Why should a company consider offering top employee benefits? It’s no secret that employers continue to face challenges in attracting and retaining top talent in the United States. While the massive layoffs in tech and finance have eased since the start of the year, and unemployment rates remain strikingly low, voluntary quitting is still at a record high, with most employees hopping industries.
This presents a unique challenge for companies: How do we attract the modern, discerning worker to traditional roles that are essential to our businesses? More importantly, what exactly can an employer do to keep them for the long haul?
By now, most companies understand the high costs of employee turnover and that adding dollars to a paycheck is just a temporary stopgap. Today’s savvy workers want purpose and a better quality of life at work. They’re looking for employers who offer work-life balance, flexibility, and an elevated employee experience. With everyone looking to attract and retain the best hires, a robust employee benefits program can become your secret sauce, allowing you to stand out.
But how do you choose the best employee benefits for your team? Let’s delve deeper into employee benefits and how to tailor them to suit your company’s ethos, size, and employee demographics. From health insurance to retirement savings plans, we will also discuss the top benefits employees are gunning for in 2023 and how you can offer them without breaking the bank.
- What are Employee Benefits?
- What are the Different Types of Employee Benefits?
- Why Are Employee Benefits Important?
- What are the 11 Top Employee Benefits at the Moment?
- How Do You Determine the Right Benefits to Offer Employees?
What are Employee Benefits?
Employee benefits are a form of non-monetary compensation offered to employees. Offering them to employees helps improve their financial security, overall happiness and enjoyment of their jobs. Essentially, a great benefits package is the “cherry on top” that makes a good job great.
Employee benefits come in many shapes and sizes depending on company size, structure, and industry. They also cater to various aspects of an employee’s life, including family, leisure, health, and future financial stability. Tech giants like Google, Netflix, Apple, and Meta are particularly known for great job benefits.
Netflix was one of the first companies in the United States to offer extended paid parental leave. Google’s lavish menu and healthy food options have made headlines since its early days. Then there’s Microsoft’s Discretionary Time Off policy, which emphasizes trust and promotes a healthy work-life balance.
These examples prove that benefits can be both practical and creative. That brings us to two terms often used interchangeably: employee benefits and perks.
Perks vs. Benefits: What’s the Difference?
Employee perks and employee benefits represent two distinct concepts in the corporate setting. Employee Benefits refer to must-have non-monetary offerings that supplement an employee’s salary. They are usually contractual and form part of the employee’s terms of employment. The best employee benefits include health insurance, life insurance, retirement plans, paid time off, paid parental leave, etc. These benefits alleviate the financial burden and help improve an employee’s quality of life.
Employee Perks are extra, often luxury or convenience-based additions that boost overall company culture. They make a company more attractive to potential employees and increase employee satisfaction and retention. Perks are typically non-contractual and discretionary on the employer’s part. The best company perks include flexible hours, gym memberships, free food or coffee in the office, child care assistance, tuition reimbursement, employee discounts, etc.
What are the Different Types of Employee Benefits?
The best employee benefits packages include various offerings that fall in several distinct categories. These include:
Mandatory (Statutory) Benefits
These are benefits employers are required by law to provide to everyone on their payroll. That may differ from country to country and state to state. In the U.S. specifically, there are 3 major benefits employers are required to provide:
- Social Security and Medicare contributions: enacted to address financial and employment security for workers through FICA. Provides for old-age, survivors, disability, and retirement. Employers and employees share the cost through a tax on salaries.
- Unemployment insurance contributions: take care of employees if they lose their job through no fault of their own. The contributions tide them over until they get another job. Employer contribution only.
- Workers’ compensation insurance: mandatory in all U.S. states except Texas. Takes care of the medical expenses and a percentage of the wages of employees injured at work.
