In today’s dog-eat-dog labor market, employee benefits have become a powerful asset that plays a significant role in talent attraction. 

A good employee benefits package has the power to keep people at your company, especially if you’re a small business that can’t afford higher salaries. 

In short, benefits should be integral to every bonus kit — from life insurance and free food to retirement benefits — since they make employees happy to work with you. 

So, if you’re considering building an effective benefit plan to attract, retain, and engage top talent, we have your back!

In this piece, discover: 

• What employee benefits are
• Why employee benefits are vital
• How to manage the main types of benefits

What Are Employee Benefits?

Tangible or intangible, such bonuses come in many different shapes and can include the following:

• Health insurance
• Profit sharing
• Paid time off (PTO)
• Disability insurance
• Childcare benefits
• Wellness programs
• Unemployment insurance
• Flexible spending accounts 

The benefits a company can offer are determined by the organization’s location and mandated by local law, meaning that some benefits are either mandatory or voluntary. 

For example, health plans are crucial in any compensation package in the United States, and employers must contribute to their staff’s social security and Medicare. 

Meanwhile, only a few companies offer flexible work schedules, which is an indirect form of compensation. 

Moreover, even if there are standard benefit regulations employers must follow, each state has different rules regarding sick days or remote work expenses. 

Remember that, in general, only full-time employees are eligible for benefits, while part-time employees are not.

As a result, when crafting an employee benefits plan, consider the types of candidates you want to attract, what benefits they would enjoy the most, and what voluntary benefits you can afford. 

Regardless of your choice, benefits are an impactful way to create a positive company culture, keep your workers happy, and boost your employee retention strategy efforts. 

But let’s dive deeper into the advantages of employee benefits in the next section. 

Why Are Employee Benefits Important?

According to the US Bureau of Labor Statistics, employee benefits comprise 31% of total compensation costs, with insurance benefits making up 8.3% of costs. 

What conclusion can we draw from this? 

Employees love benefits, especially since they incentivize them to work harder and motivate them to grow. It’s the reason why so many candidates apply to your company. 

Since employees want appreciation and recognition for their contributions, here’s why you should invest in employee benefits.  

Improved employee mental and physical health

We’ve all heard stories where an ill employee comes to work because they can’t afford sick leave.

It might mean the company they work for has a culture where employees have to be ever-present, which is not beneficial for their physical and mental health. 

That’s why healthcare coverage keeps employees healthy, allowing them to give their best every time, which translates into better results for your organization. 

For instance, benefits that improve work-life balance help prevent burnout and lower stress. 

Moreover, showing your employees that you care about their personal needs, time, and well-being leads to a positive work environment and makes them feel rewarded and appreciated. 

A few perks that assist employees in maintaining their health and productivity include gym memberships, medical insurance, flexible schedules, more vacation days, or branded swag. 

Higher workplace morale

You can closely tie job satisfaction to employee satisfaction. 

Ignoring employees’ needs might cause them to be disengaged from work, leading to a lack of commitment, productivity, and efficiency. 

So, with a more fantastic benefits package comes a morale boost. 

When taken care of, employees will be more loyal and show higher job satisfaction, especially if the benefits are exciting. 

For instance, offering perks such as casual dress codes creates a more relaxed workspace, making employees feel valued and likely to stay at your company in the long run.

Increased productivity

When your teams are healthy and happy, it can lead to more productivity.

Employees who sense you care about their well-being are likely to work harder in their roles rather than show up and do the bare minimum. 

As a result, when workers feel confident about personal matters, they can better focus on their work and how to advance their careers in your company. 

A good benefits package should include paid vacation time or flexible work schedules that prevent employees from worrying about the future, finances, or medical expenses. 

Attract top talent

Employee benefits greatly serve your employee retention efforts. 

Talent management is one of the most common HR challenges companies have to deal with, especially since you must compete with all the other businesses that want the best recruits. 

The benefits you offer show employees what your company values and how in touch it is with its staff.  

That’s why many people research a new employer before considering their job offer, so you might need to work on your benefits package if you’re struggling with employee turnover. 

