Report: Small Business Benefit Trends 2021

Employers are standing by their people in the face of tremendous challenges

January 13, 2021

Our December 2020 survey of more than 300 small businesses across the U.S. confirmed that the pandemic has hit many of them hard. Not everyone is struggling to the same degree, but COVID-19’s effects on the economy have caused nearly everyone to think deeply about their hiring and benefits picture for this new year. Still, most of the employers we surveyed are doing all they can to protect their employees, as they look toward a post-pandemic future. 

Financial woes spread unequally among small businesses

The financial picture for small business is challenging, but the misery is not shared equally. 

According to the Small Business Association, job creation tanked in the spring, rebounded slightly over the summer, and has been essentially flat this fall for small businesses of all sizes. 

On the other hand, the Bureau of Labor Statistics reports that November employment increased in some industries, including professional and business services, confirming that the pandemic is affecting different industries in wildly different manners.

Our survey of 321 employers — all of whom have under 250 employees — was not large enough to report statistically significant differences among industries, but those such as hospitality and others dependent on serving customers in person have clearly been hit hardest by the pandemic.

This dichotomy was apparent in answers about hiring plans for 2021, with a fairly equal split among those who are planning to expand their workforce and those who are planning to make cuts. 

Small business hiring plans for 2021


Planning to hire new employees


Planning reductions in salaries or hours/shifts


Planning to re-hire employees who had previously been laid off/furloughed


Planning temporary layoffs/furloughs


Looking to independent contractors to increase their workforce


Planning permanent layoffs
Question: Thinking about your organization’s business outlook for 2021, which of the following actions is your organization likely to take in response to expected changes in workforce needs? Respondents could choose more than one answer.

Bleaker picture for the smallest firms

Kelsey Meteyer Bane, Small Business Consultant at Unum, cautions that even the positive reports likely reflect a contraction from previous years. “Most years, it would be very unusual for a small business to say they weren’t hiring anybody that year. Everyone is always trying to grow, so this is a big difference,” she said.  

Business size shows a clear difference in this area. Half of respondents with 100 to 249 employees said they’re planning to hire new people next year, compared to only a quarter of those with under 100 employees. 

Customers see upsides and downsides

A survey of exclusively Unum customers in November 2020 affirms that the pandemic has brought both opportunities and challenges.

  • Half of customers surveyed (45% of those with fewer than 100 employees) cited positive impacts from the pandemic, including decreased office expenses, and better communication and collaboration resulting from increased remote working.
  • At the same time, nearly nine in ten cited negative impacts, including decreases in revenue, challenges in maintaining staffing levels, and having to implement layoffs.

Federal funding kept many afloat

As precarious as this picture is, it could have been worse without the round of federal funding that occurred in early 2020.

  • After a rocky start in which small businesses had trouble getting funding, while some very large companies did not, half of small businesses we surveyed received federal relief funding provided under the Coronavirus Aid, Relief, and Economic Security (CARES) Act last year.
  • Among those, 85% said the funds helped them maintain operations in 2020.
  • Three-quarters of those surveyed said access to new or continued federal financial support in 2021 is important. They will likely be reassured by the new aid bill signed into law on December 27, which includes such small-business assistance as:
    • more Paycheck Protection Program funds
    • economic injury disaster loans
    • extended tax credits for providing paid family and medical leave
    • expanded credits for retaining employees
    • an extended repayment period for payroll tax deferrals
    • a temporary ability to deduct 100 percent of business meals

Importance of federal pandemic relief funds

Hover over graph for details
Applied and received
Did not apply
Applied but did not receive
Not sure
Helped a lot
Helped somewhat
Helped a little
Didn't help at all
Question: Did you apply for and receive federal relief funding under the CARES Act?

In spite of challenges, benefits planning is stable

It almost goes without saying that a small business’s financial health affects the benefits it is able to offer to employees. And indeed we found that:

  • More than three-quarters of survey respondents said that their overall financial health significantly or somewhat affected the benefits they plan to offer in 2021.
  • Only about a fifth said financial health had very little or no impact on their 2021 benefits planning.

So it is encouraging that, despite the financial challenges, three-quarters of employers in our survey said they will offer the same or a better benefits portfolio in 2021 compared to 2020.

2021 benefits planning

Hover over graph for details

“We’ve had a lot of conversations with clients who have wanted to add benefits to protect their people, now that they see what the pandemic has done,” said Michael Mazzeo, Small Business Consultant for Unum.

Disability, critical illness, and viral/infectious disease coverage were the most frequently listed benefits businesses were adding due to the pandemic. Of those offering critical illness coverage this year, nearly 40% planned to include an infectious disease rider in their coverage, in a clear response to COVID-19.

