While having a competitive salary is certainly a priority for many employees, it's not the only thing they care about. People look for a great company culture, a positive work-life balance, and a comprehensive benefits plan. If your business is lacking in any of these areas, you risk losing out on great candidates and retaining critical employees. But, by offering competitive employee benefits, your company can attract top talent, keep current employees happy, and build a positive reputation. When creating a benefits plan, business owners need to know which employee benefits they are legally required to offer and which benefits give your business the competitive edge it needs.
What are employee benefits?
Employee benefits are the non-wage compensation employees receive in addition to their salary. Some employee benefits (see below) are required by law, but consider offering additional non-mandatory benefits that employees will appreciate. The specific benefits you offer employees can vary, but they should be compatible with your business.
How do employee benefit plans work?
When an employer creates an employee benefits package, it can be provided either as a standard offering or as a plan with multiple benefit options that employees can choose from. If you decide to offer multiple optional benefits to your workers, employees accept or decline specific benefits during the annual open enrollment period. Most calendar-year benefit plans (starting on January 1) hold their open enrollment periods in November of the prior year.
Plans that allow for benefits-eligible employees to cover dependents or beneficiaries require those designations to be specified during the open enrollment period. Employees who experience a qualifying life event (e.g., marriage, the birth of a child, adoption of child), anytime during their plan year can often change their benefit elections at that time.
Employees have access to their benefits during the entire period of their coverage. For example, they might use their health insurance for an annual physical, to get an eye exam with vision insurance, and to reimburse themselves through their commuter benefits plan.
Employers and employees are responsible for making the predetermined payments and contributions toward the benefits that were elected. For employees, payments are typically deducted from each paycheck throughout the year. If an individual's employment status changes, it impacts their benefits eligibility.
What types of benefits do companies typically offer?
Employees place a high importance on benefits when evaluating job offers, so it is important that your business is – at the very least – offering the most common types of employee benefits.
Vin DiDonna, national practice leader, benefits consulting for Namely, said medical, dental, vision, life, and disability insurance, as well as the opportunity to access tax-advantaged health spending accounts like a flexible spending account (FSA) and a health savings account (HSA), are a few of the benefits employees expect.
"From there, employers can offer a variety of benefits on both an employer-paid or employee-paid basis to help round out their overall benefits offering," DiDonna told business.com. "It is typically here where employees compare and contrast benefits packages when evaluating multiple job offers."
Legally required benefits
There are a few mandatory employee benefits employers are legally required to offer. These benefits include:
- Family and medical leave
- Health insurance (For companies with 50 or more full-time employees, including full-time equivalent employees)
- Social Security, Medicare, and Federal Insurance contributions, also known as FICA (Both employers and employees contribute to these funds)
- Unemployment insurance
- Workers' compensation insurance
Popular employee benefits
Other common benefits that companies offer to their employees include:
- Medical, dental, and vision insurance
- Health savings accounts (FSA, HRA, HSA)
- Life insurance
- Disability insurance (short- and long-term)
- An employee assistance program
- Flexible work hours
- Gym reimbursement
- Paid time off
- Paid parental leave
- Profit-sharing
- Remote work options
- Retirement plan, including company contribution or matching, e.g., 401(k), 403(b), 457(b)
- Transit or commuter benefits
- Tuition reimbursement or student loan contributions
- Wellness programs
Fringe benefits
You may have seen or heard the term "fringe benefits." This term refers to the additional compensation an employee receives outside of their standard salary, wages, etc.
"Fringe benefits can include other incentives, like employee discounts, subsidy programs and reimbursements," said Jennifer Soloway, HR operations specialist at Bullhorn. "For example, we [Bullhorn] offer subsidy programs with Verizon and reimbursement for exercise and wellness memberships."
Selecting which fringe benefits to offer is when you can get creative. Think about benefits your team will find most valuable (e.g., if many of your employees are parents to young children, you might want to offer on-site daycare) as well as what benefits align with your products or services (e.g., a gym could offer free membership to its employees).
Fringe benefits can include, but are not limited to:
- Career coaching
- Childcare
- Club memberships
- A company car
- Discounts and subsidy programs
- Electronics
- Free meals
- Free on-site salon
- Grocery delivery services
- Mental health and meditation services
- Moving assistance
- Stock options
What are the advantages of offering employee benefits?
