bonuses, offer a commission to your sales team, or enable profit-sharing, this falls under additional compensation. 

Let's dive into the pros (and cons) to see if administering benefits is the right choice for you. 

Tax advantages


Suppose you have a smaller team of employees and want to offer benefits. In that case, you qualify for the Small Business Health Options Program (SHOP), which aids you in claiming a tax credit for providing employee benefits.  

The smaller your employee count, the more credits you receive. You may want to consider this option if you: 

  • Have less than 25 employees
  • Pay each of your employees less than $56k/year
  • Pay at least 50% of your employees' premium costs 
  • And offer it to all employees (unless they aren't full-time)


Keep in mind that someone on your team is going to be responsible for these additional tasks. If you're a smaller business, most of your employees are probably already wearing several hats (including you). 

Overloading your team may end up breaking, not benefiting you and your business. Sometimes, it's better to wait on offering benefits until you can dedicate the task to a qualified employee, ensuring that no costly compliance mistakes are made.

HCM software integration


If you have (or are considering) an HCM platform to help manage your team, intuitive software will integrate your payroll, timekeeping, and onboarding with your benefits administration. 

Deciding to offer benefits to your team means making room for administrative overhead. Someone has to manage open enrollment, communicate with your carrier, oversee documents, and assist employees in customizing or changing their plans. 

Or do they? 

If you have a payroll provider with an intelligent HCM platform, the software and a dedicated team will do the heavy-lifting of benefits administration. 

You, an HR manager, or a dedicated admin are responsible for overseeing your company benefits, but an HCM platform can provide support and a safety net. Some features include: 

  • Ensuring COBRA compliance 
  • Legal guidance and counsel 
  • Plan document management 
  • Account-based plans
  • Eligibility rules & automation of life-qualifying events


The big question is, are you ready for an HCM platform? If you're a new business and you're just getting started, don't rush this process. 

The last thing you want is to buy an HCM package with features you will not use yet.

Luckily, you can choose to add benefit administration to an HCM package later and not pay for those additional employee costs upfront.  

Company Culture


If your employees are happy with their benefits plan and feel more secure working for you, they are likely to brag about it to friends and family. Your reputation will grow as an employer if you are generous to your team. 


However, many companies offer excellent benefits that disguise a bad company culture to retain employees. 

For example, many modern businesses offer unlimited PTO, which sounds like a dream come true to many people. Employers may use this to attract potential hires to apply and stay at the company.

In reality, it can be a distraction from blurred PTO policies and a toxic or hostile work environment. 

In addition to unlimited PTO, many larger companies offer other incredibly generous benefits, such as work-from-home stipends, maternity and paternity leave, tuition reimbursement, and mental health services

Suppose the modern workforce expects any of these as part of a benefits package. In that case, you will need to consider researching for an HCM partner to help you accomplish this without sacrificing your HR leader's (or admin's) time and energy. 

Would benefits benefit my small business?

If you want to hire talented, motivated workers who can help your company succeed, then a solid employee benefits portfolio is a great place to start. 

But benefits provide additional impact beyond compensation. Put simply: benefits suggest you have what it takes to be a great employer, which in turn attracts great employees.

At the same time, evolving regulations, benefit availability, and systems for managing employee access continue to change and get more complex. 

It may not be in your budget yet to hire an HR manager to oversee these tasks as a small business. If you're searching for a payroll provider, it's good to consider finding the right platform that can support employee benefits in the future.

The role of human resources is changing. Positive employee experiences are increasingly important, as they increase productivity and engagement. 

You can't invite loved ones over for dinner if you don't have a house. If you're a growing business, don't put the cart before the horse. 

Focus on finding a great team of people who will support your dream and help you reach your goals. After you've found your people, you may consider researching payroll and HCM partners if that makes sense for your business right now. 

But if you're still getting through the growing pains of starting a business, you may want to focus on your processes and procedures before taking the big step of finding an HCM provider. Think through offering benefits to your employees. If you do offer them, what does that look like?

Benefits terminology is not easy to understand (it's a lot of abbreviations to keep up with, isn't it?) Read this blog article on what these terms mean and how they may be relevant to you and your business.