According to Gallup, the percentage of workers who say pay and benefits are “very important” has risen from 41% pre-pandemic to 54% today. Yet a recent OnPay survey found that of more than 1,000 small businesses, 31% said they don’t currently offer benefits. For growing companies balancing hiring goals with tight margins, that reality creates a challenge. That’s where voluntary products (also known as voluntary benefits) may help bridge the gap.
What you’ll learn
What you’ll learn
Key takeaways
- Voluntary benefits expand your perks package without increasing employer costs, since they are employee-paid
- They help employees manage out-of-pocket medical expenses and income gaps that traditional health plans don’t fully cover
- A broader benefits offering can strengthen recruiting and retention efforts by improving your overall compensation strategy
- Employees get the flexibility to choose the coverage they need, while employers maintain budget control
If you’re a newer employer or just gradually building out your benefits program, understanding the landscape can feel like a full-time job. To make things easier, this guide breaks down the most common types of voluntary benefits, how they work, and why they’re worth considering as part of a modern perks package.
Understanding voluntary benefits and products
First things first: Voluntary products are employer-sponsored insurance benefits and financial products that employees can choose to enroll in, typically paying for coverage through payroll deductions. This makes it easier for employers with limited purchasing power to give workers more access to coverage without increasing costs.
Think of them as add-ons to traditional health insurance or income protection plans. They can help employees cover out-of-pocket medical expenses, keep a paycheck coming in during an illness or injury, or plan for future healthcare costs through tax-advantaged accounts.
For employers, voluntary benefits provide a way to enhance total compensation and support employees at different life stages — without having to come out of pocket to offer the extra coverage.
How voluntary benefits work
Voluntary benefits are offered through an employer, but are elected individually by employees. Here’s what that usually looks like in practice:
- Paid fully by the employee
- Deducted automatically from payroll
- Offered at group rates
- Easy to enroll in during open enrollment periods
Because they are offered through the workplace, employees often have access to better pricing or simpler underwriting than if they tried to purchase the same coverage on their own. Note that most carriers have a minimum participation threshold. For example, you may need at least two (and sometimes up to five) employees to sign up before the benefit is “bound” or active.
Why voluntary benefits make sense for many small businesses
Adding voluntary benefits to the mix is something employers consider because they:
Expand total rewards without expanding payroll costs
- Voluntary benefits allow organizations to offer more robust coverage options without fully funding each benefit.
Support high-deductible health plans
- As deductibles rise, products such as hospital indemnity, critical illness, and accident coverage help employees manage unexpected medical expenses.
Improve recruitment and retention
- A broader benefits package signals that an employer is invested in employee well-being, which can strengthen hiring and retention efforts.
Offer customization
- Not every employee needs the same coverage, and voluntary products allow individuals to choose what fits their situation.
Now that we’ve covered the basics, let’s look at the voluntary benefits you’re most likely to see in growing organizations.
Did you know?
56% of small business owners make health insurance a part of benefits programs
Common voluntary products to know
Below, we go into more detail on common voluntary products and why it makes sense to offer them. You can also use this quick reference chart to compare the most common options at a glance.
| Benefit* | What it covers | Why employers offer it |
| Voluntary short-term disability | Partial income replacement for temporary illness or injury | Supports employees during short absences without full employer funding |
| Voluntary long-term disability | Extended income replacement for serious conditions | Adds long-term financial protection to benefits package |
| Voluntary accident insurance | Cash benefits for covered accidental injuries | Helps manage unexpected medical expenses |
| Voluntary critical illness Insurance | Lump-sum payment for major diagnoses | Bridges coverage gaps in high-deductible plans |
| Voluntary cancer insurance | Cash benefits tied to cancer diagnosis and treatment | Addresses financial impact of serious illness |
| Voluntary life & AD&D | Death benefit and accident-related coverage | Provides foundational financial protection |
| Voluntary hospital indemnity | Fixed cash benefit for hospital stays | Helps offset high deductibles and out-of-pocket costs |
| Voluntary medical transport coverage (MASA) | Emergency ground and air transport protection | Covers a common but often overlooked coverage gap |
*All of these benefits can be employer-paid as well.
Short-term disability insurance
What is it?
Short-term disability (STD) insurance provides temporary income replacement if an employee is unable to work due to a non-work-related illness, injury, or qualifying life event — such as pregnancy or surgery recovery. Instead of having to forgo a paycheck during recovery, employees receive a percentage of their wages for a defined period — typically from a few weeks up to six months.
Coverage usually begins after a waiting period (often called an elimination period), and benefits are paid directly to the employee. STD policies commonly cover conditions such as off-the-job injuries, certain illnesses, pregnancy-related complications, mental health conditions, and recovery from medical procedures.
Why offer it
Short-term disability coverage helps employees maintain financial stability during unexpected life events. While not required in every state, STD can be a valuable part of a broader voluntary benefits package. For employees, it offers peace of mind. For employers, it can improve retention, support workforce stability, and demonstrate a commitment to employee well-being — without necessarily absorbing the full cost of the benefit if it’s structured as voluntary coverage.
Long-term disability insurance
What is it?
Long-term disability (LTD) insurance provides income replacement if an employee is unable to work for an extended period due to a serious illness or injury. While short-term disability typically covers the first few months of an absence, long-term disability coverage generally begins after that initial period ends and can last for several years — or even until retirement age, depending on the policy.
