Small, mid-sized businesses offer employee benefits at record levels

Even in the face of a possible recession and continued market volatility, small and midsized businesses are providing employee benefits at record levels, according to a survey by Principal.

Business owners are offering benefits at the highest levels seen since 2008, said Nate Schelhaas, senior vice president for benefits and protection, and head of business owner segment at Principal. Health and wellness offerings have grown significantly, added Schelhaas. These include comprehensive health, health savings accounts (HSAs), employee-assistance programs (EAPs) and emotional/mental wellness programs.

Comprehensive health insurance remains the most common solution (offered by 62% of participants), added Schelhaas. EAPs and emotional/mental wellness programs expanded year-over-year. There was also significant growth in the number of owners who are offering a 401(k) plan and HSAs, which have grown by10 percentage points since last year.

Business owners wish to offer more

In addition to the record number of benefits being currently offered, six in 10 business owners want to offer even more benefits, according to the survey. When asked how they will fund these additional benefits, 24 % said they would use company profits, and 21% said they did not know.

The survey also noted the importance of key employees to business owners. Key employees are employees who play important roles in an organization. According to the survey, 98% of the owners surveyed said that they have at least one key employee. Eighty-seven percent are currently offering key employee benefits, compared to 74% in 2017. And 55% said that they would like to offer more key employee benefits.

Why the increase in employee benefit offerings

There are many reasons for this rise in employee-benefits offering, explained Schelhaas. Business owners experienced significant competition for labor last year and recognized that benefits help them attract and retain the right talent. For example, he said, record levels (over 70%) of owners said that offering benefits improves the retention, recruiting, and productivity of their workforce.

But even though business owners rank employee benefits highly, not all have a plan for them. For example, when Principal asked business owners to rank their priorities and share whether they have a plan in place, the Number One priority was business protection—a benefit they have chosen as their top priority since 2010. But just over half of them have a plan.

In addition, while income protection has been a Top 4 priority since 2010, only 43% have a plan. And of those who do, only 45% own individual disability income insurance. Confidence in business-succession plans has reached record levels, but they are offered by only 61% of business owners. The most popular—and fastest-growing business- succession strategy-- is to give the business to family members.

When it comes to non-medical and voluntary benefits, dental (offered by 59%,) maternity leave (57%), paid family and medical leave (56%), vision (55%), and accident insurance (53%) are the five most popular options.

Getting more owners to offer employee benefits

So what can agents do to get more business owners to take action and put more plans in place? About two-thirds of business owners use a financial professional, but only 47% go to them for their business needs, explained Schelhaas. Business owners often are wired to try to do everything themselves, but that can lead to burnout. So, agents should “work alongside and personally connect with business owners to help them navigate the full range of employee benefits and understand which options and affordability are the right fit for their business,” he advised.
The survey is Principal’s ninth Business Owner Insights Survey since 2008. Beginning in 2022, the Business Owner Insights transitioned to an annual survey to more closely monitor business trends. The survey included 1,000 small and midsized business owners and was conducted by Dynata from January 9 – 20, 2023.

Ayo Mseka has more than 30 years of experience reporting on the financial services industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at amseka@INNfeedback.com. 

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Ayo Mseka has more than 30 years of experience reporting on the financial services industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at amseka@INNfeedback.com.