Introduction
Benefits for employees are more crucial than ever, assuming the Great Resignation taught us something. 47.8 million workers left their occupations in 2021, a record number that increased by thirty-three percent from 2020, according to the United States Bureau of Labor Statistics. Employers are under pressure to create the ideal staff benefits that draw in, keep, and engage top people while also keeping costs down, as there will be 10.1 million positions available by August 2022.
Employee Benefits: What are they?
Perks like health insurance plans, paid time off, plans for retirement savings, and more are included in employee benefits, which are part of employee compensation. Companies provide incentives to employees in an effort to increase engagement and productivity among staff members and to draw in and keep top talent. These are significant since research indicates that productive workers are more inclined to stick with an organization and feel valued and respected by their boss. Certain perks are legally mandated.
The Significance of Employee Benefits
When job seekers are weighing various offers, employee perks play a significant role in their decision-making process. Additionally, they can support increased worker retention, productivity, and engagement.
90% of those who responded stated that healthcare constitutes an exceptionally or very significant employee benefit, according to a recent report by the SHRM (Society for Human Resource Management). 83% believe that leave policy and schedule flexibility are very or extremely important.
Employee engagement and productivity can both be increased with the aid of employee benefits. According to research by the International Foundation of Employee Benefit Plans, companies that exhibit a high degree of engagement and productivity provide benefits including wellness programs, paid time off, healthcare, and retirement plans.
Lastly, perks for employees might enhance their retention. According to a SHRM survey, sixty percent of workers rated employee perks as very or extremely significant when deciding whether to continue working for their present company.
Employee Benefits Types
Employee benefits come in four primary categories:
- Wellness and Health benefits
- Retirement and financial benefits
- Leave and Time-off benefits
- Benefits of balancing life and work
Employee benefits related to wellness and health encompass coverage for prescription drugs, dental, vision, and health insurance, as well as wellness and employee support programs. Benefits related to finances and retirement include profit-sharing schemes, stock ownership for staff programs, pension plans, 401(k) plans, and retirement planning support. Benefits related to time off include paid holidays, sick days, parental leave, extended leave, and vacation time. Flexible work schedules, telecommuting, help with child care, and elder care are some of the advantages of balancing work and life.
Social Security, unemployment insurance, and workers’ compensation are among the perks that are mandated by law. Employers that have fifty or additional whole-time equivalent workers are also required by the ACA (Affordable Care Act) to provide health coverage to their staff members or face fines. Businesses that want to make sure they are abiding by all relevant laws should speak with a human resources manager or attorney.
1. Retirement and Pension Plans
One way that employers support their employees in saving for retirement is through pension & retirement programs. Retirement plans come in two flavors: defined contribution and defined benefits.
Retirees who participate in plans with defined benefits receive an income stream that is usually determined by their pay history and years of employment. Regular monthly installments are made out of this money. Conversely, defined contribution schemes enable workers to make monthly contributions to their pension funds up to a certain amount. Payments to the worker’s fund may also come from the employer.
Retirement plans come in a variety of forms, including pension plans, 457 plans, 403(b) plans, and 401(k) plans. The laws and regulations pertaining to employee qualification, contributions by employees, and contributions from employers vary depending on the kind of plan.
401(k)
The most popular kind of employer-sponsored retirement plan is the 401(k) plan. A portion of a worker’s monthly salary can be contributed to a retirement account according to a 401(k) scheme. Employers have the option to match or contribute discretionary funds to staff accounts.
403(b)
Plans known as 403(b) plans bear similarities to 401(k) plans; however, they are restricted to public schools and specific nonprofit employees. A portion of an employee’s monthly salary can be contributed to a retirement account according to the 403(b) plan. Employers have the option to match or contribute discretionary funds to staff accounts.
457
Employees of select nonprofit organizations as well as those employed by state and local governments may enroll in 457 programs. A portion of an employee’s monthly salary can be contributed to a retirement account under the 457 plan. Employers have the option to match or contribute discretionary funds to staff accounts.
