Getting a salary isn’t the only reason most of us go to work.
Having a strong employee benefits package can get you noticed by potential employees and make your current team happy and proud to work for you.
Whether you’re an HR professional in a startup looking to build a new, attractive benefits package or running HR in a big business and looking to expand on your current offering, you’re in the right place.
Here, we’re going to explore:
- Exactly what an employee benefit is
- The data behind why you need an employee benefits package
- The different categories of benefits
- Some well-known and less common employee benefits you can offer
Before we answer some burning questions that often crop up.
Let’s start to process this.
Table of Contents
Why Are Employee Benefits Important for Your Business?
What Are the 5 Main Types of Employee Benefits?
11 Employee Benefits All HR Professionals Should Know
Frequently Asked Questions (FAQs)
What Are Employee Benefits?
Employee benefits are the extras that a company gives to its staff on top of wages or salary as a form of compensation.
There are lots of benefits an employee can offer, some that will cost the company money and others that have a less tangible cost, such as flexible working.
According to the American Institute of CPAs, 80% of workers in the US would choose a job that had better benefits over one with a higher salary – employee benefits are very important to your workers and potential workers.
We’ll dive deeper into the types of employee benefits in a moment, but to give you a few examples, employee benefits can include:
- Health benefits
- A pension plan
- Paid time off (PTO)
- Wellness programs
With plenty more options your company can look at.
It’s worthwhile noting the difference between a perk and a benefit.
A benefit is when the employer offers things that an employee would usually have to pay out of their own pocket, like healthcare, whilst a perk isn’t something that comes as standard to all workers, such as negotiated discounts at local restaurants.
While some employee benefits are legally mandated in some countries and states, like sick days, other benefits are offered for the purpose of attracting and retaining the right talent, like flexible hours.
Now you’ve got a background on what job benefits are, let’s look at why you should be offering them to your team.
Why Are Employee Benefits Important for Your Business?
Employee benefits are a great way to mark your company out as different when you want to attract the best talent.
As you can see in the graph below from Achievers Workforce Institute, people who are considering switching jobs prioritize salary and benefits and work-life balance, which can definitely be achieved with a good employee benefits package.
People working in human resource management will already know that work benefits are a positive addition to any salary package, but why is that?
We’re going to break down the specifics of why you need to be offering a strong and wide-ranging benefits plan.
Reason #1: Increase employee retention
Workers stay in jobs that care about their physical wellbeing and mental health – they aren’t afraid to quit their job when they’re not happy.
More than 3.8 million people quit their jobs in the USA in June 2021; that’s more than 1.2 million more people quitting than at the same time the previous year and a rate of 2.7% of all workers.
It’s not just people in low-paid jobs quitting, either.
The Bureau of Labor Statistics’ data goes on to say that 72,000 more people quit their roles in professional and business services in June than the year before.
Add to that, the same Achievers Workforce Institute report we looked at earlier tells us that more than half of all employed people plan on looking for a new job in the next year.
Clearly, there are large chunks of the workforce who aren’t happy and want to look for a new job, so your business needs to work to keep the team you have.
How do we know benefits are important in keeping your employees happy?
In a study by Prudential, 52% of respondents said that they’d “be willing to take a chance on a new job right now if it offered better benefits” – a pretty compelling stat.
Since you’ve already invested in training and upskilling your part- and full-time employees, risking losing them by not offering employee benefits is counterintuitive.
After all, it costs 1-1.5 times an employee’s annual salary to onboard a new recruit.
Retaining your existing talent is vital to keeping your business growing.
Reason #2: Boost employee morale and productivity
A good employee benefits package should offer a good work-life balance if you want to attract top talent to your team.
Although more than half of workers worry that their boss thinks they’re not working hard enough when remote working, in fact, March and April 2020 saw a 47% increase in productivity when people worked from home compared to the year before.
This means that benefits for employees that let them stay home can directly increase your business’s productivity, and who doesn’t want that?
