Invest in technology and digitize benefits administration
Use of technology has been on the rise among small businesses with roughly three in four firms reporting that they had already digitized some aspect of human resource management in 2018.1 COVID-19 expanded the use of these platforms as employers managed remote workforces and relied on tools for collaboration and communication. Nearly 8 in 10 small firms said that the pandemic accelerated their use of technology. More than half (57 percent) of small businesses say that they’ve increased their spending on benefits administration technologies in the past four years.
Benefits administration platforms make enrollment smoother for employees and reduce the workload for human resources-related tasks, improving efficiency for both the employer and the employee. Eight in 10 small firms reported that they outsource at least one HR or benefits-related function.
Digital decision-making tools help employees better understand their benefits offerings and can help them in electing those options that are best for their unique needs. Having a more seamless, integrated approach with fewer platforms is also on the rise. Nearly four in 10 (38 percent) of small businesses describe themselves as fully integrated, compared to three in 10 (33 percent) in 2020.
Utilize solutions like PEOs and ICHRAs
Becoming a member of a Professional Employer Organization (PEO) can enable small firms to expand their benefits offerings while gaining additional support with benefits management, payroll, and other human resources administration. Membership in a PEO allows employers to offer a wider range of benefits and services at rates that are less than they would normally be able to access. Currently, 10 percent of small businesses with fewer than 100 employees use a PEO, but more than four in 10 small employers plan to start working with one within the next two years.
Individual coverage health reimbursement accounts (ICHRAs) are another strategy businesses can use to offer more attractive employee health insurance plans. ICHRAs are gaining popularity — 90 percent of employers with ICHRA benefits plan to renew them in 2022 — yet only one in four small business decision-makers are familiar with them. These accounts let businesses reimburse employees tax-free for individual health insurance premiums and other medical expenses, rather than offering the insurance plan directly to employees. ICHRAs give employees more flexibility in choosing a plan that is right for them and employers benefit from the more predictable, controlled health benefit costs.
Seventy percent of firms consider ICHRAs to be more flexible than other group health insurance options, and more than two-thirds (65 percent) report that they are more affordable. More than half (55 percent) of small businesses say that ICHRAs take less time to administer than traditional health insurance plan offerings.
Expand paid leave, telecommuting, and flexible work arrangements
Offerings around leave and flexibility are becoming imperatives for businesses today. COVID-19 created a rapid need for leave offerings as employees either experienced illness or needed time to care for a sick family member. Eighty percent of small employers report that COVID-19 raised leadership’s awareness around the key role of leave management.
The percentage of small businesses that offer telecommuting has more than doubled since 2018 and nearly six in 10 small businesses report that they plan to continue remote work in some form in the future. While the urgent need for remote work and flexibility that was experienced during the pandemic will wane, the demand for work arrangements that meet employees’ needs remains.
Flexible work arrangements and telecommuting also support employee well-being: 43 percent of employees who work for businesses with remote work rate themselves highly at taking care of their mental health versus 37 percent of employees that do not have remote work as an option.
Use benefits that prioritize employee well-being
Robust benefits offerings are becoming more and more important as small businesses seek to attract and retain talent. Seven in 10 small firms say that they are aiming to offer a better benefits package than their industry peers. To do this, small businesses are increasing the number of and variety of benefits they offer, particularly offering more voluntary benefits. Since 2017, small businesses show an increase of 13 percent in offering accident insurance and an increase 17 percent in offering critical illness insurance.
Additionally, small businesses are placing an emphasis on improving the benefits experience and supporting employee health and wellness. Both objectives saw a 13 percent increase in being rated highly important for small firms since 2018. To support their benefits priorities, most (71 percent) small firms are working with benefits brokers or agents.
The pandemic had hard-hitting effects on small businesses. The small firms that did make it through this period highlight the tools and strategies that can help businesses weather future crises and build a culture of well-being that attracts and retains a supported workforce.
Learn more about the state of small businesses today by exploring our report Inflection Point: How small businesses are emerging from COVID-19.
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