Some states may also require employers to pay:
- Disability insurance (States requiring some form of disability insurance include California, New Jersey, Hawaii, Rhode Island, and New York)
- Family and medical leave (As outlined in the Family and Medical Leave Act)
- Health insurance (for employers with 50 or more employees, per the Affordable Care Act)
Voluntary Benefits
These are non-standard benefits commonly offered by employees at their discretion. These can further be divided into:
Insurance Benefits
These are the main nuts and bolts of a traditional benefits plan. Some offerings in this plan include:
- Health insurance – covers a portion or total cost of eligible employees’ health care expenses. Often provides coverage for doctor’s visits, hospital stays, medications, physical exams, lab fees, etc.
- Life insurance – provides a predetermined financial payout to the employee’s beneficiaries in the event of their death, regardless of the cause. (Some policies may impose restrictions like suicide or death due to illegal activities)
- Accidental death and dismemberment – provides benefits in the event of accidental death or serious injuries leading to loss of use or actual loss of limbs.
- Short-term disability – Provides weekly payouts if an employee is temporarily unable to work because of an injury or illness. Typically lasts until 14 weeks.
- Long-term disability – Provides a monthly income if the employee cannot work for longer periods, typically until they reach age 65.
- Critical illness – pays a one-time lump sum payout if the employee is diagnosed with a specified critical illness.
Extended Healthcare Benefits
This typically covers services not covered by a basic health insurance plan. Offerings vary depending on the specifics of a plan but will commonly include:
- Prescription drugs
- Vision care – routine eye exams, glasses, contact lenses, etc.
- Dental care – preventative and restorative services.
- Alternative therapies – complementary treatments such as acupuncture, physiotherapy, massage therapy, etc.
- Out-of-country medical travel costs
Retirement Benefits
- 401(k) accounts
- Simple IRAs
- Pension plans
Fringe Benefits
Fringe benefits are extra perks employers add to the traditional benefits plan to set themselves apart from the crowd. While the traditional plan focuses mainly on the employee’s financial well-being, fringe benefits are more holistic, covering mental, physical, social, and emotional aspects. Examples of popular fringe benefits include:
Work-Life Balance
Flexibility is a big attraction to today’s employees. Employers can solve this by offering flex schedules, remote work options, and shorter work weeks. Paid time off has also become increasingly popular. Defined as the personal time employees take off from work while still receiving full pay, most companies offer PTO in the form of:
- Personal leave
- Sick pay
- Paid holidays
- Vacation pay
- Parental and family leave
Education Benefits
Some employers offer education assistance benefits to retain high-quality employees. This may include:
- Continuous professional trainings
- Tuition reimbursement
- Education grants and stipends
- Student loan debt repayment assistance
Fitness and Wellness Programs
After braving a global pandemic, social unrest, a war in Europe, and a near recession, wellness has become a high priority for most people. For employers, this offers a golden opportunity to show your employees just how much you care for them. And while money may be tight, there are other ways of showing your team you care for their well-being. Corporate wellness programs can include:
- Daycare and eldercare programs
- Counseling services
- Chronic disease management programs
- Gym reimbursements and memberships
- Wellness spending accounts
- Smoking cessation programs
Why Are Employee Benefits Important?
We now know what employee benefits are, but why are they so important? Why should you invest in them? From attracting potential hires to impacting your financial bottom line, here’s why employee benefits are essential for any business.
Employee benefits are a great way to demonstrate and actively invest in your company culture
A company’s culture is a predictor of how long employees can last in the company. According to a recent study, a toxic work culture accounts for 62% of voluntary quits. Predictably, companies with great cultures will consistently outperform their competition.They also have higher employee engagement.
While free snacks would undoubtedly appeal to anyone, great bosses who treat employees with empathy and respect would be an even bigger reason to stick around. For example, something as simple as employee recognition can boost employee morale, reduce turnover and increase engagement. To quote the old adage, “Employees do not leave bad jobs; they leave bad bosses.”
Ultimately, it’s the relationship employers have with their employees that really matters. As multiple studies show, great leaders play a significant role in shaping corporate culture. This then trickles down to job satisfaction, employee engagement, and productivity.