It’s not all about the increased output, though.
Not only does your business get a boost when you offer other benefits like paid leave and care leave, but these are also proven to increase the morale of your team.
When you take care of your staff, they’re much more likely to care about your business and this should reflect in your bottom line.
Let’s check out another reason why workplace benefits are a great idea.
Reason #3: Differentiate from competition
The benefits that you offer can really set you apart from other companies, especially in a competitive labor market with a shortage of workers.
With job openings in the USA at 9.3 million in June 2021, your company needs to have something that sets it apart to get talent through the door.
Workers value benefits and up to 75% of them say that employee benefits are an important part of their job.
For job seekers, benefits are very important when considering which job offer to accept.
The following is a list of employee benefits and the importance 2,000 workers placed on them when considering whether to take a new job:
Clearly, if you want to stand out from the crowd as a company looking to bring in new talent, you need to be offering things like healthcare, flexible working, and vacation days.
It’s worth noting that four of the top five don’t have a direct cost to your business, either.
Being able to offer the benefits that people are looking for will set you apart, even if you can’t afford to add any more to the salary you offer.
There’s one more significant reason when company benefits should be a part of your operations.
Reason #4: Avoid employee burnout
Making sure that your workers don’t crash and burn because of stress and overwork is a powerful reason for having a good compensation and benefits package.
In a study by Limeade, an employee inclusivity and wellbeing company, they found that:
- One-third of workers quit their job because they didn’t think their employer cared
- 20% quit because there was no support from their employer for their wellbeing
- Employees who experienced burnout couldn’t sleep, didn’t socialize, and drank more alcohol
- Three-quarters of employees had experienced burnout at some point in their career
These are some powerful reasons why you should be offering your team the best employee benefits you’re able to.
Helping to prevent employee burnout will pay dividends in your business, with workers who don’t need to take unexpected time off when they can’t cope or even just lose productivity due to stress.
Now you know why you need to offer employee benefits, it’s time to check out the main types of benefits.
What are the 5 Main Types of Employee Benefits?
There are lots of different categories that benefit plans can fall into, some of which we’ve touched on as we’ve talked about the reasons to offer them.
Some benefits packages may focus on one type of benefit whilst others could include some or all of these categories.
Let’s check them out.
Type #1: Medical benefits
Medical benefits cover a whole range of different benefits offered to employees.
This type of benefit is much more common in the USA since it’s one of only 43 countries that don’t offer free or universal healthcare.
Lots of medical benefit packages cover both the employee and their immediate family.
There are different coverage options, such as:
- Medical insurance
- Dental insurance
- Vision insurance
- Mental health care
- Prescription and pharmacy coverage
Under the Patient Protection and Affordable Care Act 2010, there are certain rules that your company’s health plans will have to follow.
What’s more, there are some companies who have to offer this benefit or pay a penalty to the IRS – seek advice from your company’s legal advisors if you’re unsure of the rules.
As we’ve already seen, this type of benefit is a consideration when looking at a job for 88% of people.
Yes, there is a cost involved with medical insurance plans, but it will make your company seem caring to your current and future employees.
Moving on to the next type of benefit.
Type #2: Life insurance benefits
Life insurance benefits plans offer a payout to your workers’ families in the unfortunate circumstance that they die while working for you.
This type of insurance generally falls into three categories:
And it works in a similar way to life insurance policies that you may already have for yourself.
An important thing you need to consider is some IRS implications – the policy must comply with section 79 of the Internal Revenue Code.
This needs to be something you check when taking out a group life insurance policy but try not to let it put you off offering this benefit.
Another benefit type is next.
Type #3: Retirement benefits
Offering your team employee retirement benefits means you help them save money now so they can enjoy their golden years.
Although retirement benefits are offered through social security for nearly every American worker, you can top that up for your team.
Work-sponsored retirement benefits usually come in the form of an employer-sponsored plan (ESP) 401(k) which includes tax benefits to your employees and your company.
