Benefits for a Team Under 20: What to Offer and How to Set It Up

Three routes cover most small employers, and each fits a different situation:

• Small-group health plan. You choose a plan (or a few), pay part of the premium and employees pay the rest through payroll. Carriers typically set rules about how much of the premium you contribute and how many eligible employees must enroll, so ask about participation requirements before you commit.
• QSEHRA (qualified small employer health reimbursement arrangement). You give employees a tax-advantaged monthly allowance to buy their own individual coverage. It's designed for employers with fewer than 50 full-time-equivalent employees that don't offer a group plan, and it has annual caps set by the IRS. It's simpler to run and predictable in cost, but employees shop for their own plans.
• ICHRA (individual coverage HRA). Similar in spirit, with more flexibility in how allowances are set across employee classes and no small-employer size limit. It suits teams that expect to grow or have employees in different states.

Which is best depends on your team's ages, locations and preferences. A group plan gives everyone the same coverage. An allowance gives choice but requires employees to buy coverage themselves. Confirm current limits and rules with a benefits broker or your accountant.

Health coverage gets the attention, but several other benefits cost less and are appreciated more than employers expect.

Retirement: A 401(k) is common, and many small employers begin with a simple design and a modest match, or no match at first. Some tax credits may be available for new plans, so ask your CPA what applies to you. Confirm who is responsible for testing, filings and contributions timing.

Time off: Paid time off, holidays and sick leave often matter more than a dental plan. Some states and cities require paid sick leave, so check your local rules before writing a policy.

Other coverage: Dental and vision plans are cheap to add. Basic life and disability coverage protects employees at a modest cost. An HSA-compatible health plan lets employees save pretax for medical costs.

Nonfinancial benefits: Flexible hours, remote options and a learning budget cost little and can matter as much as a premium subsidy. Write everything into the employee handbook so expectations are clear.

Work through this sequence, and give yourself a few months for health coverage in particular:

1. Survey the team. Ask what matters: health coverage for families, retirement match, time off, flexibility. Anonymous input is best.
2. Set a budget per employee you can sustain through a slow quarter, not just a good one. For example, decide on a monthly amount per person and design the package within it.
3. Talk to a broker. A broker for small groups can quote group plans and explain HRA options, and is typically paid by the carrier, so ask how.
4. Choose the health route using the comparison above, and check enrollment windows and effective dates.
5. Add retirement and time-off policies once health is settled.
6. Connect benefits to payroll so deductions and contributions are automatic. Payroll and HR platforms can handle much of this. Justworks and Gusto are two options that cover small-team benefits administration in different ways, so ask each how it handles plan choices, deductions and compliance for your state.
7. Communicate clearly with a one-page summary and a Q&A session.

For help comparing providers, see Rippling vs Gusto vs ADP TotalSource.

Small teams are affected disproportionately by a few traps:

• Minimum participation rules. If a group plan requires most eligible employees to enroll and several have coverage elsewhere, you may fall short. Ask the carrier what happens and whether waivers count.
• One expensive claimant. In very small groups, a single employee with high claims can change renewal pricing sharply. Ask brokers how renewals are set for your group size.
• Contribution rules. Carriers and regulators may set minimum employer contributions. Get them in writing.
• Mid-year changes. Adding or dropping people, changing plans or switching providers outside the renewal date can reset deductibles for employees.
• Forgotten compliance tasks. Retirement plans, reimbursement arrangements and benefit notices have filing and notice requirements. Assign an owner and a calendar.

Payroll is often the largest cost in a company; across US firms with fewer than 500 employees it averages 19.49% of revenue¹. Benefits sit on top of that, so build the budget with your finance lead, not around it.

Benefits generally go to employees, not independent contractors, and giving a contractor employee-style benefits can blur the line between the two. If someone works like an employee, review their classification instead of adding benefits to patch it.

Design with growth in mind. Choose an option that scales: some plans and allowances are simple at ten people and awkward at forty. Ask each provider what happens as you cross size thresholds, including when you may become subject to additional employer rules. Review the package annually and compare it with the market, and revisit the choice when you add employees in new states. The hiring process template is a good place to make sure benefits are covered in offers, and the global benefits harmonization playbook helps if you later hire abroad.