A company’s benefits package is an excellent indicator of its corporate culture. While salaries and wages may be dictated by the economy and industry trends, the benefits you offer and how you structure them says a lot about who you are as an organization. For example, if employee well-being is an essential pillar of your company, you will find a way to include it in your company’s benefits package.
Employers have a duty of care toward their employees
The effects of an uncertain economy, rising inflation, and the disruption of the pandemic have been far-reaching. Although we’re slowly regaining our footing, the cost of living is still over the roof for most people. And as an employer, you should look after your team members.
Beyond merely providing a paycheck, more and more employers are stepping in to help employees care for their mental, financial, and physical health and well-being. Offering flexible hours, mental health workshops, and financial literacy are examples of how employers can help alleviate the burden.
Price effectiveness of pooling employee risks
Offering group insurance benefits offers price effectiveness through the pooling of risks. Many employees can’t ordinarily afford individual insurance plans for all their needs. Given each person’s varied age, health conditions, and lifestyle habits, the insurance company will likely charge higher premiums to compensate for the higher-risk members.
When you offer group insurance benefits, you’re effectively pooling together all these risks. This balances out the higher-risk individuals with lower ones, resulting in a lower overall risk. Consequently, the insurer can offer lower premium rates for group insurance than individual policies.
The other advantage is in the underwriting process. For example, employees under a group health insurance plan do not have to undergo stringent medical exams to qualify for coverage.
Potential tax benefits for your business
Some employee benefits are eligible for tax advantages. The premiums for these benefits are a deductible expense to the business owner and not a taxable benefit in most cases to the employee.
In other words, while you’re investing in your employees’ well-being and job satisfaction, you’re also potentially reducing your taxable income, resulting in significant tax savings. Such employee benefits include healthcare benefits, qualified retirement plans, and education assistance programs.
Benefits allow you to protect your business’s most valuable resource
It’s often said that employees are the backbone of any business. No matter the size or structure of your company, you need productive employees to help you scale. On their part, many employees are simply looking for a more human experience at work.
Offering great employee benefits can help you create an outstanding human experience. For example, medical benefits can help improve employee health and well-being. In 2019, 66.5% of all bankruptcies filed in the country were tied to medical costs. The previous year, medical expenses accounted for 33% of all GoFundMe accounts opened.
Here are more statistics from a recent Kaiser Family Foundation study that underscore the importance of employer-sponsored health care benefits:
- Nearly half of Americans can’t afford health care costs
- 4 in 10 people have gone for at least 1 year without medical care due to high costs
- 41% of Americans have current debts caused by medical bills
- 25% of people have not filled their prescription because of high costs
- 71% of Americans are worried about being unable to afford unexpected medical expenses
What are the 10 Top Employee Benefits at the Moment?
The world of work has evolved dramatically since COVID. So have employee needs. Here are the best employee benefits in 2023 according to the MetLife Employee Benefit Trends Study:
- Employer-Sponsored Healthcare benefits: 79% of employees cite employer-sponsored health care benefits as a must-have. 51% of employers in the US offered health care benefits in 2022.
- Dental Insurance: 73% of workers are interested in dental insurance benefits.
- Vision Care: 70% of people care about a vision care insurance or discount program.
- Health Savings Accounts (HSAs): Set aside funds per employee to save money (pre-tax) and spend it for an eligible medical expense.
- Wellness Spending Accounts: Employees may select wellness benefit that work for them, e.g. gym subscriptions, chiropractor visits, etc. Particularly useful if you don’t have an onsite fitness program.
- Retirement Benefits: 75% of employees feel a 401(K) or other defined contribution retirement plan is essential to their well-being.
- Wellness Programs and Benefits: 45% of employees are very interested in financial wellness tools and resources. 48% of employees report poor mental health due to financial concerns.
- Employee Assistance Programs (EAPs): These are vital offerings for mental health support. They provide crisis management, divorce counseling, financial planning, general mental health support, etc.
