A professional guide to employee benefits
For employers looking to build on existing policies, or even implement new ones that will ensure the growth of an organization, it’s important to consider employee benefits. These are specific benefits given to employees as a part of working for a particular company or organization, and which may be divided into specific types and categorized by certain characteristics. Employee benefits should also be given special importance by employers, as well as the employees that make use of them.
What are employee benefits?
Employee benefits are defined as “any kind of tangible or intangible compensation given to employees apart from base wages or base salaries”. Basically, they are added perks and advantages offered to employees by employers, on top of compensation. They are also sometimes referred to as “fringe benefits”.
For employers, it is important to know that employee benefits have become an essential part of any competitive job offer or compensation package in the modern era. Most employees looking for a new position within a firm will want to ensure that said firm offers a selection of benefits to its workforce.
What types of employee benefits are available?
In the United States, many employers regard insurance and retirement plans as the major types of employee benefits. The types of insurance covered by this usually include life insurance, health or medical insurance, and disability insurance. However, this does not take into account other benefits which should be given equal importance. These have been expanded on below:
Insurance benefits
These benefits normally cover health insurance (often including dental, medical, and vision), life insurance, and disability insurance. In many countries, it is mandatory for employers to offer their employees health insurance or a medical plan of some description. There will often be publicly available medical care sponsored by employers, though many choose to use a private group or individual insurance. This is designed to provide a better range of options for their employees.
Life insurance offers compensation to employees’ families in the event of their death. This sum will typically cover funeral expenses and other associated costs, as well as their cost of living for a period of time. Depending on the employer, life insurance might also be complemented by Accidental Death and Dismemberment (AD&D) policies. These pay a sum to employees or their families when they die or sustain injuries which leave them incapable of working.
Disability insurance is designed to cover long-term or short-term disability or illness. This means that if an employee gets sick or is injured and unable to work, they will be able to receive payments for as long as their sickness or injury lasts. Some companies might also use these policies to fund maternity leave for their employees.
Retirement benefits
These benefits help to secure an employee’s future after they have retired. An example of a benefit offered by employers is the 401(k), in which both a company and an employee make contributions to the employee’s account on a regular basis. However, this doesn’t guarantee that employee a specific benefit amount at retirement because money invested from the account may be lost if the investments fail. Employees also choose how to invest contributions, or how much to contribute from their paycheck through pre-tax deductions.
Employers can also contribute to an employee’s 401(k), sometimes by matching a percentage of said employee’s contributions.
Defined retirement plans, on the other hand, are entirely funded by the employer, meaning employees will receive a specific monthly benefit at retirement. The amount they receive may be determined by age and their tenure at the company.
Time off benefits
In many other countries, paid time off is mandated by law. Employers in the US, however, may not be obliged to offer paid vacation leave. There is an advantage that encourages employers to offer it voluntarily, though; it is a great way to attract and retain employees over competitors. According to a 2018 study conducted by the Society for Human Resource Management (SHRM), 9 out of 10 employees (92%) reported that paid leave is an important factor in their overall job satisfaction.
It’s for reasons such as this that many employers around the world have chosen to extend law-mandated leave in order to include extra days for sickness (sick leave), parental leave, or bereavement leave. Other benefits related to time off that employers may choose to provide include training days and sabbaticals. The latter two are usually voluntary for employers as well, but can have as much of an impact on employee engagement as the list of time off benefits mentioned above.
Additional compensation
Other and additional compensations cover any kind of money given to employees, apart from their regular compensation (wages or salaries). This money may include direct compensation forms such as awards, bonuses, commissions, or gifts, as well as indirect compensation forms like stock option plans and profit-sharing.
Bonuses can either be contractual or discretionary, and may include:
- Individual or company-wide performance awards
- Lump sum gifts (e.g. for being an outstanding or exemplary employee)
- Sales commissions
These compensations will usually be part of incentive programs designed to motivate employees, so that they will produce more and better quality results. These incentives also help to keep morale high, which often has an added bonus of improving quality of work in general anyway. These bonuses will often be determined by union contracts.
Even though there are many positive arguments to be made for monetary benefits, there are some arguments to be made against giving them as well. For example, financial rewards have been suggested to create envy and an unhealthily competitive atmosphere, or even in extreme cases, to encourage unethical behavior, among coworkers.
Preventing these may be achieved by ensuring every employee has the same chances to earn bonuses, making criteria for bonuses transparent for everyone to understand, and monitoring employee results for unexplained discrepancies.
Other employee benefits
Alongside the major employee benefits, there are many other types that may appear in company benefits plans. Even though it’s not possible to list all of these potential employee benefits, an employee might expect their workplace to offer benefits such as:
- Work From Home schemes or flexible hours
- Food and snacks
- Company equipment (such as laptops, phones, or cars and other vehicles)
- Employee discounts
- Gym memberships and fitness centers
- Transportation subsidies
- Education or tuition assistance (for employees looking to earn degrees)
- Care services, programs, and assistance for child and dependent care
- Games and activities in office spaces (such as ping-pong tables or pool tables)
- Wellness services, particularly those that look after mental health and wellbeing
Characteristics of employee benefits
The diversity of employee benefits makes them difficult to separate and discuss in terms of characteristics. Generally, each tends to be dealt with independently, rather than put with others as a group. However, when they are analyzed and categorized for any reason, experts recommend that a number of different factors are examined. Some of these factors include:
- Purpose (what the benefit provides)
- Legal requirements (how the benefits are offered and administered)
- Contributions and cost (who is paying for the benefit, or how much an employee and employer should each contribute to the cost of the benefit)
Employee benefit packages and plans
Depending on the organization and the job an employee has, employee benefits packages and plans can be very different. Examples might be the difference between government employee benefits packages for full-time employees and those offered to part-time employees. Typically, employee benefits packages and plans will be discussed during the final interview, or at the time when a job offer is extended to a potential employee.
