Employee benefits are an integral part of today’s workforce and an important factor in attracting and retaining talent. Common employee benefits differ from industry to industry and new types of benefits are being created each year to win top talent.
- What are employee benefits?
- Why do employers need to offer benefits and services?
- What types of benefits categories are there?
- 28 Types of Employee Benefits you can offer
- Free Downloadable Employee Benefits PDF
What are employee benefits?
Employee benefit is a type of compensation that is supplementary to your base salary or hourly wage. Benefits are often offered to employees as a package in an offer letter before they accept the position. Employers use unique and generous benefits as a strategy to attract and retain high-quality talent.
Some of the most common employee benefits are:
Health Insurance
Retirement Savings Plans
Flexible Spending Accounts
Paid Time Off (PTO)
Tuition Reimbursement
There are three main types of employee benefits:
Why do employers need to offer benefits and services?
Benefits were first introduced in the U.S. in the late 1800’s when companies started to offer retirement plans, life insurance, disability benefits, and pensions. Employers offer benefits for many reasons; the most prominent being to win and retain high-quality talent.
The more unique and generous benefits employers are able to offer a potential employee, the more likely the employee is to accept your company’s offer over other offers they may receive. Larger and more established companies are able to offer more generous industry standard and fringe benefits because they often have larger budgets, but that doesn’t mean smaller companies don’t stand a chance. If you are curious to hear what your employees think about your employee benefit offerings, you should conduct an employee benefits survey (here’s a free template to get you started)!
Culture is also one of the most important factors a potential employee will put into consideration when accepting a job offer. The types of benefits can help shape a company’s culture, which often holds more weight than how much an employer can afford to give.
What types of benefits categories are there?
There are many different types of benefits and new benefits are being created and popularized year after year. Some benefits are unique to certain industries. For example, many employers may offer professional development stipends and educational reimbursements, but the entertainment industry often offers its employees free acting or singing lessons to help them pursue their dreams outside of work hours.
Benefits can be provided to an employee in the form of:
- Stipends
- Incentives
- Insurance
- Reimbursements
- Expense accounts
- Profit sharing
- Stock options
- Company product discounts
- Monetary contributions to a savings account
Benefits can fall into (but are not limited to) the following categories:
- Wellness
- Mental health
- Professional development
- Personal development
- Personal care
- Health and fitness
- Nutrition
- Commuter and travel
- Living Expenses
28 Types of Employee Benefits you can offer
Benefits That Are Required by Federal Law
1. Workers’ Compensation Insurance
Workers’ compensation insurance is mandated by the U.S. Department of Labor as a safety net for when an employee gets sick or injured at work. In the case that an employee gets injured or sick and consequently unable to perform their job, workers’ compensation provides employees with supplemental income and medical benefits.
2. Minimum Wage and Overtime Compensation
Although the federal minimum wage is $7.25 per hour, each state can set their own minimum wage (as long as it’s higher than $7.25). Employers are required to pay their employees a minimum of $7.25, but some exceptions apply to this rule. For example, employees who work for tips. Similarly, every state can set their own minimum wage for tip workers (like waitresses, delivery service workers, etc.), but the federal minimum is $2.13 per hour.
Employers are also required by federal laws to compensate employees for working overtime, usually at a rate of 1.5 times their regular hourly rate. Overtime is recognized in this law as any time worked over 40 hours in one week. Like minimum wage, there are exceptions to this rule depending upon type of employee and other state laws.
Always consult with your specific state and local laws around these types of benefits.
3. Unemployment Compensation Contributions
Unemployment compensation is a safety net for employees who are unemployed and looking for work. The unemployment compensation program is designed to provide income to individuals who are out of work, looking for a job, and meet certain eligibility requirements.
Employers in the US are required to pay for unemployment insurance for every employee, regardless of whether they work full-time or part-time. Employers pay a combination of both state and federal taxes into an Unemployment Trust Fund. This fund is kept for when eligible employees are paid out should they qualify for unemployment.
4. Social Security and Medicare Contributions
Social security is a type of insurance that helps people who have retired or disabled, while medicare is a health insurance program for seniors. The purpose of these benefits is to provide security and protection to workers from being impoverished in their old age or in case they become disabled.
The Social Security Act of 1935 requires employers to provide employees with social security and medicare benefits.