- Better Work-Life Balance: 64% of all employees are interested in the 4-work week. 40% of US employers have adopted or are in the process of adopting some 4-work weeks. 52% of employees are interested in compressed schedules or reduced hours. 77% of workers want mandatory paid time off.
- Personal Development: 35% of all workers are interested in professional development and career growth. Sadly, 53% of Gen Z workers are dissatisfied with their employers’ professional development programs.
Note: Earlier studies in the employee benefits space also corroborate the above findings. According to the Kaiser Family Foundation’s 2022 Employer Health Benefits Survey, technology, flexibility, and accessibility have become important themes in the benefits space.
- 36% of employers are using telemedicine for behavioral health services.
- 33% use it for primary care
- 27% hope it will be important in providing specialty care.
Some employers offering employer-sponsored health benefits provide assistance for lower-wage workers. Most of them are designed to help reduce the time employees spend away from work due to illness, financial or mental distress.
How Do You Determine the Right Benefits to Offer Employees?
The MetLife study mentioned earlier found that “87% of employers believe that their organization currently demonstrates care, while only 65% of employees agree.” This means there’s a huge disconnect between what employers offer and how the employees perceive them.
This is a shocking fact, given all the efforts that go into designing and implementing a robust employee benefits program. During the employee benefits planning phase, take time to create a comprehensive benefits package. Recommended steps:
Discovery stage
This stage is important to define your benefits philosophy: what is essential to your business, the values and culture you would want the plan to communicate. How will your current plan expand and adapt to your growing population?
Examine your company’s demographics
Different things appeal to different people based on factors like age. Conduct an employee benefits survey on your team to understand who they are and what would appeal to them. For example, an older population is generally drawn to things like drug care, pharmacy care, long-term disability, and life insurance. Younger employees who’re single and with no families might be looking for more flexibility and room to creatively express themselves.
Preliminary plan design
This serves as the starting point for a budget. What kind of pricing are you looking at? Does it fit within the larger budgetary considerations for the company? (Include a benefits advisor and your finance team to figure out what can be moved or integrated to make way for the new plan)
Take the plan out to the market
Present your preliminary plan to select carriers who seem like a good fit. Compare their quotes. Tweak and modify your benefits plan. Keep it simple if you’re starting a new benefits plan from scratch. It’s better to add benefits over time than have to take some away.
Select carrier and implement the plan design
Get a competent benefits advisor, administrator, and carrier to help ensure the implementation goes smoothly. Educate employees on what benefits they will be receiving. Set up the program for success.
Monitor, review, and revise
Employee demographics change with time. So do their needs. The company culture may also evolve as the business expands. Periodically re-examine demographics and evaluate claims experience. What are the most popular benefits for employees? Where are there more claims being made? This will tell you if the plan design suits the actual employee needs.
Make plan design changes and possibly change carriers
Sticking with a carrier and building a solid relationship with them is great. However, it’s a good idea to occasionally do a market check to ensure your plan is competitive from a price perspective and that the carrier is the right fit for you.
Final Thoughts
A company’s benefits plan can bring substantial returns on investment and reduce employee turnover. As we’ve established, great employee benefits can boost employee satisfaction, improve productivity and reduce turnover. Here are a few tips to help you get the most out of your benefits plan:
- Stay updated on the trends, technology, and innovations available in the market.
- Pay attention to liability within your plan. Ensure proper benefits administration.
- Build a good team consisting of a plan administrator, benefits advisor, and insurance carrier. Provide training and support.
- Have an advisor that will ensure you’re well-educated on the market to serve as a bridge between the company and the insurance carrier. They do the same for the business owner and the employees.
- Communicate regularly with the employees about the offerings and how to use different products. Ensure they’re up-to-date with the changes in the plans.
- Find ways to make the plan meaningful and accessible. Regularly improving the existing plans will ensure you achieve and maybe even surpass your original objectives.
