Benefits Software for Small Businesses: 5 Key Features

It’s crucial to find benefits software that caters to your specific small business needs — but make sure to consider these general features.

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When benefits software shopping, don’t miss out on features such as integrated administration, benefits compliance, and more

In a Society for Human Resource Management study, 92% “of employees indicated that benefits are important to their overall job satisfaction.”

However, offering benefits to your workforce is only part of the equation, as how you administer and deliver benefits is equally critical.

Although many small businesses are still administering benefits via paper and spreadsheets, these methods are time consuming and magnets for errors.

For starters, benefits administration is tied not only to human resources but also time and labor, payroll, and finance. Secondly, benefits laws have gotten more complex over the years. In both scenarios, manual administration slows down processing and elevates the risk of mistakes.

When you combine these administrative obstacles with studies showing that most employees want to enroll in benefits online or electronically, you get a super-strong case for benefits software — but not just any benefits software.

While it’s crucial that the software caters to your specific small business needs, there are some general features to consider, namely: 

  1. Integrated administration
  2. Employee self-service platform
  3. Benefits compliance
  4. Reporting and analytics
  5. Additional solutions

1. Integrated administration

To understand the significance of integrated administration, we must examine the different aspects of benefits administration, some of which are broken down next.

  • The benefits you supply must first go through HR. These benefits may include paid time off, health insurance, 401(k), life insurance, flexible spending accounts, employee assistance programs, and supplemental benefits like accident and critical illness insurance. Whatever the benefits, you must incorporate them into your HR system and monitor and update them.
  • New hires must choose their voluntary benefits, and current employees should be allowed to change their voluntary elections. Further, employees must automatically receive any benefits required by law, such as state-mandated paid sick or family leave.
  • Each employee’s mandatory and voluntary benefits must be processed through payroll. The specifics — such as health insurance premiums, leave payments, and 401(k) contributions — vary by employee.
  • When an employee leaves the company, HR processes the termination and payroll handles the final wages.
  • Employers are required to fulfill regulatory obligations specific to benefits — such as conducting governmental reporting and sending disclosure notices to employees.

Tackling all of these processes (and more) via paper, spreadsheets, or email — or through disparate technologies — exponentially spikes the chances of errors and the cost of benefits administration.

In fact, a 2019 study found that a single data entry for an HR-related task done without fully-automated, full-service Human Capital Management software costs employers, on average, $4.51 — for labor, printing, postage, etc.

Again, that’s $4.51 each time someone at the company makes 1 manual data entry for functions connected to HR — namely onboarding, training, benefits enrollment, time management, expense management, separation management, and performance management. The study largely does not include payroll, which means the total cost is likely higher when you factor in payroll.

A 2019 study found that a single data entry for an HR-related task done without fully-automated, full-service Human Capital Management software costs employers, on average, $4.51 — for labor, printing, postage, etc.

Small businesses can save ample time and clamp down on errors by adopting integrated software that combines:

  • Time and labor
  • HR, including onboarding
  • Benefits
  • Payroll

With the integrated system, benefits data needs to be entered only once, as the information will automatically flow to correlated processes, including payroll — thereby:

  • Decreasing manual labor
  • Reducing data entry errors
  • Streamlining workflows
  • Easing administrative burdens

Note: You’re supposed to record (and reconcile) benefits transactions — including employee deductions and employer contributions — in your general ledger. So, it’s worth considering benefits software that’s also capable of integrating with your accounting processes.

2. Employee self-service platform

As concluded in a survey, “user experience” is the main reason most employers evaluate their benefits administration platforms. So, it would be a mistake to assume that because your business is small, your employees will not care how you present your benefit offerings.

The bottom line is that today’s employees are accustomed to getting information rapidly via the Internet — whether through their smartphone, tablet, laptop, or desktop. And they expect the same when it comes to their workplace benefits.

Most employees do not want to:

  • Wait for their benefits packages to arrive in the mail
  • Sift through paper benefits documents
  • Have to contact HR or payroll every time they need benefits information
  • Enroll in benefits via paper forms

They want a best-in-class user experience that includes a mobile-friendly online platform that lets them: 

  • Review, compare, and select their benefits, including during open enrollment
  • Access benefits resources, including general plan information
  • Make benefits changes, such as to their health insurance plan, 401(k) investment options, or 401(k) salary deferral
  • View their compensation statements, which reveal their pay and benefits
  • Submit time-off requests to their manager
  • Print Form W-2s for tax-filing purposes

In the current COVID-19 climate — which demands social distancing — employee self-service platforms are virtually a must for employers of all sizes.

Note: In the current COVID-19 climate — which demands social distancing — employee self-service platforms are virtually a must for employers of all sizes.

3. Benefits compliance

Along with integrating time and labor, HR, payroll, and ideally accounting, the software should simplify compliance with benefits regulations.

Common areas of benefits compliance for small businesses:

  • Pretax benefits — such as health insurance, 401(k), flexible spending accounts, and commuter benefits — offered under an IRS-qualified plan
  • Post-tax benefits, such as additional life insurance, Roth 401(k), and certain benefits offered outside of a cafeteria plan
  • Business expense reimbursements
  • Disclosures to employees, such as Consolidated Omnibus Budget Reconciliation Act (COBRA) notices, plan summaries, and notification of plan changes
  • Affordable Care Act, if you have more than 50 full-time employees
  • Mandatory sick and/or family leave
  • Disability insurance, whether mandatory or voluntary
  • Workers’ compensation
  • Unemployment insurance
  • W-2 reporting
  • Privacy and anti-discrimination laws

That’s a lot to handle — and there might be more — depending on the size of your business, the types of benefits offered, and where your business is located. To help avoid penalties for noncompliance, make sure your benefits software is built with compliance in mind.

4. Reporting and analytics

Measuring the effectiveness of your benefits program is vital to knowing what’s working and what’s not working, plus how to correct deficiencies.

To accurately measure the program’s success, you’ll need to gather benefits reports and analyze the data. Benefits software is instrumental to obtaining these reports and conducting analytics.

Through reporting and analytics, you can determine:

  • The amount of paid and unpaid leave offered versus the amount taken by employees
  • 401(k) participation and contribution levels
  • How your benefit programs are affecting recruiting, engagement, retention, attendance, and performance
  • Open enrollment behaviors, such as how many employees miss open enrollment or  how employees respond to communications about open enrollment
  • Strategies for curbing future benefits spending, such as eliminating underutilized programs that lack potential for improvement

5. Additional solutions

You should have a range of options to pick from instead of the bare bones, because at some point you may need other features.

For instance, along with the basics, Zenefits benefits software offers these advanced solutions:

  • Electronic Data Interchange (EDI), which transmits benefits enrollment data to health insurance carriers electronically — saving you time, money, and resources
  • Plan building services, including renewal plans for open enrollment
  • Carrier management, which takes the headache out of contacting insurance carriers
  • Bring your own plans and broker, or work with one of Zenefits’ certified broker partners


When shopping for benefits software, aim for:

  • Integrated administration
  • Employee self-service platform
  • Benefits compliance
  • Reporting and analytics
  • Additional solutions
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