The employee benefits you offer are one of the most important considerations for candidates. 3 in 5 people consider benefits and perks to be a leading factor in accepting a new job.
Great employee benefits can give a boost to your employer branding, helping you attract and retain that coveted top talent. And, once you've landed those great hires, employee benefits and perks help to ensure that your employees remain satisfied, engaged, and loyal to your company.
Employee benefits are important for various reasons, and they're a top priority for most job seekers today. But what are employee benefits? And which ones should you be offering?
We'll dig into both of those questions in this article.
What are employee benefits?
The definition of employee benefits is essentially any form of compensation given to employees over and above their regular salary and wages.
Employee benefits are a key element of the overall compensation package that you offer to employees. They help you create a competitive total compensation package for your employees and offer specific benefits and perks that enhance their overall quality of life.
The most common and prioritized employee benefits are health insurance, retirement savings plans, vacation policies, and parental leave. These benefits usually comprise a core plan that is a must-have in many industries and countries worldwide.
Companies like Google dramatically expanded on what "employee benefits" mean by offering catered meals daily, bi-weekly massages, yoga classes, haircuts, private transportation, and dry cleaning services.
Of course, not all companies are Google. The size, scope, and cost of employee benefits programs will vary significantly depending on your company budget, industry, and the regional labor laws that you must follow.
Employee benefits such as health insurance or parental leave in one country might be legal requirements in another country. Because of that, it's important to take regional legal requirements and cultural priorities into account when crafting an employee benefits package.
Regardless of what employee benefits and perks you end up offering, what is clear is that there is both a significant cost and benefit associated with these programs.
We'll expand on that more in the next section.
The importance of employee benefits
Employee benefits plans are a critical part of your employer branding and compensation strategy. They should be front and center in your company's efforts to attract and retain top talent. They should be revisited regularly to ensure that you're staying up-to-date with industry standards and expectations.
The best candidates on the market expect that you will offer a robust employee benefits plan in line with the rest of the industry. Many will not consider a role or company if the benefits package does not meet their expectations.
In addition to the expectation of benefits from external candidates, there are also a wide range of benefits to employers for offering these compensation and perks packages.
Some of the key benefits of employee benefits are:
- They help boost employee satisfaction and retention. Benefits are designed to make your employee's lives easier. When employees feel that their company is helping to take care of these priorities, it's been proven that they will have much higher job satisfaction and more positive morale overall. Happy employees mean loyal employees, which helps to improve employee retention rates and long term loyalty to your company.
- They improve engagement and performance. With a stronger loyalty to your company comes deeper engagement in the overall mission and outcome. Enhanced staff engagement is known to improve performance and output, which is just good business for your organization.
- They keep you competitive for talent. Ensuring that your employee benefits plan stays in line with or in front of other employers in your industry gives you a significant competitive edge when hiring for critical, in-demand roles. Great employee benefits can even win your top talent, even if your salary offering is slightly lower than that of the competition. That's because benefits offer the quality of life improvements and show that your company is firmly committed to its employees' wellbeing. All of this is great for employer branding and talent acquisition.
- They shape the lives and wellbeing of your employees. We've hinted at this so far in the article, but it's worth calling out specifically. Companies have the opportunity with employee benefits to influence the quality of life of their employees dramatically. Poor or no benefits can put a lot of undue stress and worry on your employees, which will have ripple effects on their work and performance. On the other hand, great employee benefits and perks will greatly reduce this stress and help your team focus on the task at hand. Organizations have a lot of power over their employees' quality of life and take that responsibility seriously when creating and investing in their benefits packages.
Of course, not every company has the funds to offer over the top benefits packages like Google. Employee benefits are a high cost and can place a lot of strain on a company's resources, especially when they begin to scale their headcount.
Luckily, many of the most important benefits to employees come at a relatively low cost. Perks like flexible hours, more paid vacation and remote employee benefits are all considered highly important to employees but do not require additional costs. They do, however, require a culture of trust and management policies that encourage individual work ownership.
Now that we've provided a definition of employee benefits, and talked about why they're important, let's dig into the different employee benefits.
Common types of employee benefits
As mentioned earlier, the types of employee benefits you offer at your company will vary depending on various factors. Some of these might include:
- Regional labor laws
- Company budget
- Number of employees
- Industry expectations
- Competitor offerings
Each of the above factors should be taken into consideration when creating your employee benefits packages. You will also need to have an eye on your offerings' scalable cost, especially if your company is in growth mode.
