Should a small business offer health insurance?


Importance of small business health insurance

If you’re looking to attract top talent to your small business, offering private health insurance cover is a great way to enhance your employment perks package. Offering private health insurance can also benefit the business itself, with employees taking less time off due to illness.

However, if you’re a small business, offering health insurance might not be economically viable. In this guide, we’re going to cover everything you need to know about employment-base

What is health insurance?

Health insurance is a form of medical cover that entitles you to private care in the event that you fall ill or need medical treatment. It’s important to note that ‘health insurance’ is something of an umbrella term; there’s no one-size-fits-all health insurance package, as there are various providers in the UK all offering different types of cover.

What is employee health insurance?

Employee health insurance refers to when a private company offers health insurance to its salaried employees as one of their employment perks. In most cases, this will be a basic coverage plan that includes inpatient care, limited outpatient care, as well as digital and phone appointments with GPs. While a business owner can certainly extend their employee insurance plan to cover extra care if they wish (such as dental) any add-ons will increase the overall price of the monthly premium. 

Do I need to provide health insurance to my employees?

In the UK, medical care is covered by the National Health Service, a publically-funded healthcare system which is free at the point of use. As all UK citizens are automatically covered by the NHS from birth, you’re not obliged to offer supplementary healthcare coverage when you hire employees.

Businesses that do offer private medical insurance typically do so to keep their businesses attractive to top talent. By offering lucrative perks such as private health insurance, businesses are likely to attract sought-after and experienced professionals in their field.

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How much does employee health insurance cost?

The cost of providing health insurance for your employees will depend on how many employees you have, and what type of coverage you choose. Basic plans will naturally be the cheapest, while comprehensive and advanced insurance packages will be more expensive, but offer a wider range of medical cover.

In general, health insurance companies in the UK will offer private medical insurance for any business with 1-250 employees, although do note that this figure may vary from provider to provider. 

Should a small business offer health insurance?

While there’s no legal obligation for you to provide health insurance for your employees, doing so can improve employee morale, attract qualified and talented candidates to your business, and contribute to a healthier, more productive workforce. Here are some factors to take into consideration if you’re thinking about providing employee health insurance:


As a small business, you may not have the necessary funds to cover a basic health insurance plan for all of your employees. While you could remedy this by offering insurance coverage only to management or full-time employees, this might create tensions, or lead to an “us vs. them” mentality developing within your workplace. Adding a health insurance plan will increase your monthly business expenses, so make sure it’s an affordable option for you before taking the plunge.

How new your small business is

If you’ve just started your small business, now is a great time to attract top talent to your enterprise. Having skilled employees is the best way to ensure that your business grows, so offering an attractive employee package is going to result in a higher calibre of candidates.

Conversely, if you’re still in the early stages of your business development, you might want to hold off before offering health insurance to employees. In the early stages of your business, you’ll want to keep expenses low and invest what you have back into the business itself. Once your small business feels established and more secure, you might be in a better position to offer these kinds of employee perks.

The age of your employees

When calculating the cost of a business health insurance plan, most providers will determine the cost of your monthly premium by the average age of your employees. This is because all health insurance costs are age-based: health insurance for over 50 tends to be more expensive than health insurance for someone in their 20s or 30s.

If the median age in your organisation is high, you’re going to end up paying more, even for a basic coverage plan. While this shouldn’t influence who you hire - doing so would be legally considered as age-based discrimination - you can take a look at the average age in your workplace to figure out whether an insurance plan is an affordable option for you or not.

Why provide employee health insurance?

If you’re on the fence about offering employee health insurance - and you have the means to do so - here are just some of the benefits you can enjoy by offering employee medical cover:

Reduced sick days

NHS waiting times are at an all-time high, meaning that your employees may end up dealing with prolonged illnesses and conditions that require them to take paid time off work. This can negatively impact the workflow in your business, as you’ll not only need to cover sick pay, but you’ll also need to pay someone to cover their absence and catch up on missed duties. By offering a private healthcare plan, your employees will have access to state-of-the-art medical treatment and the best medical professionals in the country - not to mention no waiting lists.

Increase employee retention

Since the COVID-19 pandemic, employees have been leaving the workforce at historically high rates. Known as the ‘great resignation’, this trend appears to be influenced by growing online work opportunities, such as remote working, freelancing, and e-commerce. If you want to retain talented employees, offering a generous private healthcare package is sure to mitigate the impact of these trends on your business.

Boost employee morale

Professionals quitting the workforce is alarming for employers, but current rates of employee satisfaction should also be a concern for small business owners. According to Gallup, Millennial and Gen Z employees have some of the lowest rates of employee satisfaction, with their age cohort being the most likely to feel that their wellbeing, growth opportunities, and overall professional development is not a key concern in the workplace. 

While some amendments may still be needed to fix the post-pandemic workforce, offering a private health insurance policy can be a great way to show your employees that their health and emotional wellbeing is valued by their employer.

The bottom line

While small businesses are not legally obliged to offer private medical insurance to their employees, doing so can be a great way to boost office morale, attract top talent, and reduce time spent off work due to sickness or illness. Having a generous perks package can also help to protect your business against current economic trends, where workers don’t feel connected to their jobs or decide to flee the workforce altogether. By showing your staff that their emotional, physical, and mental wellbeing is important, you’ll do your bit in helping reshape and reform the modern workplace. To ensure you receive the very best business-specific health insurance advice, your adviser will come from our sister company - Towergate Health & Protection.


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