Small Businesses Struggle to Provide Employee Benefits

 According to research from consulting and professional development form LIMRA, only 47 percent of American small businesses currently offer benefits to their employees. The new finding is the lowest rate of coverage in about 20 years. Further, the study found that 78 percent of small businesses are family-owned, a large subset of the sector that experienced the sharpest decline in benefit penetration over the past seven years. Just 40 percent of family-owned businesses offered insurance benefits last year compared to 47 percent in 2005.

“The recession has had an impact on smaller employers’ ability to offer benefits, particularly those with fewer than 10 employees,” Kim Landry, research analyst with LIMRA Product Research, said. “The weak economy caused a lot of small firms to close, while the new firms cropping up to replace them are less likely to offer benefits. Many small businesses are also hesitant to add new benefits until the economy improves.”

Small businesses that offer insurance coverage to employees most commonly reported providing medical and prescription drug plans and are typically the first to be on boarded. The study also found that females not only own a disproportionately small 25 percent of the small-business market but also post lower revenues and are 13 percent less likely to offer benefits to employees than male-owned companies.

“These benefits provide an opportunity for small business owners to obtain coverage not only for their employees, but also for themselves and their families,” Landry said. “We also found dental and vision coverage to be common offerings among small businesses, as these products tend to be very popular with employees.”

Small firms usually offer life insurance due to its relative low cost of coverage and plan administration. Conversely, disability benefits, both long-term and short-term, have low rates of penetration for these businesses.