Employee Benefits Package: Definition, Types and Tips

When people are looking for a new job, a higher salary isn't always the most appealing factor. Nowadays, job seekers want more than just good pay—they expect a range of benefits and rewards. HR professionals need to explore different types of benefits and decide which ones to offer to attract and keep employees.

Thanks to Salary.com's Compensation Consulting Services, backed up by over 70 years of compensation and total rewards experience, companies can develop and offer attractive employee benefits that will make them stand out in the job market.

What is an employee benefits package?

An employee benefits package is a collection of various perks and benefits that go beyond regular pay which offers extra value to employees. These packages, which often include health insurance, retirement savings plans, and wellness programs, are important for attracting and retaining top talent, especially for small businesses that may not be able to offer high salaries.

The importance of employee benefits

Employee benefits are an important component of any employee compensation package, often influencing job seekers' decisions when choosing between offers. In fact, a study revealed that 42% of employees would prefer receiving new employee benefits over a $200 wage increase.

Total Rewards Strategy will you understand your business, refine your compensation philosophy, and design balanced and equitable rewards programs that ensure employee engagement and support your unique objectives.

What is typically included in an employee benefits package?

Comprehensive benefits packages usually comprise a combination of these:

Legally mandated benefits

Legally mandated benefits, such as health insurance and unemployment insurance, are required by federal laws like the Affordable Care Act. Employers must offer these benefits to eligible employees as failure in doing so can result in hefty fines and other legal consequences.

Voluntary/Fringe benefits

Fringe benefits, like mental health benefits and flexible spending accounts, are extra perks that employers offer to make their employee benefits packages more attractive. These benefits, though not required by law, help improve employee satisfaction and work-life balance.

Types of employee benefits

Common types of employee benefits include:

1. Financial benefits

   Financial security is crucial for employee well-being. Offering retirement savings plans, life insurance, and student loan assistance can help employees feel more secure and focused at work.

2. Healthcare benefits

   Providing health insurance that covers medical expenses, including medical, dental, and vision insurance, is essential for attracting and retaining employees. Health savings accounts and employer contributions to health insurance plans can make healthcare more affordable for your team.

3. Paid time off (PTO)

   Paid time off helps employees balance work and life by offering paid leave for vacations, sick days, and personal time. PTO is a popular employee benefit that shows you value your employees' well-being and need for rest.

4. Unique employee benefits

   Stand out by offering unique benefits like mental health support, wellness programs, and tuition reimbursement. These voluntary benefits not only attract job seekers but also help retain employees by addressing their specific needs.

Benefits packages tips for employers

Organizations that are planning to offer benefits packages should keep these tips in mind:

Customize benefits to employee needs

Offer employee benefit plans like health benefits and retirement savings plans that your team will actually use, ensuring they're valuable to both the employer and employees.

Balance cost and value

Provide health insurance, disability insurance, and wellness benefits that improve employee productivity without straining your budget, so you can still offer competitive salaries.

Stay compliant with legal requirements

Ensure you're offering all benefits mandated by law, such as family and medical leave, to protect your business and support your employees.

Communicate clearly

Make sure employees know how to access their medical insurance, life insurance, and other benefits to maximize their use and satisfaction.

Focus on affordability

Select employee benefit offerings, like a health reimbursement arrangement or commuter benefits, that are cost-effective yet appealing, making your package both comprehensive and sustainable.

Benefits Program Evaluation can help review how employees currently perceive your benefits offerings, and develop competitive new benefits plans that fit within your budget.

Examples of top employee benefits in 2024

Here are top examples of benefits that employees usually prefer:

• Financial wellness benefits: Help employees manage their money better, reduce debt, and save for the future through education and counseling services.

• Dental insurance: Provides coverage for routine dental exams that can catch health issues early.

• Employee stock options (ESOs): Let employees buy company shares at a discount, giving them a financial stake in the business and boosting loyalty.

• Remote work program: Offers the flexibility to work from anywhere which improves work-life balance.

• Group life insurance: Provides financial support to an employee’s family for funeral costs, showing that the employer cares about their well-being.

• Paid time off (PTO): Allows employees to take time off for vacations, sickness, or personal reasons, helping them maintain a healthy work-life balance.

• Child and dependent care benefits: Many employers now offer child and dependent care benefits to help cover daycare and other related expenses, easing the burden for working parents.

• 401(k) plans: A 401(k)-retirement savings plan is one of the most popular employee benefits, allowing workers to save for retirement with employer matching contributions.

• Pet insurance: Pet insurance is becoming a popular employee benefit, with more companies offering it to attract and retain employees who consider their pets part of the family.

• Family stipends: Provide employees with extra financial support for family-related costs.

With Competitive Pay Assessment, organizations can assess the market competitiveness of their pay and benefits programs to identify any existing pay gaps and recommend what changes, if any, need to be made.

FAQs

Now that you understand how employee benefits packages work, let's discuss some frequently asked questions about them.

How do you explain benefits to employees?

Explaining benefits to employees involves clearly explaining the value of your comprehensive benefits package. Guide them on how to efficiently utilize these benefits, such as maximizing health savings accounts and understanding their health insurance options, to ensure they fully benefit from your benefits offerings.

What do employees want in a benefits package?

Employees generally seek a benefits package that includes comprehensive health insurance, such as medical benefits and prescription drug coverage, to ensure their well-being and that of their families. They also value retirement plans, like employer-sponsored retirement plans, and disability insurance, including short-term disability insurance, to secure their future and manage unexpected events.

What does a good benefit package look like?

A good benefits package is typically a combination of mandatory benefits, fringe benefits, and unique employee benefits. Offering a balanced mix of employee benefits can make your package stand out and enhances both employee satisfaction and your appeal as an employer of choice for job seekers.

Compensation and Benefits Program Design can improve the strategic value of your pay programs and design benefit packages that deliver a clear competitive advantage while containing costs.