While most large employers tend to be legally required to offer fringe benefits, a small business usually does not have to offer certain fringe benefits such as health insurance. However, prioritizing fringe benefits may be worthwhile for a small business seeking to further improve its company culture for several reasons.
Continue reading to learn more about which kind of businesses are required to offer fringe benefits.
The IRS defines fringe benefits as forms of pay in addition to the stated compensation for the performance of work or services.
These are employer-sponsored benefits offered to employees as compensation for work-related activities or to promote job overall satisfaction.
Examples of common fringe benefits include:
The IRS tax guide for fringe benefits further explains which employee benefits are taxable and nontaxable. For example, group health insurance is a nontaxable fringe benefit, and employee health insurance premiums are usually tax deductible for small business employers.
According to the IRS and the Affordable Care Act (ACA) mandate for employers:
This means that small businesses typically do not have to offer specific types of fringe benefits that a large employer may legally be required to provide.
Most employers are required to offer the following fringe benefits:
|Fringe Benefit||Required for a large business?||Required for a small business?|
|Group health insurance||Yes||No|
|Family and medical leave||Yes||No|
|Social Security tax||Yes||Yes|
|Civic obligations (i.e. jury duty)||Yes*||Yes*|
*Workers’ compensation and jury duty rules vary by state law.
Overall, business size and state law determines which kind of employers are required to offer fringe benefits.
Even though your small business may not have to provide certain fringe benefits to your employees, doing so may contribute to several strategic advantages for your business, such as creating a more positive company culture, increasing employee retention, and assisting with recruiting.
Ultimately, while a small business is required to offer fewer benefits than a large business, it may be worthwhile for a small employer to provide employee benefits to its workforce.
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Visit eHealth.com or speak with one of our licensed insurance agents today to see how you can find affordable health insurance for your small business.
This article is for general information and may not be updated after publication. Consult your own tax, accounting, or legal advisor instead of relying on this article as tax, accounting, or legal advice.