Running a small business is no walk in the park. You’re juggling a dozen balls, wearing just as many hats, and trying to keep everyone happy while also growing your business. One wrong move, and suddenly, you’re losing talent, morale is in free fall, and your bottom line takes a hit. And yet, far too many business owners treat employee benefits like an afterthought—a costly checkbox instead of a strategic investment.
Here’s the reality: your benefits package speaks volumes about your company before a single employee ever files a claim. It tells your team whether you value them or see them as an expense. And if you get it wrong? Prepare for higher turnover, plummeting productivity, and a workforce that’s constantly looking for the exit. Let’s break down the biggest mistakes employers make—and how to stop them from derailing your business.
Mistake 1: Taking the One-Size-Fits-All Approach
Choosing a generic benefits plan is like serving the same dish to every employee and expecting them to love it. Your workforce is a mix of young professionals, parents, caregivers, and seasoned employees nearing retirement—each with different priorities. Yet, too many companies default to a generic package that leaves half their workforce frustrated and underserved.
What’s the solution? You need a custom employee benefits package that reflects your company’s culture and your team’s specific needs. Find out what benefits actually matter to your employees. You may not know until you ask. Survey your employees to ask about priorities. Involve them in the process. Do they need flexible working hours, mental health support, or perhaps more dental coverage?
As your employees’ needs change over time, you will be able to respond with changes and updates to the benefits package because you are listening to what they say. The more tailored your benefits, the more valued your employees will feel. And valued employees stick around.
Mistake 2: Failing to Educate
According to a study by the Plan Sponsorship Council of America1, 25% of employees feel they are “a little” or “not at all” informed about their benefits. Perhaps the most significant finding, though, was that employees who reported not feeling informed were the most likely not to enroll or use their employer-provided benefits, including 401ks and HSAs.
Even the best benefits package can fall flat if your team doesn’t know how to use it. Perhaps not surprisingly, many employees and employers don’t fully understand benefits packages. Why? Because benefits are wrapped in a maze of jargon and fine print, making it overwhelming for the average person to decipher what’s available to them. And if your employees don’t understand their benefits, they might as well not exist.
Whether the information comes from your HR department or an employee benefits broker, it should be in a form that employees can understand. Don’t send out benefits packets that no one reads. Host interactive Q&A sessions, send out digestible summaries, and leverage one-on-one meetings. Your employees should know exactly what they have access to—and how to use it. When they know what they have, they are more likely to use, appreciate, and benefit from it all.
Mistake 3: Prioritizing Cost over Quality
Yes, business budgets are tight, and benefits are expensive. But cutting benefits to save money is a short-term play with long-term consequences. When you trim your benefits package, you don’t just reduce expenses—you also drive away talent, demoralize your team, and make it that much harder to compete with bigger companies that offer real support.
If you’re not measuring your benefits program’s return on investment (ROI), you’re flying blind. It’s crucial to track which benefits are truly valued by your employees and which aren’t making an impact.
Use data to track which benefits employees actually use, and adjust accordingly. And don’t assume that cutting costs is the only way to save money. Investing in high-impact benefits, like preventative healthcare or mental health support, can reduce long-term expenses by keeping employees healthier and more productive.
Mistake 4: Overlooking Legal Compliance
Benefits management isn’t just about what’s popular, fits the budget, and attracts talent (although those are all important). It’s about what keeps you and your company compliant.
Falling out of compliance with benefits regulations isn’t just a minor headache—it’s a financial nightmare waiting to happen. Fines, lawsuits, and reputational damage can cripple a small business. If you’re not actively keeping up, you’re already behind.
Stay informed about the latest legal requirements and ensure your benefits package aligns with them. Consult a benefits broker or legal advisor if you need help. They are experts in local and federal laws and how they apply to businesses like yours. The cost of prevention is always lower than the cost of legal trouble.
Mistake 5: Sticking with Outdated Contracts
If you have been in business for 10 years and still offer employees the same benefits, you are missing out. The benefits market is constantly changing, as are the needs of your workforce. Sticking with the same contracts year after year could mean you’re overpaying for outdated services or missing out on better options. It can also lead to higher costs, lower employee satisfaction, and a benefits package that fails to attract or retain top talent.
Don’t be the dinosaur in your industry. Shop around. Challenge your providers to give you more for your money. Consider switching plans or providers if it means better coverage or lower costs. A good benefits broker will help you navigate this process and make sure you’re not paying too much.
Investing in Benefits
If you treat benefits like just another expense, your employees will notice—and they’ll act accordingly. They’ll disengage. They’ll leave. They’ll find an employer who actually values them. But if you take the time to build a thoughtful, competitive benefits package, you won’t just retain your top talent—you’ll attract new ones, boost morale, and create a workplace where people actually want to stay.
The question isn’t whether you can afford to prioritize benefits. The question is—can you afford not to?
Ready to revamp your benefits strategy and see measurable outcomes? Contact The Benefit Doctor. Our unique approach to benefits will give you and your employees the support, education, and tools you need to make sure you have a customized benefits plan that truly fits your organization’s needs. Let us help you get the most out of your benefits.
1https://www.psca.org/news/psca-news/2024/9/study-finds-most-participants-dont-understand-their-benefits/