LTD policies typically replace a percentage of an employee’s income and include an elimination period before benefits begin. Coverage may apply to a wide range of medical conditions, including chronic illnesses, severe injuries, and long-term health complications that prevent an employee from returning to work.
Why offer it
Long-term disability can add deeper financial protection to your benefits package — without requiring you to fully fund the coverage. For employees, it offers long-term income stability during life-altering events. For employers, it strengthens the overall benefits package and reinforces a commitment to employee security and retention.
Hospital indemnity insurance
What is it?
Hospital indemnity insurance is a supplemental health policy that pays a fixed cash benefit if an employee is hospitalized. Unlike traditional health insurance, which pays providers directly, hospital indemnity coverage pays the employee — allowing them to use the funds for medical bills, deductibles, or even everyday expenses like rent or groceries during recovery.
These plans typically provide a set daily, weekly, or lump-sum benefit for hospital stays. Some policies may also include coverage for emergency room visits or certain outpatient procedures.
Why offer it
It helps employees manage rising out-of-pocket costs, especially when paired with high-deductible health plans. Since it’s employee-paid and offered at group rates, it’s a low-cost way to enhance financial protection.
Life insurance and AD&D coverage
Life insurance provides a lump-sum payment to an employee’s designated beneficiaries if the employee passes away while covered under the policy. Many employers offer group life insurance as a standard or voluntary benefit, often with coverage equal to a multiple of the employee’s salary or a flat dollar amount.
Accidental death and dismemberment (AD&D) insurance is commonly paired with life coverage. It provides additional benefits if an employee dies or suffers certain serious injuries as a result of an accident.
Why offer it
Life and AD&D coverage can provide a foundational layer of financial protection for employees’ families — often at relatively affordable group rates. Group policies are typically affordable and easy to administer, making them a common addition to a voluntary benefits package. While coverage may not be as customizable as an individual policy, it can serve as a foundational layer of protection.
Cancer insurance
Cancer insurance is a type of supplemental policy that pays a cash benefit if an employee is diagnosed with cancer. Coverage may include lump-sum payments upon diagnosis as well as benefits tied to specific treatments such as chemotherapy, radiation, or hospital stays.
Unlike traditional health insurance, which pays providers directly, cancer insurance typically pays the employee. This allows them to use the funds to cover out-of-pocket medical expenses, travel for treatment, childcare, or everyday household bills during recovery.
Why offer it
Employers may consider cancer insurance as part of a voluntary benefits package to help employees manage the financial impact of a serious illness. Because it is usually employee-paid and offered at group rates, it allows businesses to expand financial protection options without significantly increasing benefits costs.
Accident insurance
Accident insurance provides a cash benefit if an employee experiences a covered accidental injury. This may include injuries such as fractures, burns, concussions, or emergency room visits resulting from off-the-job accidents.
Benefits are typically paid directly to the employee and may help cover deductibles, copays, transportation, or even lost income during recovery. Policies often provide scheduled payouts based on the type and severity of the injury.
Why offer it
This coverage can be especially helpful for employees to offset rising out-of-pocket healthcare costs. It can be particularly appealing in workplaces with active or younger workforces, where work-related injuries may be more common.
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Critical illness insurance
Critical illness insurance pays a lump-sum benefit if an employee is diagnosed with a covered serious condition, such as a heart attack, stroke, or other major illness defined in the policy.
The benefit is paid directly to the employee and can be used for medical bills, mortgage payments, travel expenses, or other financial obligations that arise during treatment and recovery.
Why offer it
Critical illness coverage can help bridge gaps created by higher deductibles and out-of-pocket maximums. As deductibles and out-of-pocket maximums increase, this type of policy can help employees bridge coverage gaps without requiring the employer to fund the full benefit.
MASA medical transport solutions
Medical transport coverage, such as services offered through MASA, helps protect employees from high out-of-pocket costs associated with emergency medical transportation. This may include ground ambulance services or air ambulance transport that is not fully covered by traditional health insurance.
Instead of paying a fixed benefit amount, some medical transport memberships coordinate directly with providers to cover eligible transport costs beyond what insurance pays.
Why offer it
Medical transport coverage can address a gap that many employees may not even realize exists — especially when emergency air transport isn’t fully covered by a health plan. Most people don’t realize that calling 911 can lead to a massive bill. Offering access to this protection provides major peace of mind for a very common — and often overlooked — coverage gap. Offering access to this type of protection can provide added peace of mind without significantly increasing employer costs.
Understanding how these options work and the impact they can have on your team is a great foundational step. As you build your company, a strategic perks program can go a long way in making your workplace more appealing to job seekers and more supportive for the people you’ve already hired.
Putting employee perks in motion
Voluntary benefits can be a practical first step if you’re building your perks program gradually or trying to stay competitive without stretching your budget. They give employees more ways to protect their income and manage healthcare costs — while giving you more control over what you fund. And as your company grows, these options can evolve with you, whether that means layering in employer-paid coverage, retirement benefits, or additional health perks down the road.
If you need a hand figuring out which voluntary products make sense for your team, OnPay’s benefits consultants can walk you through your options and help you build a plan that fits your goals and your budget.
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Jon Davis is the Sr. Content Marketing Manager at OnPay. He has over 15 years of experience writing for small and growing businesses. Jon lives and works in Atlanta.