Notably, small business employers want to support their employees – 9 in 10 employer respondents in our study, conducted in partnership with Pacific Community Ventures (PCV) with support from Wells Fargo Foundation, said that they were aware of the financial challenges their employees faced. A similar share (88%) said it was important to improve their employees' financial wellbeing. This is especially true of employers who identified as minority- and women-owned enterprises, perhaps suggesting an even greater commitment among these business owners to give back to their communities by providing employment opportunities.

Yet cost and a perceived lack of innovation in the benefits marketplace are barriers preventing many small business owners from providing benefits. Our research suggests that, while market innovation has made financial benefits more affordable and accessible, many small businesses are unaware such innovations exist. In addition, from PCV's work with small businesses directly, we know that fear and distrust are also important barriers, particularly for entrepreneurs of color.

Making innovation more accessible

Actors throughout the small business employee benefits marketplace – including benefits innovators, brokers and payroll providers, and investors – can all play a role in closing this gap.

Benefits innovators, including the growing number of retirement plan providers, health insurers, and fintechs who are leveraging technology to lower costs for small business clients, should make sure their solutions are simple and easy for time-constrained small businesses to adopt, especially given that many of them do not have dedicated HR staff. As one small business owner in our focus group said: "The key is to have simplicity and to have a super strong UX. Ideally this would be super simple and be an app that the employees all know they have. There would be no responsibility of the business owners to communicate or educate their employees about it."

Innovators should also take the time to understand the cultural and business needs of businesses owned by women and people of color and to center those needs in product design and delivery. Our research suggests that these entrepreneurs do not need different products compared to other small businesses, but that they could disproportionately benefit from solutions that are culturally-informed and responsive to their lived experiences. For many, this includes a lack of trust with solutions providers perceived to be designing for the average user and not for and with their communities in particular.

Brokers, payroll providers, and PEOs, for their part, have an opportunity to leverage the recent surge of market innovation by investing in and helping to curate solutions for their small business clients. We found that small businesses want to support their employees' wellbeing but too often lack the resources, time, and awareness of solutions available on the market that can help them do that. Trusted intermediaries like these can help to fill this gap.

Investors, including banks and CDFIs, can combine capital with supportive services to help small business owners create high-quality jobs that support their employees' financial health. This includes helping their small business investees navigate the complex employee benefits landscape.

Read more: Small business is big business

Worker wellbeing is a competitive advantage

Though it is both urgent and important, embracing small business worker financial wellbeing isn't just a feel-good exercise. The data show that small businesses want this support from their vendors, brokers, and investors – and those that meet this demand with high-quality and innovative solutions will have a leg up against their competitors.

Beth Brockland is vice president, Workplace Solutions at Financial Health Network.