To emphasize this point, 88% of job seekers rate dental insurance and better health benefits as one of the most important perks they want when searching for a new job. 

You can differentiate your business through more sick days, an educational stipend, or parental leave. 

Stellar company reputation

In today’s competitive world, brand loyalty is crucial for business success. 

Modern consumers are more than willing to spend their money on a business that shares their values, which means that if a company mistreats its workers, people won’t view them favorably.

As a result, just one disgruntled employee could cause a loss of revenue and tarnish your reputation. 

By offering unique benefits packages, you foster brand loyalty among your coworkers.

Even if employees leave your company, they will likely become brand ambassadors, which means they’ll recommend your company to others and continue using your services.

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With the five advantages of employee benefits in mind, let’s move on and discuss the four main types of benefits that every potential candidate considers when applying for a job. 

4 Main Types of Employee Benefits

Since each company is unique and has its perks, there is no one-size-fits-all employee benefits package. 

However, there are a few common types of benefits to look out for. 

Insurance (medical, life, disability)

One of the most essential perks of any employee package is insurance. 

Whether health, life, or disability insurance, offering medical care is mandatory in many countries, and it’s often publicly available and sponsored by employers. 

However, many businesses prefer to invest in private or individual insurance plans that provide better options for their employees.

For instance, The Family and Medical Leave Act (FMLA) is an affordable care act that gives employees job-protected, unpaid leave per year for medical or family reasons. 

Generally, companies with a certain number of employees must provide basic health insurance for employees working over 30 hours, including primary care doctors, hospitalizations, or emergency care. 

Other insurances, such as life insurance, serve the employee and the family. If an employee dies, the family gets a sum that covers the funeral expenses and their living costs for some time. 

Last but not least, disability insurance takes care of long- or short-term disability or illness. 

For example, female workers can use short-term disability policies to pay for maternity leave. 

Retirement plans

Pension plans help employees save for retirement by putting a portion of their pre-taxed income into an investment account. 

Employees can manage their funds and withdraw a sum once they reach retirement age, the amount being determined in many cases by their years of service and tenure at the company. 

There are two types of retirement savings: 

1. Defined benefit offers a source of income for retirees based on their years of service and salary history, paid out in monthly installments. 
2. Defined contribution allows employees to put a percentage of their income into their retirement accounts each month. 

One popular retirement plan in the United States is 401(k), where employees and the company contribute to the account daily.

Paid time off

Paid time off allows employees to recharge their batteries and return stronger after a sabbatical, making it one of the most vital benefits a company can offer. 

Usually, PTO includes parental leave, bereavement time, or sick days and is distributed yearly or by case. 

While the standard is one or two monthly sick days and ten vacation days per year, some countries offer up to five weeks of paid vacation time annually. 

For example, paid time off is mandatory by law in the European Union, while employers in the US are not required to offer paid vacation leave.

However, those who do can get a competitive advantage in talent attraction and retention, contributing to overall job satisfaction and the professional development of employees.

Fringe benefits (additional compensation)

Fringe benefits are voluntary perks or compensation you offer employees for their performance outside their regular wage. 

They can be part of an incentive program that keeps morale high and encourages employees to produce better results. 

Fringe benefits might include:

• Educational assistance, such as tuition reimbursement or student loan repayment
• Company holidays
• Free snacks and food
• Lump-sum gifts
• Sales commissions
• Stock option plans
• Individual or company-wide performance awards

These fringe benefits are powerful tools for engaging employees, recruiting top talent, and motivating current staff to perform better. 

As a bonus, some fringe benefits are tax-deductible for employers. 

Author’s Tip: Monetary benefits can create envy among team members, so be careful to treat everyone equally and make the bonus criteria transparent to all.

Learn More About HR

Employee benefits keep your team members happy. 

If your staff is happy, you’ll get better business results and your business will run smoothly.

You can take this as a sign to implement an attractive benefits package that suits your company’s culture, values, and mission while helping your teams work toward greatness. 

However, there’s more to HR than employee benefits.

Sneak a peek into our HR glossary to discover the different terms that can elevate your business to greater heights.