Employee Benefits

Employee Benefits are any kind of tangible or intangible compensation given to employees apart from base wages or base salaries. Employee benefits are defined as indirect, non-cash, or cash compensation paid to an employee above and beyond regular salary or wages.

Employee Benefits Definition

Employee benefits are non-financial compensation provided to an employee as part of the employment contract. Employee benefits may be required by law (depending on the risk associated with the job or industry and the laws of the country where the job is held) or provided voluntarily by the employer. From an employee’s point of view, a good package of benefits increase the value they receive from their working life and contribute to their own health and that of their family. From an employer’s point of view, benefits help staff remain happy and committed, reducing the chance of them leaving to work elsewhere. In some instances staff swap a proportion of their pre-tax salary for a benefit, known as salary sacrifice – the [Cycle2Work scheme] is a good example of this, whereby companies buy a bike and the employee loans it from them until the initial purchase amount has been paid off. Benefits can be taxable or non-taxable. Private medical insurance is one of the most common taxed benefits. In the last ten years, employers have increasingly provided less traditional employee benefits that provide benefit to the employee’s life as a whole rather than just their working life – examples of these are childcare, healthy foods in the office and subsidized gym memberships. Due to increased competition for good candidates, the benefits an employer provides for a particular position will be an important factor in attracting applicants.

Ways to Structure Employee Benefits

In addition to the different types of employee benefits, companies must evaluate how to structure the benefit. Employers have two different ways to structure, contribute, and offer employee benefits:

• Organizationally: These are benefits structured in “traditionally” They are generally employer-owned and employer-selected. Examples include a traditional health insurance policy, retirement pension or 401(k), or formal wellness program.
• Employee-oriented: This benefit structure focuses on the employee as an individual. With this approach. With this type of benefit employees use employer-funded dollars to customize their benefits using technology.

To help clarify these definitions, here is a chart showing examples of common employee benefits using these two approaches.

source: Peoplekeep

While organizational-oriented benefits are more traditional structures for benefits, many small employers are finding consumer-oriented benefits are of equally high value to employees, are typically more flexible, and also more affordable. Whereas organizational-oriented benefits have historically been the way to offer benefits, many employers are turning to consumer-oriented benefits to better meet the expectations of employees and to better control cost.

Employee Benefits Plans

Depending on the type of organization and the job, employee benefits may be quite different. For example, government employee benefit packages for full-time employees look very different from the packages offered to part-time employees. Employee benefits packages are typically discussed during the final interview or at the time an offer is extended. The right benefits package can give you a distinct advantage in competitive recruiting situations.

Each state in the USA is different; however, there are some basic benefit laws all employers must follow. Required benefits include:

• Provide employees time off to vote, serve on a jury and perform military service
• Comply with all workers’ compensation requirements
• Pay state and federal unemployment taxes
• Contribute to state short-term disability programs in states where such programs exist
• Comply with the Federal Family and Medical Leave (FMLA)

Employers are not required to provide:

• Retirement plans
• Health plans (except in Hawaii)
• Dental or vision plans
• Life insurance plans
• Paid vacations, holidays or sick leave

Types of Employee Benefits

In its 2019 Employee Happiness Index, HR tech company Benify distinguishes 4 categories of employee benefits:

• Benefits at work: This includes working hours & leave, skills development, food & beverage, and employee clubs, activities & gifts.
  • Working hours & leave: Think of flextime here for instance. Flextime gives your employees the possibility to decide about their working hours and/or the location they want to work from. Other examples include additional holidays and, one of the other benefits employees value most, paid parental leave.
  • Skills development: Rapid technological developments and the fact that people change jobs more often make skills development more important too. Skills development, however, is not just an important benefit for (younger) employees, it’s also essential for organizations if they want to remain competitive.
  • Food & Beverage: France offers meal vouchers. Other benefits that fall into this category include free lunches, fruit, and coffee. Employees of companies such as Yahoo, Robinhood, Sendgrid and many others get to enjoy a free lunch every day and it’s something that’s very much appreciated by the team. As an added bonus, free lunch and fruit are also a good way to promote healthy eating habits at work.
  • Employee clubs, activities & gifts: There are heaps of possibilities when it comes to this category of the employee benefits package: knitting clubs, running groups, (video) game nights, Secret Santas, anniversary gifts, you name it.
• Benefits for health: Think of health and wellness and healthcare here.
  • Health and wellness: More and more companies have employee wellness programs. The possibilities are endless and examples of employee wellness programs vary from a simple gym membership to full suite solutions that include physical, mental and financial wellness.
  • Healthcare: Healthcare benefits also come in different shapes and sizes. Think of physiotherapy and chiropractic sessions, for instance, but sometimes fertility treatments and psychological support can also be included.
• Benefits for financial security: The number one thing here are pension plans. Other benefits for financial security are insurances, financial benefits for employees, and personal finance benefits.
  • Pension plans: Interestingly, according to the research study, pension plans are considered as a very important benefit by every generation, but they’re not among the top ten most appreciated benefits.
  • Insurances: In some countries health insurance is something that comes with the simple fact of being an employee. Other types of insurance benefits for employees cover parental leave or injury.
  • Financial benefits: Think of commissions, bonuses and the possibility for employees to buy shares of the company they work for.
  • Personal finance benefits: The Benify report also shows that stress about personal finances has grown bigger over the past years. Yet another reason for employers to seriously start thinking of benefits such as advice about loans and savings. In other words: employee financial wellness.
• Lifestyle benefits: Lifestyle benefits consist of work-life balance and mobility.
  • Work-life balance: As employees increasingly attach importance to their work-life balance, it’s no surprise that benefits in this area become more popular too. Examples are childcare, grocery delivery, and legal services.
• Mobility: Mobility benefits can make your employees’ life a lot easier. Because even if they can work from home or elsewhere, they’ll still have to come into the office – or workplace – regularly. This category covers things like public transport and cars but also bicycles and carpooling.