When your company contributes to an employee’s 401(k), it’s a long-term financial benefit and can definitely set you apart from other companies in your industry when you’re recruiting talent.
Type #4: Disability benefits
Disability benefits give your workers a guaranteed income if they get ill or injured.
This type of cover is usually for short-term disability, like a broken bone, and tends to cover absences from work for around three to six months.
If you want to offer disability benefits, there are insurance plans that your company can take out so that you don’t have to pay money from your payroll to cover an accident or illness in your team.
You can choose a policy that covers either a defined dollar amount or a percentage of your workers’ wages when they’re absent for an extended period.
There can be waiting periods for your policy to kick in and lots of employers choose to offer sick leave to cover that time.
Sick leave or medical leave can even cover general absences like if someone catches the ‘flu and needs a couple of days off work to recover and come back at full productivity.
For long-term disability, employers can choose a policy that works alongside their short-term plan and can cover up to the time a worker can claim social security, and for even longer if they wish.
That’s the major financial benefits you can offer, let’s look at some other fringe benefits.
Type #5: Fringe benefits
Lots of companies will see medical, retirement, and other benefits we’ve talked about as standard.
If your competitors all offer the benefits we’ve already looked at, you can consider adding other fringe benefits to make you stand out.
Some examples of extra benefits you can offer include:
- College tuition reimbursement
- Childcare benefits
- Parental leave
- Employee discounts
- An employee assistance program
- Flexible working
To name just a few.
If you’re unsure about the extra benefits you can offer as part of your salaried benefits package, consult your current team and see what they’d like to see offered.
Now, we’re going to dig into more details with specific employee benefit options for your company.
11 Employee Benefits All HR Professionals Should Know
Working in HR, putting together an employee benefits package will land on your desk.
Whilst there are some standard benefits employees can expect, there are other options that can make you stand out from the crowd, helping to retain your current workforce and entice in new talent.
Here are our top 11 employee benefits you can consider offering:
- Medical insurance
- Dental insurance
- Vacation time
- Paid sick leave
- Long service leave
- Flexible working
- Remote working
- Daycare and school fees
- Student loan assistance
- Gym membership
- Equity or share schemes
Let’s look at the details.
Benefit #1: Medical insurance
Medical or health insurance is a major draw for many people, with large chunks of the American workforce happy to receive a lower salary if they get this benefit.
Whilst it is a cost for your business, there is a long-term benefit in having a team that’s healthy and able to get medical advice and treatment when needed.
You can also consider offering a Health Savings Account, or HSA, which lets your workers save money, pre-tax, to cover things your medical policy doesn’t like deductibles and copays.
Benefit #2: Dental insurance
Dental care can be expensive, particularly for families with children who need orthodontic care like braces.
By offering a dental insurance plan to your workers, you can take some stress off their minds – even if a dental emergency arises they won’t have to worry about money.
Benefit #3: Vacation time
We all love a holiday and the USA has the worst legal minimums for vacation time in the world:
You may not be compelled to offer PTO, but your workers will definitely appreciate it.
It doesn’t have a direct cost to you, in that you don’t need to pay for an insurance policy, but you will see an increase in your overall output, as we looked at a little earlier.
Benefit #4: Paid sick leave
Paid sick leave can help boost your company’s productivity and decrease employee turnover.
In terms of productivity, it’s estimated that $234 billion is lost in the US economy due to people working when they’re sick, which can be cut by offering sick leave.
Some industries can see employee turnover reduce by 50% when they introduce sick leave.
Like vacation time, sick leave isn’t a direct cost to your business – it just requires good planning and resource management, which is what your HR department is there for!
Benefit #5: Long service leave
Long service leave is a great way to reward your most loyal workers.
In some countries like Australia and New Zealand, it’s a legal requirement that a worker gets a guaranteed period of leave after working a minimum number of years, and similar schemes exist in countries like Finland and Indonesia.
It may not be law in the US, but it’s definitely something your team will appreciate and will likely stick around for.