Pension
Plans with defined benefits, such as pensions, give retirees an income each month that is typically determined by their past salary and number of years of employment. ERISA (Employee Retirement Income Security Act) governs pension schemes.
2. Healthcare/Dental Employee Benefits
Health insurance is a perk offered to employees that helps with the cost of medical bills. Different insurance policies have different coverage for different services, as well as different requirements for copayments and deductibles as well as premium costs. Companies, government agencies, or health insurance providers may offer health insurance schemes.
There are numerous varieties of insurance policies, such as PPOs, HDHPs, and HMOs. Without referrals, PPOs enable workers to visit any physician or specialist. A doctor of primary care who will oversee the worker’s care must be chosen to participate in an HMO. Although premiums are less, HDHPs have hefty deductibles.
Dental insurance is a benefit for employees that assists in covering dental-related costs. Preventive care like X-rays and teeth cleanings, as well as routine operations like fillings or tooth extractions, are typically covered by dental insurance. Bridges and crowns are examples of major treatments that are covered by certain dental insurance policies.
Within a group medical plan, employers have the option to provide dental and health insurance. An employer-sponsored benefit policy that offers dental and/or health coverage to staff members and their family members is known as a group healthcare plan.
Transgender Healthcare
Medically necessary treatment for transgender workers is covered via employment benefits known as transgender-inclusive medical coverage. Surgery, mental health treatment, and hormonal treatment may all be covered with this kind of coverage, based on the healthcare provider.
The Affordable Care Act forbids discrimination in medical care on the grounds of age, sex, national origin, race, color, or disability. However, several ongoing legal proceedings have contested the ACA’s applicability to transgender people since the date of publication. Whether or not companies must provide transgender-related health as a component of their worker health insurance policies may depend on the resolution of those lawsuits. Given how quickly this industry is evolving, we advise talking through these choices with your healthcare provider to be sure your medical coverage complies with the law as it stands at this time.
Telehealth/Telemedicine
Using technological devices to deliver health services from faraway locations is referred to as telemedicine or telehealth. In addition to treating and diagnosing patients, telemedicine can also be utilized to offer possibilities for distance learning and consulting with other medical professionals. While video conferencing is the most common method of delivering telemedicine services, it can also be sent by email, text message, or phone.
Greater accessibility to care, improved outcomes for patients, and reduced healthcare costs are just a few of the numerous potential advantages of telemedicine. Companies can also gain from telemedicine since it can boost productivity and lower employee absenteeism.
The COVID-19 epidemic has led to a notable surge in the utilization of telemedicine services, despite the fact that the idea is not novel. This is partly because, in certain cases, telemedicine can assist stop the propagation of infectious illnesses like COVID-19.
Fertility Employee Benefits
Employee perks known as fertility benefits assist with the financial burden of reproductive procedures like in vitro fertilization (IVF). IVF is the process of removing eggs from the ovaries of a woman and fertilizing them in a lab with sperm. Afterward, the female’s uterus receives the injected embryos. The expenses of storing sperm or eggs may also be covered by fertility benefits. For workers who wish to save the fertility for later use, this may be helpful.
Prescription Drugs
Medications recommended by a physician to address a health issue are known as prescription pharmaceuticals. With an approved prescription, prescription medications can be purchased from a drugstore. As a component of the group health policy, employers frequently offer prescription medication coverage. Prescription medication costs are usually covered for a portion by this kind of coverage, with the worker covering the remaining amount.
Mental Health
Mental health advantages are insurance that assists in paying for mental health services. Treatments for mental disorders, counseling, and drug misuse treatment are all included in mental health services. Employee benefits for mental health can be offered separately or as a component of a group medical plan.
Companies are beginning to provide mental health advantages to their staff members as a result of their growing recognition of the value of mental healthcare. This is partly because mental health issues may have a big effect on how productive and happy employees are at work.
Employee Assistance Program
A sort of benefit known as an EAP (employee assistance program) provides private support and counseling services to employees who are experiencing personal or professional challenges. EAPs can help staff members with a variety of concerns, including anxiety, stress, substance abuse, depression, financial difficulties, and interpersonal conflicts.