“We had to,” said one respondent. “We want to keep everyone safe.”

Small number planning to decrease benefits

Only about a fifth of survey respondents are planning to drop a benefit without adding a new one. This shows that employers are really standing by their people, despite the tremendous challenges.

  • Among those who had discontinued some benefits, one-fourth stated that all of the benefits discontinued were a result of the pandemic. But an equal proportion stated that none of the benefits they discontinued were a result of the pandemic.
  • Some employers reported that they dropped benefits that employees weren’t using. “We dropped on-the-job accident coverage because no one is working on-site,” said one. “No one is going to the dentist right now, so we dropped dental,” said another, suggesting that some dropped benefits may be reinstated when the pandemic recedes.

Some will shift more costs to employees

While many respondents said they weren’t dropping benefits, that doesn’t mean the economy is not reflected in their plans. About a quarter plan to increase the employee portion of premiums paid, while just under a fifth plan to increase the employer portion. 

Our November 2020 survey of Unum customers affirms these trends. Looking ahead to the next one to three years, they believe the pandemic’s most significant impacts on the benefits landscape will include increased premiums for both employees and employers, as well as an increased focus on medical and disability benefits.

Caution: Too many cuts can hurt competitiveness

It’s understandable that employers are looking to control benefit spending during these perilous times. However, they should be cautious to balance long-term competitiveness against short-term budget pressures, as benefits will remain important to recruiting and retaining workers.

According to the Unum-sponsored 2020 Workplace Wellness Survey, conducted by the Employee Benefit Research Institute (EBRI) and Greenwald & Associates:

  • Seven in ten employees agreed that they need their employer’s help ensuring they are healthy and financially secure, and just over six in ten say it is their employer’s responsibility to do so.
  • To a great and growing degree, employees feel that employer-offered benefits contribute to their feelings of financial security.

How workplace benefits contribute to feeling financially secure

Hover over graph for details

Source: Employee Benefit Research Institute and Greenwald & Associates, Workplace Wellness Surveys 2018, 2020. *Not asked in 2018. Question: How does each of the following benefits offered by your employer contribute to your feeling of financial security?

Our survey of Unum customers affirms that employee engagement with their benefits grew in 2020. Four in ten respondents said that employees were more aware of, appreciative of or engaged with their benefits, and 20% said employees were using their Employee Assistance Programs (EAPs) more frequently.

We’ve long known that benefits are crucial to employees and heavily influence whether they join or stay at a company. In fact, one study shows that 78% of workers say their benefits packages are as important as their salaries in keeping them at their current employers.

With the increased need for benefits, and worrying trends of a growing mental health crisis amid the pandemic, it will be important for employers to maintain a long-term view of benefits. Employers will want to ensure they can compete for talent when the pandemic is over and the economy starts growing again. As one survey respondent said, “We had to do what fit our budget and also remain attractive to recruit talent.”


I believe employees are paying a lot more attention to what
benefits our company offers due to the pandemic.

Unum customer
Under 100 employees

Outdated processes make the job even harder

Many small HR teams may be working harder than they have to, due to outdated processes and systems. According to our survey, many are still relying to a significant degree on manual rather than digitized processes to manage HR functions:

  • More than half (53%) of employers rely on an equal mix of technology-driven processes and manual processes. This is even more prevalent among businesses with fewer than 100 employees (58%).
  • Only one-fourth (25%) rely heavily on technology-driven processes. More of the somewhat larger businesses, with 100–249 employees, report this (32%).
  • One-fifth (22%) still rely heavily on manual processes, most often for performance management and leave administration.

Processes used for HR functions

Hover over graph for details

Question: What is the primary approach your organization uses to manage each of the following HR functions?

Smaller businesses were more likely than somewhat larger businesses to rely on brokers for enrollment, benefits administration and payroll, and more likely to rely on manual processes for performance management and time and attendance tracking. The 100–249 employee segment was more likely to use digital processes across the board, except for leave administration (see the next section).

Despite this large dependence on outdated, manual processes, two-thirds of employers do not plan to add any new technology/digital HR capabilities in 2021 (71% for the 1–99 employee companies). The few who are planning new capabilities most frequently mentioned:

  • More digital/automated processes in general
  • Electronic/digital time tracking/timesheets
  • More/upgraded computers

Leave management is especially challenging

If there’s one thing COVID-19 taught employers, it’s the importance and complexity of managing employee leave. Employers who before the pandemic may never have heard of the Family and Medical Leave Act (FMLA), or never thought about offering paid sick leave, were faced with a new reality as employees fell ill with the virus, or had to care for someone who did. 