While each state is different, there are some basic benefit laws which all employers must follow regardless of company location. Examples of these benefits include:
- Providing employees time off to vote, to serve on a jury, or to perform military service
- Complying with all workers’ compensation requirements
- Paying state and federal unemployment taxes
- Contributing to state short-term disability programs in states where such programs exist
- Complying with the Federal Family and Medical Leave (FMLA)
Why do employers offer employees benefits?
Offering employee benefits is an important task for an employer; it demonstrates to employees that their employer, and the company they work for, are invested in them, their health, and their future. Having an excellent employee benefits plan or package available can often assist in differentiating one particular company from its competitors, and attracting and retaining talent in a firm is made easier if employees are presented with an excellent set of benefits.
Why are benefits important to employees?
Employee benefits are not only important to employees because they demonstrate that their employer or the company they work for cares about them. They are also important to employees because they:
- Improve overall quality of life
- Offset living expenses and allow employees to save money
- Help to keep employees physically healthy
- Help to keep employees feeling mentally healthy
- Improve employee satisfaction
- Improve employee engagement
By improving employee satisfaction, engagement, and by keeping them feeling physically and mentally well, employers will be helping to prevent burnout and absences in their staff. By improving employee satisfaction and engagement, benefits may also have the added effect of improving company loyalty and increasing productivity in its workforce.
How do you find out about employee benefits?
In order to find out about employee benefits within their own organization, it is highly recommended that employees speak to their company’s employee benefits advisor or specialist. These individuals can tell employees more about the benefits packages and solutions that their company is committed to providing. Some companies will also have an internal employee benefits information system (which might also be called a benefits portal) containing the services a company offers.
Depending on the organization involved, employees might also receive employee benefits news outlining changes to benefit plans.
Those not familiar with employee benefits can find more information through the Employee Benefit Research Institute or the International Foundation of Employee Benefit Plans.
Companies with the best employee benefits
It will never be possible to compile a full list of companies with the best employee benefits, as the benefits offered will be different in every company and not every company is likely to offer every benefit. However, those looking for jobs with specific firms may be interested in looking at the types of benefits said firms offer.
Here, we have provided a list of ten of the most well-known companies and organizations that also offer excellent employee benefits and perks to their workforces:
- Facebook (free housing and healthcare coverage for interns; paid parental leave and bonuses for people with newborns; wellness allowances; an onsite barbershop and video game arcade)
- Netflix (fully paid, unlimited parental leave; $1.5m life benefit to help support employees’ families in the event of their death)
- Google (free food; cooking classes; gyms; celebrity talks; massage therapists; a death settlement which offers a deceased employee’s spouse or partner 50% of their salary for 10 years)
- Amazon (assistance with adoption costs; the ability to earn extra time off on top of paid time off; a Career Choice program which offers to prepay 95% of tuition costs, textbooks, and related fees)
- Starbucks (free dry cleaning and Spotify subscriptions; “family expansion” reimbursement; tuition reimbursement)
- Microsoft (childcare; social clubs for networking and building relationships; employee housing and relocation benefits)
- Hubspot (unlimited holiday time; four extra weeks of paid leave for every five years an employee spends at the company; tuition reimbursement; generous parental leave and financial assistance for egg freezing procedures)
- Spotify (flexible work options; fertility assistance programs and generous parental leave; free concert tickets)
- Airbnb (flexible spending accounts; premium life insurance; paid volunteer time; $2k annual travel stipend and the ability to stay at any Airbnb location across the globe; generous parental leave policies; healthy snacks for on-the-clock workers)
- Bank of America (401(k) matching; tuition reimbursement; financial counseling; career planning services; charitable contribution matching; generous leave-of-absence plans)
How to manage employee benefits effectively
To reduce the possibility of mistakes made when managing employee benefits plans, and to save time, employers might consider:
Including a description in the Employee Handbook
Dedicate a section of your Employee Handbook to important information on benefits and perks available to employees. This ensures that they are aware of the benefits they have available to them.
Finding better software
Managing employee benefits is best done with the help of technology. Having a good employee benefits information system installed ensures employers can see which employees receive which benefits, export statistics, and administer benefits. It’s also possible to integrate certain systems with talent acquisition software to make the HR process even more streamlined.
Closely measuring benefits and costs
Overall, this will be the responsibility of the finance department. However, it’s still important for HR to track rising or falling costs and gains. The data will be vital when forming a long-term benefits strategy.
Monitoring employees’ needs and wishes
The needs of employees may change over time, especially as they start to consider having families and get older in general. Examples of this might include offering free lunches and gym memberships for younger employees, but switching these for benefits based on flexible hours and parental leave as they become parents.
Hiring an employee benefits specialist
Employers might consider hiring external help, such as a Benefits Broker, or hiring a person in-house, such as a Benefits Administrator or Compensation and Benefits Manager, to assist. These professionals help companies by finding the best options for benefits based on the company’s needs, calculating costs and gains, and can even negotiate prices for certain benefits.