Employee assistance specialists, who have received training in providing private counseling and assistance, are usually the ones offering EAPs. There are several ways for employees to use EAPs: in-person meetings, phone hotlines, and online services.
EAPs might prove advantageous to businesses as well as employees. Workers’ well-being and productivity can increase when they receive the support they need to deal with personal or professional issues. Reduced staff attrition and absence rates are also advantageous to employers.
3. Paid Time Off
Paid time off, or PTO refers to the leaves that employers offer to their staff at no expense to them. PTO can be utilized for personal, sick, or vacation days, among other things. To draw in and keep workers, employers could provide paid time off (PTO). Plus time off (PTO) can assist staff in balancing work and personal life.
Employees are permitted to utilize a maximum of twelve weeks of unpaid leave for particular medical and family reasons under the FMLA. Employers with fifty or more workers who worked for a minimum of twenty weeks in the previous or present year are covered. Laws in several jurisdictions also mandate that companies offer specific kinds of paid time off, such as family or sick leave.
PTO is often provided by employers as a component of a full range of perks for staff members. Among the most well-liked benefits for employees is generally paid time off.
4. Child & Dependent Care Employee Benefits
Benefits for employees might occasionally assist with dependent and childcare expenses. Benefits for dependents and children can be offered separately to employees or as a component of a group health plan. The price of nurseries, babysitters, and additional childcare expenditures may be lessened for employees thanks to these perks.
In order to draw and keep workers, employers frequently provide benefits for dependent care and children. Benefits for child care can also assist workers who have small children in juggling work and personal obligations. Even certain companies provide on-site daycare centers.
5. Life Insurance
An employee’s beneficiaries can get financial support via life insurance in the event of their death. Funeral costs, debt repayment, and other closing costs may be covered by life insurance proceeds.
Enrollment in the life coverage offered by their employer is a requirement for life insurance eligibility. Upon death, the worker’s beneficiaries usually receive life insurance payouts.
6. Disability Insurance
When an individual cannot continue to work due to a serious sickness or injury, disability insurance might help them financially. To help employees be financially secure until they are ready to get back to their occupations, disability insurance covers a portion of their earnings.
A sickness or accident that prevents an employee from working is a requirement for disability insurance. The normal payment period for benefits under short-term disability coverage is no more than 26 weeks. Legally, short-term disability insurance is required in five states along with one territory. Puerto Rico, New York, New Jersey, California, Hawaii, and Rhode Island are among them.
Legally Mandated Employee Benefits
Employee benefits that must be provided by law—whether local, state, or federal—are known as legally mandated advantages. A few examples of these benefits are workers’ compensation, COBRA, FMLA, minimum salary, overtime compensation, and unemployment insurance.
Legally required benefits must be offered by businesses to all qualified workers. There could be severe consequences if you don’t. Although most firms follow the law, others do try to get around it by misclassifying workers or declining to offer benefits that are necessary. If workers feel they aren’t getting all the benefits they are entitled to, they can file a complaint with the Dept. of Labor or their state’s labor office.
1. Minimum Wage
The minimum wage set by the federal government represents the lowest possible hourly rate that an employer can provide its employees. At present, the minimum wage (federal) stands at $7.25 an hour. While certain states have decided to establish their own salaries, which may be greater or less than the amount specified nationally, the federal govt. has set a minimum wage.
Regardless of which is greater, employers are required to pay all workers no less than the state or federal minimum wage. In addition to additional damages, workers who get below the legal minimum wage could be eligible for back compensation.
2. Overtime
When an employee works over forty hours a week, they are compensated with overtime. If an employee works overtime, they will be paid 1.5 times their usual hourly rate, according to the federal overtime wage rate of time & a half. State-specific overtime compensation regulations may differ from federal overtime rates of pay in some ways.
Either the state or federal overtime rate of pay, whichever is higher, must be paid by employers to all employees. Back pay and additional damages could be due to workers who get paid below the overtime rate of pay.
3. Unemployment Insurance
A government-funded program called unemployment insurance helps those who were forced to leave their jobs due to uncontrollable circumstances. When looking for a new job, unemployed workers can use unemployment insurance to assist them pay for their essentials.