Benefit 6: Flexible working
Offering your team flexible working conditions can be a very cost-effective way of offering a benefit that lots of people want.
Flexible hours can have lots of different elements, including:
- Compressed hours
- Flexible shift patterns
- Job sharing
- Banking hours
Not only should this flexibility keep your team happy, but you should also see them be more productive when they are working.
It’s a great benefit for everyone involved.
Benefit #7: Remote working
Remote working, or working from home, has increased dramatically during the recent COVID-19 pandemic.
According to PWC, more than two-thirds of financial services companies will have at least 60% remote working following the pandemic.
Working remotely can offer a better work-life balance to workers who no longer need to commute and can be in an environment that they control.
Benefit #8: Daycare and school fees
In the USA, the average cost of daycare for kids is $8,355 each.
That’s a huge chunk of anyone’s salary and stress that new parents could do without.
You can consider making contributions to childcare costs, offering on-site daycare facilities, or negotiating a discount with a local provider for your employees.
Paying school fees is more likely to be a benefit offered to workers who are sent overseas and can be a strong incentive to some considering an international posting.
Benefit #9: Student loan assistance
On average, Americans graduate college with $54,921 of student loan debt.
You can choose to help out your employee with that debt by offering student loan assistance and paying money directly to their student loan servicer to help clear the debt quicker.
Offering to help with costs for further professional development is also common.
It’s up to your company how you structure your tuition reimbursement program, but commonly you’ll refund an employee for the cost of classes that are relevant to their work once they’re completed.
Benefit #10: Gym membership
We all know how important it is to stay healthy so giving your team a membership to the local gym will be greatly appreciated.
It’s likely that you can negotiate a group discount when you sign your company up with a set number of spots.
Your team will appreciate not having to pay their monthly membership costs and you have happier, and more productive workers.
Benefit #11: Equity or share schemes
The final employee benefits package example we have for you is an equity or share scheme.
Especially if your company is a startup or is about to scale, you may not have a lot of cash on hand to pay large salaries and bonuses.
However, you can offer your team stock options in the company, where they get to own a part of the business and benefit from that ownership as they grow.
The people who take part in the scheme will have a vested interest in staying with your company and making it a success.
It’s not just for startups, Apple offers all their workers discounted stock options, too.
If Apple and other big businesses do it, there’s a strong chance that it’s a very effective employee benefit.
That’s all for our list of employee benefits, let’s bring this to a close.
That’s the top employee benefits you need to know about.
Offering more than just a salary will set you apart when bringing in new people and help you keep the valuable team you’ve already built.
There are lots of benefits available to put together a top employee benefits package that will keep your business productive and workers content.
Which employee benefit is working well at your company?
Leave a comment with your most successful benefit!
Frequently Asked Questions (FAQs)
Still got questions about all the options for employee benefits?
Here are the questions that often crop up.
Q1. What are the most common employee benefits?
Some of the most common employee benefits include medical insurance, dental insurance, vacation time, paid sick leave, long service leave, and flexible and remote working.
Q2. What are some popular companies that offer employee benefits?
Lots of well-known companies have generous employee benefits packages. Some famous ones include Facebook which offers bonuses and parental leave when you have a child, Netflix offers up to $1.5 million to family members if a worker dies, Google offers free food and an on-site gym, and Microsoft offers a generous healthcare and childcare package.
Q3. What’s the difference between a benefit and a perk?
There isn’t a very clear distinction between a benefit and a perk, although a benefit is generally something extra that tops up an employee’s salary package while a perk is an added extra on top of a standard salary package like a bonus or reward for high sales.
Q4. Are promotional products good employee benefits?
Promotional products can easily be built into an employee benefit package. For example, during your onboarding process, you can give a bundle of tech swag like a company phone, power bank, and laptop bag. Other options include travel swag for your team who need to travel for work and an annual summer swag bag and Christmas hamper.
Featured image by bruce mars on Unsplash