Employee benefits are (obviously) great for employees, but they provide advantages to employers too. Here are four advantages for small businesses that offer employee benefits:
It helps your business attract top talent.
Before accepting a new job, people consider not only the salary or wage offered, but the benefits as well. Your benefits package should reflect the type of employees you are looking for.
Alyssa Setting, HR operations specialist at Bullhorn, said that employee benefits reflect on a business. "Providing comprehensive, quality benefits signals that your business cares about your employees and that your organization is financially stable enough to support their well-being, thus improving both acquisition and retention of top talent," said Setting.
Improved work-life balance for employees.
Certain benefits provide employees with a better work-life balance. For example, benefits like unlimited paid time off and flexible work hours can give employees a sense of control over their work schedules. Integrating a positive work-life balance into your overall company culture may reduce employee burnout and increase productivity.
It promotes a healthy workforce.
Less traditional benefits like gym memberships and free nutritious meals can encourage active and healthy lifestyles. Additionally, offering competitive healthcare options and supplemental healthcare accounts (e.g., an FSA, HRA or HSA) can reduce employee stress about getting (and paying for) healthcare for themselves and their families, and it may encourage employees to take an active role in maintaining their health.
By implementing employee benefits that are designed to promote a healthy workforce, employees aren't burdened with the stress of securing benefits and coverage on their own. This can allow them to spend more time focusing on the jobs you hired them to do.
It allows companies to demonstrate appreciation to its employees.
Employee benefits show employees that you care about them. Although employee shout-outs and awards demonstrate your appreciation to team members, employee benefits take it one step further, offering tangible evidence that you care.
"It is not every day that an employer can illustrate concretely how much they care about their employees," DiDonna said. "However, through employee benefits, an employer can achieve this goal by showing employees just how much they care about them and their families."
Employees who feel appreciated tend to have higher morale, and positive morale can do wonders for your reputation and your bottom line. Businesses with engaged employees are 21% more profitable than their counterparts. [Read related article: Looking for other ways to increase morale? Here are 10 Ways to Boost Company Morale.]
How to find an employee benefits plan that works for your business
Creating a carefully thought-out employee benefits plan is crucial. Each employer (or HR professional) needs to consider the needs of the company and its employees when determining a benefits plan. Below are five tips to help you create an optimal benefits package:
Evaluate your company's perspective on benefits.
DiDonna said employers that view benefits as a way of caring for their employees, rather than something they are obligated to do, tend to have higher employee engagement and greater employee appreciation of benefits.
"While being cognizant of budget, employers can genuinely make an impact on the lives of their employees by offering a robust, well-rounded benefits package consisting of both employer-paid and employee-paid benefits," said DiDonna. "Giving employees options helps signal that the employer took their wants and needs into account when selecting benefits. Ultimately, this approach leads to a higher level of employee satisfaction, translating into a more loyal and productive workforce."
Survey your employees.
The next step is to find benefits that employees will be enthused about, and to do that, you want to consult with your staff. Send out an employee benefits survey, but in that survey, ask questions that will yield actionable results.
DiDonna said Namely created an employee benefits survey that asked employees what they would do or what they would have done in a given situation. "That gives us insight into what employees find important based on their actions," said DiDonna. "From there, we can make pointed recommendations based on the specific answers of any given employee population."
Hire a benefits broker.
Another option is to hire a benefits broker who can help you pinpoint the benefits you want to offer employees and select potential vendors.
Track employee benefits participation and utilization.
As Setting noted, your employees' needs change over time, and so, too, should your benefits. It is important to track what portion of your workforce is utilizing the benefits you offer. (Benefits can be tracked and managed through HR software.) If a specific benefit has low participation, it could signal that it does not meet the needs of your employees, and you need may need to pivot.
"Low participation is OK for voluntary benefits, since most are niche in nature and only pertain to a subset of the population," said DiDonna. "That's why employers typically add multiple voluntary benefits that target different needs. However, for plans like medical and dental, low participation could signal plan designs that do not meet the needs of employees or contributions deemed unaffordable by employees going through open enrollment."
Employers can evaluate key metrics throughout the year to determine the optimal benefits and mix of benefits they should offer their employees.