The convergence of market forces has prompted small businesses to rethink the role of employee benefits in their companies. On average, nearly 40% of small business workers depend on their workplace benefits for financial security.1 Guardian’s 5th Annual Workplace Benefits Study, Small Business, Big Benefits, shows benefits remain a top concern for small businesses and a majority of them are still struggling to deliver the right benefits.2 Yet, most of these owners have not had a conversation with their benefits broker about their benefits needs, although more than 30% have expressed interest in having a conversation.
Below we explore some top trends that will impact most small businesses in the next few years and should be considered when developing employee benefits strategies.
1. Focus on Well-Being
- Financial Wellness: Money is the top source of stress for small business workers, and college debt is the major culprit. Nearly 4 in 10 small business workers are living paycheck-to-paycheck and struggling to pay off college debt or save for their children’s college education. High-deductible health plans (HDHPs) increase out-of-pocket costs for workers, but small firms are offering access to supplemental health coverage (e.g., accident, critical illness) which help fill the gaps — an increase of 30% since 2015. Financial education and decision support tools for benefits enrollment are in greater demand given the rise in voluntary benefits.
- Work-Life Balance: To help attract and retain talent, more small businesses are offering flexible work schedules, telecommuting, and convenience services, such as day care and other concierge services.
- Physical Health: Seven in ten workers say it’s important that employers offer benefits to support workforce health. Small businesses are responding with refreshed wellness initiatives, including biometric screenings and health risk assessments.
2. Expand Use of Benefits Technology
- Benefits Digitalization: Nearly half of all small businesses are more digital than paper-based and that will accelerate rapidly in the next five years as more business owners realize the relatively low cost and high potential. Migrating benefits administration to cloud-based software/systems will yield efficiency gains and enhanced employee experience.
- Integration/Outsourcing: Small firms are handing over the reigns to technology platforms/third-party administrators who can help them achieve greater efficiency and better service with holistic HR and benefits solutions.
- Artificial Intelligence/Robotics/Automation: No longer just IT buzzwords; small firms are beginning to apply these technologies to their own business models and can more easily see the application for improving benefits communication, enrollment and engagement.
3. Improve Compliance Discipline
- Affordable Care Act – Tax Reporting Obligations: Employer mandate requires self-insured employers to report individuals covered by their plan or face penalties. The excise tax on “Cadillac” plans goes into effect in 2020.
- State Paid Leave Laws: Seven states have enacted or passed paid family leave laws, and many more are pending. Paid sick leave is next.
- Family Medical Leave Act (FMLA) and Americans with Disabilities Act and Amendments (ADAAA): FMLA marked its 25th anniversary in 2018, yet many employers remain non-compliant on aspects of the law and with ADAAA. For example, small business owners often are unaware that FMLA applies to full and part-time workers, or that ADAAA applies to groups with 15 or more employees.
- Association Health Plans: Expanded definition allows employers to join together as a single group to purchase health insurance in the large group market. By joining together, employers may reduce administrative costs through economies of scale, strengthen their bargaining position to obtain more favorable deals, enhance their ability to self-insure and offer a wider array of insurance options.
So how do small businesses address these trends?
Beyond size, difference in benefits strategy must reflect small business owner’s needs, goals, and most importantly, their values. As the 2020-decade approaches, the benefits landscape will likely become even more complex. Owners will need greater support from their benefits broker to navigate changes and develop optimal benefits strategies for the future of their business.