Workers cannot collect unemployment benefits if they are unemployed due to their own faults. If an employee is jobless and meets the qualifications, they will be paid a weekly amount based on their prior earnings. Each state has different guidelines on how long an employee can get unemployment insurance benefits.
4. FMLA
A federal statute known as the FMLA (Family and Medical Leave Act) grants workers up to 12 months of unpaid time off per year, covered by their jobs, for specific medical and family needs. Workers are permitted to take intermittent or consecutive 12-week blocks of FMLA leave, as long as they are not taking more than 12 weeks off in one year. However, not every worker qualifies. For leave under the FMLA to be available, a worker must have served for their company for a minimum of 12 months and 1250 hours in the prior year. Businesses that have more than fifty staff members and have worked for a minimum of twenty weeks in the present or previous year are eligible for the FMLA.
5. COBRA
Employees who quit their jobs or otherwise discontinue company-sponsored health care can still continue to receive group medical insurance coverage under the COBRA (Consolidated Omnibus Budget Reconciliation Act), a federal legislation. Employers employing twenty or more workers are subject to COBRA.
Typically, continuing coverage under COBRA lasts for a maximum of 18 months. Beneficiaries of COBRA must pay the entire premium as well as an additional 2% for administrative costs.
6. Workers’ Compensation
Financial support for employees injured on the job is provided by workers’ compensation, a state-mandated provision. Benefits from workers’ compensation may pay for death benefits, missed income, and medical expenses. Workers must have an injury at work to be eligible for compensation from their employer.
Fringe Perks and Benefits
Fringe benefits, sometimes referred to as employee perks or benefits, are additional remuneration that companies may give to their staff members. Child care, company holidays, benefits offered while working, and help with schooling are examples of fringe benefits.
Even though they aren’t mandated by law, employers may choose to provide additional perks to draw and keep talent. Certain fringe benefits could qualify as tax deductions for employers.
1. Parental Leave
A staff benefit known as “parental leave” gives new parents compensated or unpaid leave. Parental time can be utilized for taking care of an ill kid, forming a stronger bond with a newborn, or managing a health issue related to pregnancy. While certain parental leave is discretionary, some are mandated by regulation (such as in situations where the FMLA is applicable).
Pay or no pay may be given for parental leave. Employers, government entities, or staff assistance programs may provide paid time off for parents. Generally speaking, employees who fulfill specific qualifying requirements—like having been employed by their employer for a specific amount of time—are the only ones who can take unpaid parental time off.
2. Commuter Benefits
Employee perks known as commuter benefits assist with the expense of transport from home to work. They can aid in the financial savings of employees when they travel, which for many can be a substantial cost. The advantages for commuters might also aid in lowering pollution and traffic jams. In order to draw and keep workers, employers frequently provide rewards for commuting. Employers can achieve their business sustainability objectives by offering commuter benefits.
3. Flexible Hours & Remote Work/ Telecommuting
Employee perks like telecommuting and flexible hours let workers arrange their work schedules more freely. Working various hours on various days or working fewer hours overall are two examples of flexible hours. Employees who participate in telecommuting may operate from home full- or part-time.
For workers who have kids or other responsibilities outside of their jobs, telecommuting and flexible scheduling might be advantageous. These incentives for employees can also lessen traffic & save companies dollars on the workspace.
To entice and keep workers, employers might provide incentives like telecommuting and flexible work schedules. A set amount of hours every week or availability during designated hours may be mandated by certain businesses for their staff members.
4. Relocation Assistance
One perk offered to employees is help with relocation, which assists with the expense of relocating for work. Moving costs, including storage and transportation charges, may be covered by relocation assistance. To assist with short-term living expenditures, certain employers could additionally provide a daily stipend.
In order to draw in and keep workers, employers could provide relocation help. One way to provide relocation aid is to make a one-time payment or to refund real costs incurred.
5. Sabbatical
An unpaid or paid period of leave for a specified duration may be taken by employees as a benefit of their jobs—a sabbatical. Composing a book, completing a personal business, or pursuing a degree are examples of how sabbaticals can be utilized for professional or personal growth.
