Business Strategies

Benefits can help you attract and keep good people, but they come with rules and costs. These are some common questions from small-business owners.

Which benefits are most common for small employers?

Many small businesses offer some combination of health coverage, a retirement plan, paid time off, and perhaps life or disability insurance. You do not need to offer everything. Start with what your employees value most and what your budget allows.

Am I required to offer health insurance?

Under the Affordable Care Act, employers that reach a certain size, measured in full-time-equivalent employees, must offer coverage that meets federal standards or face a penalty. Smaller employers are generally not required to offer it. Because the size test has its own counting rules, confirm where you stand. Healthcare.gov has information on small-business options.

What kinds of retirement plans can a small business set up?

Common choices include a SIMPLE IRA, a SEP IRA and a 401(k). They differ in setup cost, administrative burden, who can contribute and how much. A 401(k) generally offers the most flexibility, while a SEP or SIMPLE is simpler to run. The IRS publishes current limits at irs.gov.

Are benefits tax-deductible?

Employer contributions to many benefit plans are deductible business expenses, and many benefits are not taxable to the employee. However, the rules vary by benefit and by business structure. For example, owners of some entities are treated differently from rank-and-file employees for certain fringe benefits.

Can I offer different benefits to different employees?

Sometimes, but many plans must pass nondiscrimination tests so that they do not favor owners or highly paid staff. Splitting by job category or by full-time versus part-time status is common, but should be set up carefully.

What about paid leave?

Federal law requires unpaid leave for certain situations at larger employers, and paid leave is mostly a matter of company policy in Georgia. Put your policy in writing so everyone understands it.

How do benefits affect payroll?

Some benefits reduce taxable wages while others must be added to them, and each affects withholding and reporting. Accurate payroll setup matters; see our payroll services.

Thinking about adding or changing benefits? Reach out to us and we can help you weigh the costs and tax effects.