Certain benefits are required for employers with 50+ full-time employees. Learn more about employee benefits required by law here.
Benefits That Are Considered “Industry Standard”
5. Health insurance
Legally, there is no federal law that says companies must offer health insurance to their employees. However, employers’ health insurance requirements do apply for some businesses depending on their size. The Affordable Care Act imposes some extreme penalties on medium and large-sized employers who fail to provide health insurance to their workers. Many employers also use wellness benefits to tackle population health issues, in order to decrease their health insurance spending.
Types of health insurance an employer can provide are:
- Medical: Medical benefits cover the cost of medical bills and treatments. Employees can choose from different plans such as PPOs or HMOs.
- Dental: Dental benefits cover the cost of dental treatment and procedures like teeth cleaning or fillings.
- Vision: Vision benefits cover the cost of eye care like glasses or contact lenses.
6. Family and Medical Leave (FMLA)
Family and Medical Leave Act (FMLA) is a federal law that gives employees the right to take time off from work without losing their job. The FMLA guarantees 12 weeks of unpaid leave for most people working in the United States.
This time can be used for:
- Taking care of a family member with a serious health condition
- Giving birth or adopting a child (maternity leave)
- A serious health condition that makes you unable to perform your job
- Taking care of an injured service member who is part of your family
Although employers are required to let employees take a leave of absence for the reasons listed above, they are not required to continue to pay them while they are gone. Every state has different laws regarding if employers are required to provide paid leave, which employees qualify, which type of leave qualifies and what percentage of their regular pay they will receive.
Learn more about the qualifications and requirements in each state here.
7. Disability Insurance
Disability insurance is a type of insurance that provides protection against the financial consequences of a disabling injury or illness.
Similar to workers’ compensation, disability insurance can help an employee maintain financial stability in the event that they are unable to work for some time due to an injury or illness. How disability insurance differs from workers’ compensation is that it is intended as a financial safety net for when someone gets sick or injured for reasons not related to their job or work environment.
Employers often offer disability insurance as an employee benefit to help control labor costs and reduce the risk of losing valuable employees who may be difficult to replace.
8. Life Insurance
Workers’ compensation insurance is mandated by the U.S. Department of Labor as a safety net for when an employee gets sick or injured at work. In the case that an employee gets injured or sick and consequently unable to perform their job, workers’ compensation provides employees with supplemental income and medical benefits.
9. Retirement Savings and Planning
A retirement savings plan is an employer-sponsored plan that provides employees with the opportunity to save for their future. These plans are generally tax-deferred, which means that the employee does not pay taxes on their earnings until they withdraw them from the account.
A few types of retirement savings plans include:
- 401(k)
- Traditional IRA.
- Roth IRA.
- SEP IRA.
- Simple IRA and Simple 401(k)
- Solo 401(k)
The most common types of plans are 401(k)s, which are funded by the employer and often matched by the employee with tax advantages, and IRAs, which are funded by the employee with tax advantages and often include employer contributions too.
Retirement savings plans are one of the most valuable and attractive benefits an employer can offer. Learn more about the different types of retirement savings plans and how they work here.
10. Paid Time Off (PTO)
Paid time off allows employees to take the time off the need to maintain a healthy work-life balance. PTO allows employees to take time off from work without losing pay, which can help reduce stress and make them happier, more productive, and dedicated employees.
Types of PTO include:
- Vacation Time
- Sick Time
- Personal Time
11. Stock Options
Employee stock options are a form of long-term incentive compensation that provides employees with an ownership stake in their company. Stock options can offer financial security for employees and it is a way for companies to keep their employees around for the long term.
Offering stock options has many benefits for both employees and the company. When employees have a stake in their company’s success, they feel more vested in the company and motivated to help it succeed.
Benefits that Are Considered “Fringe Benefits”
Health and Well-being
The overall health and well-being of your employees is one of the most valuable aspects of your business that you can invest in as an employer.
Healthy employees are more engaged, more productive and are able to do their best work, creating an overall happy, healthy and efficient workplace.
Some benefits that employers can offer to help employees form healthy habits and maintain good health are:
12. Wellness Programs
Today’s workforce, especially post-pandemic, is invested in not just their physical health, but their overall well-being. Offering a wellness program can be equally beneficial to a company as it is to its employees, as this investment in their personal wellness improves the employee experience, in turn improving employee engagement.
