Your small business has been growing rapidly, and it’s time to think about hiring. But before you can start sending those offer letters out, you’ll need to get those employee benefits in place. The world of benefits can be a complex one to navigate, so to help you out, here are four basics you should know.

1. Some Benefits Are Legally Required

Legally-required benefits vary at different government levels, so make sure you’re caught up on federal, state, and local requirements. All companies planning to hire employee must contribute to certain federal programs that either protect employees or provide social security nets.

These include:

  • Worker’s compensation insurance
  • Unemployment insurance
  • Social Security and Medicare

Some mandatory benefits won’t show up in a new employee’s compensation package but still offer important protections for workers. Every U.S. company must offer overtime pay and more recently, Coronavirus leave, under federal law.

Other benefits, like health insurance and family and medical leave (FMLA), are only required for specific companies. Health insurance under the Affordable Care Act (ACA), for example, must be offered at any company with more than 50 employees working at least 30 hours a week who are 26 or older.[1] Failing to offer health insurance can result in a public assessment and heavy fines. Family and medical leave, which gives employees up to 12 weeks of job-protected, unpaid time off, is required for federal, state, and local government agencies, most schools, and any company with more than 50 employees.[2]

Each state has different requirements for employees. Some states, like California, Hawaii, New Jersey, New York, and Rhode Island, have made disability insurance mandatory, while others require employers to pay jury duty leave.[3]

2. Other Benefits Are Voluntary but Still Industry Standard

You may be used to seeing 401(k)s and paid time off (PTO) at most large companies. But the truth is, these benefits aren’t actually required, and a lot of smaller companies and companies that hire gig workers or part-timers don’t offer them.

Here are a few other benefits you might think are required for small business employers but aren’t:

  • Paid personal days
  • Paid sick days or leave
  • Life insurance
  • Flexible spending accounts (FSA) and Health savings accounts (HSA)

And remember that some of the mandatory benefits mentioned above are only required if your business is big enough. So health insurance, family and medical leave, disability insurance, and jury duty leave may also be voluntary if you have a small staff and don’t do business in certain states.

3. Fringe and Free Benefits Can Help You Stand out as a Potential Employer

Workers applying for jobs often look for more than basic paid benefits; they’re also interested to see what “perks” there are to working for your company in particular. Benefits like retirement accounts and paid sick days aren’t necessarily going to draw much interest unless they’re an unusual choice in your industry. But by offering unique fringe and free benefits, you can more easily attract and retain the talent you hire. These could include employee-focused offerings like flexible scheduling, remote or hybrid work, employee assistance programs (EAPs), or mental health support.

Other popular benefits:

  • Professional development stipend
  • Childcare support
  • Gym memberships or other wellness programs

4. Your Employee Benefits Should Match Your Company Responsibilities, Budget, and the Needs of Your Future Workers

Now you have a list of employee benefits to consider. But how to choose? You may be a bit concerned about what all this is going to cost, but don’t worry, it’s less than you think. According to the Bureau of Labor Statistics (BLS), total employer costs for employee compensation averaged $41.03 per hour worked in June 2022, and employee benefits cost just $12.72 (31%).[4]

Here’s an easy way to build your benefits package:

  • Set a budget for benefits.
  • Make a list of the benefits you are required to offer (and their costs).
  • Determine your remaining budget, so you know what you have left to spend.
  • Research which perks and benefits are most important to workers right now to narrow things down.
  • Make your final choices and add them to your total compensation package for future hires.

Choosing a good benefits package for your first hires is as important as writing a good job description. With the right combination of benefits, you can attract the best talent to support your business’s future growth.