Today's Benefits

Mind the Gap: The Small Business Benefits Challenge

Providing adequate and relevant options is never ‘one size fits all’

by Bob Risk

Mr. Risk is Senior Vice President, Group Protection Sales and Distribution, Lincoln Financial Group. Visit

Employees working for small businesses typically aren’t afforded the same benefit choices as their counterparts at larger organizations.

A recent employee study by Lincoln Financial Group shows some major differences in access to nonmedical benefits for small-business employees, versus those working for mid- or large-sized companies. In this research, a “small business” is defined as an organization with less than 100 employees.

The study also reveals that the benefits packages offered by smaller employers don’t always stack up to their employees’ expectations. Employers should take note of their employees’ benefit needs and wants, and take action in order to stay competitive in today’s market.

Small Business, Small Benefits

Not surprisingly, the study – Lincoln’s 2015 Special Report: M.O.O.D. (Measuring Optimism, Outlook and Direction) of America on Employee Benefits – shows that health insurance is the most common benefit offered to employees at both large and small organizations, with 96 percent of all employees and 89 percent of small-business employees stating that they are offered medical coverage.

Outside of medical, however, the gap widens significantly:

  • 74 percent of employees at small businesses are offered dental insurance, compared with 91 percent of all employees surveyed,
  • 72 percent are offered a retirement plan, compared with 89 percent total,
  • 66 percent are offered vision insurance, compared with 84 percent total,
  • 62 percent are offered life insurance, compared with 81 percent total, and
  • 52 percent are offered disability insurance, compared with 74 percent of all employees.

Financial Wellbeing: Not One Size Fits All

These numbers – differences as large as 22 percent – show a disparity that should be addressed.
Employees at small businesses need nonmedical benefits, too. Just like their counterparts at larger organizations, these employees have financial fears – fears that certain benefits can help alleviate.

For example, just 11 percent of employees working at small organizations feel very confident that they could cover their expenses if they were to encounter serious illness or injury. This compares to 18 percent when looking at the total population. These employees would greatly benefit from the financial protection of disability insurance, which could secure their income if they were unable to work due to a health issue. However, only about half of small-business employees have the option to enroll in disability coverage.

Looking at financial concerns more broadly, we see similar figures. (Figure 1) Just 11 percent of employees at small businesses say they feel very secure about their financial futures. This compares to 17 percent of all respondents.

Protected Employees are Productive Employees

Financial peace of mind is an invaluable asset to American employees: for the most part, they define financial security as “having enough money for today” and “having enough money for the future.” They also note that “control” or “stability” in general play a role in boosting feelings of financial security. These sentiments are consistent across all employees, regardless of employer-size.

If small businesses can help employees protect their money for today AND tomorrow, they’ll help provide that feeling of stability. Less time spent worrying about financial issues equals a more focused and productive workforce.

It’s NOT just about health insurance: employees want more

While small-business employees don’t always have access to a full menu of benefits, they DO still highly value nonmedical products: (Figure 2)

  • 90 percent of employees at small businesses say their employer should offer a retirement plan.
  •  Dental, vision and life coverages are considered the most important ancillary insurance benefits: 87 percent and 83 percent say it’s important for their employer to offer dental and vision insurance, respectively, and 76 percent cite life as a key benefit.

These numbers illustrate another big gap: between employees’ benefit needs and what they’re actually getting from their employers.

When 90 percent of small-business employees say a retirement plan is essential and 87 percent say they want dental insurance, but in reality only 72 percent get retirement and just 74 percent have dental, it becomes a problem for small employers. And those are just two examples. Might those employees start looking elsewhere for better benefits? Maybe, at a larger company?

Almost 70 percent of employees at small businesses say that workplace benefits have influenced their decision to join a company in the past. And benefits outside of medical are not just viewed as “nice to have,” but are actually considered to be highly important. (Figure 3)

Small employers have options, and should take action

In today’s competitive landscape, it’s critical for small employers to offer more comprehensive benefits packages – including nonmedical insurance coverages and retirement plans – to their employees. And this IS a delicate balance… small employers have to mitigate costs and administrative needs, while offering attractive benefits packages that bring in talent and reduce turnover.

But it is possible.

Small business employers, along with their brokers and advisors, should work to identify insurance and retirement providers that specialize in- and cater to- small businesses. This can enable employers to provide useful solutions to their employees in an efficient manner, without taking focus from running the business, or incurring a major administrative burden.

Employers today can also look at voluntary options. We live in a world of personal responsibility, and employees realize that they will likely have to contribute to their benefits, medical or other. The “paternal” era of workplace benefits is long gone.

Regardless of business-size, American employees are fundamentally the same. They want financial security and peace of mind. With the right benefit offerings, employers can help their employees achieve those goals, enabling more engagement and productivity at the workplace.

Differing needs for very small businesses

For small businesses with just a handful of employees, benefits needs change. Individual insurance coverage becomes exceedingly important – particularly, life insurance. Individual life insurance can not only protect someone’s family in the event of a tragedy, it can also protect a small business.

It’s important for small-business owners and partners to be prepared for unforeseen events, to ensure preservation of their hard work and legacy. ◊



About the Special Report: M.O.O.D. of America on Employee Benefits
Results for the Special Report: M.O.O.D. of America on Employee Benefits are based on a national survey of employees conducted by Whitman Insight Strategies (WINS) on behalf of Lincoln Financial Group. The research was conducted in early February 2015, among 933 employed adults ages 22 to 69. Data shown in this report is weighted to reflect the proportion of U.S. employees by gender, age, region, race and ethnicity, based on data from the Bureau of Labor Statistics and the U.S. Census Bureau. The margin of error is +/- 3.1% at the 95% confidence interval for the entire sample.
Mr. Risk is Senior Vice President, Group Protection Sales and Distribution, Lincoln Financial Group. Visit