A few types of common wellness programs include:
- Activity Rewards and Incentives (this can be tracked through wearable technology)
- Wellness Team and Individual Challenges (check out this post about wellness challenge ideas you can implement)
- Reimbursements for health and wellness products, services, memberships and equipment
- Free or discounted gym memberships
- Biometric Testing, so that you can educate your employees about their health
Not to brag but…our platform does make facilitating a successful and effective wellness program a breeze. Learn more about the capabilities and solutions our platform offers.
13. Mental Health Coverage, Resources and Support
Mental health is quickly becoming one of the most sought out benefits by today’s workforce, but unfortunately can be one of the most expensive and difficult benefits for an employer to provide. There are many avenues an employer can take when establishing mental health benefits for their employees.
A few options employers have when it comes to mental health benefits are:
- Employee Assistance Programs (EAPs)
- Offering an insurance plan that covers mental health costs
- Employee Resource Groups (ERGs) for mental health
- Employee resource library for mental health
- In-house counseling
- Offering meditation spaces and “quiet rooms” in the workplace
Skill Building and Professional Development
Many employers recognize the importance of employee training and the value in investing in the development of their employees’ skills and knowledge
Providing reimbursements or even paying for employees to take classes, online courses or even go back to school not only helps the employee grow personally, but helps the company itself grow and succeed by developing their workforce as a whole.
These types of benefits can include:
14. College Grants and Scholarships
When an employer gives or helps an employee obtain grants and scholarships to pay for college.
15. Paid Training and Professional Development Stipends
Some employers may offer to pay or reimburse for purchases or payments made toward their own professional development as a benefit.
16. Continuing Education
Continuing education is a type of additional formal education that is generally not focused on resulting in a degree, but building on pre-existing knowledge and skills. Employers can offer to pay for their employee’s continuing education as a benefit.
17. Tuition Reimbursement and Student Loan Repayment
When an employer pays for an employee to go back to school or pay off student debts.
18. Company Equipment
Company equipment given to an employee by their employer can include things like laptops, cell phones or smart phones, iPads, etc.
Commute, Travel and Location
Location is an extremely important factor when job seekers are searching and deciding where to work.
Offering flexibility in the time and location employees can work, as well as offering financial aids and incentives, can offer employers enormous advantages when trying to win today’s top talent.
These types of benefits can include:
19. Commuter Benefits
Commuter benefits can be offered as a reimbursement, complimentary accommodations or by allocating a set amount of the employees earnings into a tax-free account to pay for parking or public transportation to and from the workplace.
20. Remote or Work From Home Options
This benefit allows employees the flexibility to work from home (and in some cases, anywhere they want) in an effort to support a healthy work-life balance and employee satisfaction.
21. Flexible Work Hours
An attractive benefit to today’s workforce s can offer employees the ability to work
22. Relocation and Housing Options
Some companies will offer to pay for a portion or all of an employee’s relocation expenses if they’re required to move for the job.
23. Travel and Spending Expenses
Employers can provide employees that are required to travel for their job with an expense account or reimbursement to pay for things like hotels, transportation, food, etc.
24. Unlimited PTO
With today’s workforce placing more and more importance on maintaining a healthy work-life balance, unlimited PTO has become a popular offering in recent years. Today, about 9% of today’s workforce has access to unlimited PTO.
25. Extended Leave
When an employer offers employees the ability to take more FMLA time, in addition to the 12 weeks minimum already required.
26. Company Transportation
When an employer supplies an employee with a vehicle owned by the company for the employee to travel to and from or for work.
Financial
Everyone wants financial security. The more financial security you can offer your employees, the more dedication and quality work you’ll get in return.
The ability to offer employees financial compensation or supplementary income, in addition to their regular salaried or hourly rate of pay, this can be a long-term, fruitful advantage to both the employer and employee.
27. Investment Opportunities
When an employer offers investment opportunities to it’s employees. Some employers even offer a matching contribution for those who invest in company stock, which is an incentive for the employee to invest in their company.
28. Appreciation & Performance Rewards & Incentives
Some companies may privately or publicly acknowledge or reward employees for a job well-done or impressive performance. Incentives are a great method for encouraging employees to do their best work and stay with the company long-term.
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