Accordingly, three-quarters of surveyed employers reported challenges in managing the administration of employee leaves and absences during the pandemic. Thirty percent found managing leave extremely challenging. Several mentioned the need to provide employees with more flexibility on leave due to the pandemic. 

The new federal stimulus package does not extend the expanded and paid leave requirements of the Families First Coronavirus Relief Act (FFCRA), which ran out December 31. But employers can voluntarily provide such leave and receive tax credits, meaning the complexity of leave management during the pandemic continues. 

What employers can do now to make benefits easier to offer

Small businesses are stretched thin and may not have a lot of wiggle room when it comes to benefits budgets. But benefits providers and brokers can offer tools, services and coverage that can help employees stay protected.

Simplify benefits administration to take pressure off HR

Small businesses have more options than they know when it comes to benefits technology. Some benefits providers can offer systems that integrate with a company’s HR information system to automate and streamline plan setup, enrollment, billing and evidence of insurability (EOI). Some can offer an end-to-end digital benefits experience that cuts repetitive manual processes to save HR time and trouble.

“Benefits don’t need to be a hassle. Your provider’s job is to minimize the time you spend with them, not maximize it,” says Shea Treadway, Unum’s Vice President of Small Business. “Be sure to ask how your insurance carrier can make your life easier by simplifying and digitizing your benefits processes, from implementing benefit plans all the way to filing employee claims. That way, you can focus on your people and your business.”

computer infographic

Implement easy enrollment and digital self-service tools

According to the Workplace Wellness Survey, employees are interested in a more online enrollment experience, including a benefits-selection portal, decision-making tools and online brochures. Brokers can hook employers up with low-cost or no-cost enrollment services, and carriers can add the educational materials that help employees make appropriate benefit decisions. 

The trend toward remote working makes employee self-service tools even more important. According to our survey, nearly half (44%) of small-business employees continue to work from home, and employers expect that more than twice as many employees will keeping doing so after the pandemic as before (28% versus 12%). “We are planning to work more from home,” said one, “but we will require more resources for technology to accomplish this.” 

woman at desk infographic

Seek leave administration services to cut the complexity

As for leave management, carriers can help in administering leaves under short term disability coverage and state paid-leave plans, important as more employees use these benefits due to COVID-19 illness and caregiving demands. 

“Small businesses are going to need to rely on their partners and their vendors,” said Ellen McCann, AVP and Legal Counsel in Unum’s Employment Law Group. “They’re also going to need to do their homework. A small business that doesn’t have their own in-house legal counsel is going to need to stay informed, by making sure they’re reading updates, attending webinars and tapping into the insights of experts in the leave space.” 

Employee-paid benefits can step in when funds are tight

Finally, when employers feel their benefits budget is stretched to the breaking point, brokers and benefits providers can point the way to coverage workers can choose and pay for themselves. “Voluntary” benefits like supplemental health, disability and life insurance can close the protection gap when employer-paid group coverage is not an option. Employees can get coverage at rates not found on the individual market, and employers can use scare funds to keep their people employed. 

“If you’re thinking about dropping benefits due to costs, reach out to your broker to learn more about employee-paid benefits,” says Kelsey Meteyer Bane.

We’re still in the tunnel, but now we can see the light

As we write this, COVID-19 vaccines are rolling out across the country, helping frontline health care workers and others, such as nursing-home residents, weather the winter virus surge. Experts are predicting that widespread vaccine distribution could occur as early as spring or summer. 

As we look forward to easier days, it is encouraging to know that small businesses are doing what they can to keep themselves and their employees ready to rebound. Be sure to lean in to your benefits provider or broker for the help you need to emerge on the other side of this pandemic safe, sound and well-positioned to capture the opportunities that lie ahead.

About the survey

We surveyed 321 employers from November 30 to December 11, 2020, this time focusing on small businesses. We received 189 responses from businesses with 1 to 99 employees, and 132 from businesses with 100 to 249 employees. Respondents were limited to persons involved in employee benefits decision-making or administration at U.S.-based organizations representing a wide variety of industries. We are actively keeping a pulse on the market and employers’ concerns amid the pandemic’s disruptions and have been releasing bimonthly reports since April 2020.

You may be interested in

SHRM webinar

February 3, 2021

Watch the panel also explores findings from the Unum 2021 Small Business Benefit Trends Report, which surveyed more than 300 businesses with 250 employees or less across the United States.

Small business guide to employee benefits
Small businesses need a practical approach to crafting a benefits plan that helps attract, keep and protect great workers, while recognizing today’s economic realities.