Workers who have been employed by their company for a specific amount of time are usually eligible for sabbaticals. As a means of keeping workers on staff, employers can provide sabbaticals.
6. Unrestricted Time Off
One advantage offered to workers is no limitations on time off, which enables them to take whatever time off that they need without needing permission from their company. Employees are entitled to unlimited vacation time, which they can utilize for personal travel, business, or other purposes.
In order to draw in and keep workers, employers might provide limitless vacation time. A set amount of hours a week or availability during specified times may be mandated by certain businesses for their staff members.
7. Employee Discounts
Employee discounts refer to perks offered to employees that enable them to obtain discounts on goods or services. Businesses that have contracts with their employers or the business itself may give discounts to employees.
Discounts for employees can be utilized for both personal and professional needs. There may be discounts available to employees on goods, services, entertainment, or travel.
8. Unpaid Leave
Employee benefits include unpaid leave, which enables workers to take time off without being compensated. Medical or personal needs may warrant the use of unpaid leave.
If an employee has worked for the company for a specific amount of time, they may be entitled to unpaid leave. Unpaid leave is one method that employers use to keep workers on board.
9. At-work Employee Benefits
At-work incentives, which have gained popularity from startups trying to draw in a younger clientele and from digital behemoths like Google, are benefits that employees may access while they are at work. Benefits offered at work could be free or heavily subsidized meals, childcare provided on-site, sleep rooms, pets allowed, coffee service, an endless supply of refreshments, no restrictions on attire, help with transportation, or a membership to a gym.
At-work employee benefits are something that employers might provide to draw in and keep workers. Benefits offered at work can boost productivity and employee morale.
10. Educational Assistance/Reimbursement
One benefit that aids employees cover the cost of their education is reimbursement or educational assistance. The expense of fees, instructional supplies, and additional education-related costs may be covered by educational assistance. To assist with short-term living expenditures, certain employers could additionally provide a daily stipend.
To entice and keep workers, employers could provide financial aid for school or other benefits. The provision of educational help might take two forms: a one-time payment or a repayment for real costs incurred.
The Best Ways to Manage Your Benefits Package for Workers
A few items to consider when creating the employee benefits plan are as follows:
- Ensure that the perks you provide are those that your staff members will value and utilize. It makes no sense to provide an incentive that nobody will accept.
- Take your workforce’s needs into consideration. Encouraging your staff to make use of benefits that cater to their requirements will increase their likelihood of doing so.
- Ensure that the advantages you provide are within your company’s budget. Having too many pricey benefits will put a burden on your finances and render it harder to provide new benefits or raise salaries.
- Make careful to let your staff members know all the specifics of the perks package. They ought to be aware of their rights and how to utilize the benefits that are offered to them.
- Recognize the regulations. Ensure that the perks you’re providing meet all the legal requirements for the type of business your state has for benefits.
Conclusion
A compensation package’s core component is its employee benefits. Employers can draw in and keep exceptional workers by providing rewards. Employers should take into account their workers’ needs in addition to the cost of the perks when creating a benefit plan because there are numerous sorts of benefits available to them. It is imperative for employers to ensure that their employees are informed about the specifics of their perks. Additionally, to make sure that are in legal compliance companies should speak with a staff benefits lawyer regarding the perks that are mandated by law.
Frequently Asked Questions
1. Which four categories of employee benefits are the most common?
Paid time off, retirement savings schemes, fringe benefits, and health insurance are the 4 main categories of employee benefits.
2. What kinds of benefits are available to employees?
Health insurance, paid time off, educational support, and discounts for staff are a few examples of benefits offered to employees.
3. Do I have to provide benefits to my employees?
Certain employee benefits, like COBRA and FMLA, are mandated by law. While not necessary, employers may choose to provide some benefits like employee discounts and retirement savings schemes to draw and keep talent.
4. Which three employee benefits are the most in demand?
Healthcare, paid leave, and retirement savings plans rank as the top 3 benefits offered to employees.
