Should Your Small Business Offer Fringe Benefits?
Published on August 01, 2019
Fringe benefits are types of additional compensation that employers may choose to offer to their employees. Examples of common fringe benefits include health insurance and paid vacation or time off. Group health insurance coverage is often one of the most valued employee benefits at a small business, and it may help build a positive company culture by providing access to lower premiums on average, enhancing recruitment and retention, and contributing to greater workforce productivity.
What are fringe benefits?
According to the IRS, fringe benefits are forms of pay or compensation in addition to the stated pay for the performance of work or services.
Employers often offer fringe benefits to their employees as work-related compensation or to increase job satisfaction and morale. You’ve probably already heard of some fringe benefits, such as health insurance or paid vacation and time off.
As per the IRS, fringe benefits can be divided into:
- Taxable fringe benefits – These benefits are include in wages and gross income, and are reported on Form W-2, the Wage and Tax Statement, and generally subject to Federal income tax withholding, social security, and Medicare. They can also be partially taxable or tax deferred.
- Nontaxable fringe benefits – These are excluded from wages. For example, employer-sponsored health insurance is a non-taxable or excludable fringe benefit.
You can learn more about related tax guidelines via the IRS tax guide to fringe benefits for 2019.
What are examples of fringe benefits?
Common examples of fringe benefits that a small business can choose to offer to its employees include:
- Group health insurance
- Group dental and vision plans
- Paid vacation or time off
- Disability insurance
- Health Savings Accounts (HSAs)
- Retirement planning (401(k) plans)
- Flexible hours
- Paid family leave
- Life insurance
- Employee discounts
If your small business has less than 50 employees, then it is typically optional whether you decide to offer fringe benefits to your workforce. If your company has more than 50 employees, then your business may be legally required to offer certain fringe benefits.
Why is small business health insurance the most valued employee benefit?
Group health insurance continues to be among the most popular fringe benefits offered to employees, and one of the benefits that employees care about most. Employer-sponsored health insurance could be an excellent way to help create a positive company culture at your small business while providing coverage for yourself, your employees, and their families.
Key reasons why group health insurance may contribute to building a vibrant company culture include:
- Access to lower premiums – On average, small business health insurance coverage tends to be more affordable per person than individual health insurance. Employees may express greater job satisfaction when their company provides them access to lower-price health insurance. A satisfied workforce is ultimately a key factor that help creates a positive company culture.
- Loyalty and retention – When employees know that their employer has invested in their long-term well-being with a health plan, they may be more likely to stick around. Reduced turnover may be a good sign of a company culture that inspires employee dedication and commitment.
- Improved recruitment – According to a Randstad survey, 66 percent of workers agree that a strong benefits package is the largest determining factor when considering job offers. As one of the most appealing fringe benefits, group health insurance can help improve your small business’ recruiting strategy while cultivating a wellness-focused company culture.
- Greater productivity – Healthy workers tend to be happier, more productive employees. With the peace of mind from knowing they have health insurance coverage, they may be more likely to be focused and engaged in their work. Healthier employees can also mean less sick days and absenteeism among your small business workforce.
You can learn about more great reasons to offer small business health insurance here.
Shop for affordable small business health insurance with eHealth
With eHealth, you can get free quotes for group health insurance plans based on your budget and coverage preferences. By comparing options from multiple health insurance providers, you can find the optimal small business health insurance for your company. eHealth also serves as your advocate and point of communication with the health insurance company, even after you have enrolled in coverage.
Visit eHealth.com or speak with one of our licensed health insurance agents to find the right group health plan for your small business today.