By Stephanie Shields
Small businesses across industries are facing challenges—from rising costs and inflationary pressures to competing with larger organizations in the ongoing war for top talent. Nearly half of small businesses cite inflation as their top concern and employee retention concerns have risen to 16% (up from 11% the previous quarter), according to U.S. Chamber of Commerce’s Small Business Index Q2 2025.
At the same time, small businesses are working to preserve company culture and employee connection in an increasingly remote and hybrid work environment, where a striking 74% of organizations with fewer than 500 employees now offer full flexibility in where their teams work.
Large corporations can often weather storms and periods of risk and uncertainty with an abundance of capital and big teams, but small business owners must stretch every dollar and juggle everything from compliance to culture, often with just a small team.While open enrollment season is currently underway for most businesses of all sizes, many businesses are already looking ahead to next year's open enrollment cycle and how they might enhance their benefits offerings. By and large for most small business owners, the answer isn't about investing more money in benefits nor is it necessarily about scaling back. But instead, it's about realizing the strategic value of an often-overlooked solution that many small business owners are often unaware of—voluntary benefits.These employee-paid benefits, which can include accident, critical illness, hospital indemnity, disability, and group life insurance, can help employees manage out-of-pocket health expenses and protect their paycheck and the financial livelihood of their loved ones in the event of an unexpected health event. Whether an HR director at a small business or a small business owner wearing an "HR hat," not incorporating voluntary benefits into the organizational strategy means missing a powerful opportunity to build culture and reduce risk—key to keeping the business resilient during tough times.
Voluntary Benefits as Culture Builders
How can voluntary benefits, which even for larger organizations are often viewed as secondary, help shape company culture? It's unrealistic for small businesses to think they are going to compete with larger businesses on salary alone and they don't need to. Part of what helps small businesses stand out from a recruiting and retention standpoint is their ability to combine relevant benefits with a culture that feels personal and connected.
And culture isn't built by offering free coffee and ping-pong tables (in fact in an increasingly remote workplace—it's likely not as meaningful anymore) it's rooted in something much deeper. Culture is built through trust, care, and a shared purpose. And as Simon Sinek, whose work on leadership and purposes has inspired many, says it best: “Customers will never love your company until your employees love it first."This love and loyalty begins with how employees are treated. Voluntary benefits that offer financial protection, like life insurance, critical illness insurance, hospital indemnity insurance, and financial wellness programs are expressions of care that foster emotional connection without increasing payroll. They make employees feel seen and valued, creating a stronger workplace culture and better retention. These benefits also drive productivity, reduce absenteeism, and alleviate financial stress by equipping employees to handle unplanned financial burdens caused by unexpected health issues.
A 2024 survey of CHROs by Gallup finds that employees who feel their employer cares about their well-being are 4.4 times as likely to be engaged at work and seven times more likely to recommend their organization as a great place to work.
Many small business leaders have described voluntary benefits as "cost-neutral culture builders" and "signals of care and commitment." And for founders that have experienced turnover firsthand, they believe these offerings can rebuild trust and reinforce their company's values.
Independent research supports this. A 2024 survey of CHROs by Gallup finds that employees who feel their employer cares about their well-being are 4.4 times as likely to be engaged at work and seven times more likely to recommend their organization as a great place to work. Another recent study from EBRI finds that small employers view financial wellness benefits—of which many voluntary benefits fall into this category—as very effective in driving certain business goals, such as improving worker productivity, attracting and retaining workers, improving employee satisfaction, and reducing absenteeism and tardiness.
Voluntary Benefits as Risk Reducers
Running a business involves financial, operational, and human risks. But for small businesses, often the stakes are much higher.When uncertainty arises, small businesses often feel the impact first. Big companies can more easily tap credit lines or draw on financial reserves to weather the storm. Small business owners have to watch every dollar, and with rising costs and tighter access to capital, and the ever-present risk of supply-chain challenges, protecting margins isn't just smart—it's essential for survival.Aside from macroeconomic risks that can eat away at profits and even result in small businesses closing their doors, there are other risks that are more common and detrimental to small businesses than their larger counterparts: turnover risk, productivity risk, and compliance and administrative risk.Turnover is one of the biggest threats to small businesses. That's because the cost of replacing an employee can range anywhere from 50% to 200% of their annual salary, depending on their level, according to the Society for Human Resource Management. This includes the costs of recruiting, training new hires, lost productivity, and the disruption to client relationships. Voluntary benefits improve retention, allowing small businesses to reinvest savings into growth or stability.Productivity risk is another concern and while it’s problematic for businesses of all sizes, it can be more pronounced within smaller organizations. Financial stress is a silent productivity killer. According to the Global Benefits Attitudes Survey by Willis Towers Watson, financially stressed employees cost U.S. companies approximately $250 billion in lost productivity each year. Financial stress is also correlated with absenteeism and turnover. Financially protective voluntary benefits help employees stay focused and worry less.
And lastly, there's compliance and administrative risk. Many small business owners are reluctant to offer benefits because they believe adding benefits will complicate their HR operations. However, if leaders work with the right carrier, they can find modern voluntary benefits platforms that are digital-first, easy to administer, and often come with built-in education tools. This takes the pressure off HR leaders and can help reduce the risk of confusion, low participation, and compliance missteps.Ultimately, voluntary benefits act as risk reducers, enhancing strategy without overspending or adding complexity. With turnover, productivity, compliance and administrative risks, these benefits can be a good way to stabilize a small business' workforce and protect profit margins.
A Strategic Imperative for Small Business Success
In a climate where small businesses are constantly doing more with less, while managing uncertainty, voluntary benefits can be more than just supplemental coverage for their workforce—they deliver strategic value. They can help build cultures rooted in trust, care, and shared purpose, and they often reduce many risks that threaten a business' stability and growth. They also can empower employees to safeguard their health, families, and financial future.
Whether preparing for next year's open enrollment or rethinking long-term workforce strategy, now is the time to view voluntary benefits not as extras, but as foundational elements of a resilient, people-first business.
Stephanie Shields is head of employee benefits at Equitable.