Benefits like health and dental insurance come with hefty premium bills that you will need to cover. These bills will increase exponentially as your headcount increases. To plan for these costs, your team will need to establish how the employee will pay much of that premium, and how you will handle additional costs down the line.
This is just one example of the financial considerations you'll need to consider when choosing which employee benefits to offer. Each of the benefits types listed below will require this exercise to ensure that what you're offering is sustainable.
Before we launch into the different types of benefits that you might offer, it's important to reiterate that regional labor laws will likely come into play during this process. Some benefits that are considered extras in one region might be mandated by law in another. Your team must review the regional labor laws for each country that you operate in to ensure that you're providing the necessary coverage for all global employees.
Examples of employee benefits that might be mandated by regional labor laws include:
- Vacation or leave time
- Sick days
- Minimum wage
- Overtime compensation
- Unemployment benefits
- Health insurance
- Parental leave
Like parental leave or health insurance, some of these benefits might also be supplemented by the regional governments. This might be another factor to consider when crafting your offerings.
With the cost and labor law considerations out of the way, let's look at some of the common employee benefits.
High-priority benefits
High priority benefits - in the context of this article - refer to the offerings that most employees will expect to receive from their employers. These are the critical quality of life and growth benefits that are typically seen as non-negotiable for most positions.
High priority employee benefits include:
- Paid time off (vacations and sick days)
- Health insurance
- Healthcare spending accounts
- Life insurance
- Dental insurance
- Vision insurance
- Retirement plans
- Short- and long-term disability insurance
- Professional development
- Pay raises
As you can see, most of these employee benefits cover quality of life, risk coverage for the employee and their families, and offer a growth path for their career and pay.
All of these benefits also come at a high cost to your organization, so it's important to have a thorough scalability and funding plan to ensure the longevity of these programs.
Medium-priority benefits
Medium-priority benefits - in the context of this article - refer to offerings that are very well received by employees, but are not necessarily an expectation. These offerings also offer significant quality of life benefits but do not rise to must-have status.
Medium priority benefits include:
- Tuition reimbursement
- Childcare coverage
- Gym memberships or fitness subsidies
- Employee recognition programs
- Flex hours
- Work-from-home options
- Parental leave top-ups
- Sabbatical leave
- Public transportation assistance
- Free parking
- Volunteer leave
As you can see, medium-priority benefits offer significant quality of life enhancements to employees but are not considered a default part of a total compensation package. These are offerings that companies should consider to give them a competitive edge over industry competitors.
Nice-to-have benefits
Nice-to-have benefits - in the context of this article - are offerings that go above and beyond the standard for employee benefits packages. These are usually seen more as perks than benefits, and help make the day-to-day life for employees a bit better.
These perks are also great for promoting your employer brand and culture. Choosing unique perks to offer your employees will help you create a workplace that jives with your company's values and personality.
Nice-to-have benefits - or perks - include:
- Catering
- Pet-friendly offices
- Snacks and free coffee
- Lounges and games rooms
- Employee outings
- Free transportation
- Themed office spaces
- Travel subsidies
This list is by no means comprehensive. But it gives you an idea of what fun perks you might consider to round out your total employee benefits package.
It's important for all benefits tiers that you have the long-term financial backing in place to fund these offerings. Giving out benefits and perks, and then removing them for financial reasons does not send a positive signal to your employees.
Relevant: 7 employee benefits to offer during the pandemic
Employee benefits plan structures
In many organizations - especially those that don't have endless capital like Google - it will be necessary to establish a payment framework for your offer's employee benefits.
Two popular ways that companies can structure their employee benefits plans are:
- Organization-led benefits
- Employee-led benefits
Organization-led benefits occur when the company offers its employees a specific and clearly defined benefit or group of benefits. These employee benefits are both owned and structured by the employer, with no input from the employee. Examples of organization-led benefits include health insurance and retirement plans.
This benefits plan ensures that the organization has complete control over the cost associated with these programs and how they can use them.
Employee-led benefits, on the other hand, are funded by the employer and customized by the employee. These benefits can be used in a way that suits each employee's needs. Examples of employee-led benefits might include healthcare spending accounts, personalized benefits programs, or fitness subsidies.
Large organizations might choose to take a hybrid approach to their total benefits program to ensure that each offering provides the best value for them and their employees.
When choosing your team's employee benefits and plan structure, you should always consider what is important to your employees and what your organization can feasibly afford. Introducing a total employee benefits package that is financially sustainable and appealing to top talent will give you a competitive advantage over your closest rivals.
