Major Types of Employee Benefits Organizations Need to Offer

Employee benefits are essential for attracting and retaining talent, as well as boosting employee satisfaction and productivity. According to the U.S. Bureau of Labor Statistics (BLS), paid leave, health insurance, and retirement plans are among the most common benefits offered.

This guide includes the major types of benefits organizations should offer in promoting a competitive and supportive work environment.

What are employee benefits?

Employee benefits are various forms of non-wage compensation that employers provide to eligible employees. These benefits are designed to improve employees' overall well-being, offering financial security and other incentives.

The U.S. Department of Labor's Employee Benefits Security Administration (EBSA) regulates several benefit plans, ensuring that participants and beneficiaries, including full-time employees, can access plan information and that plan managers comply with established conduct rules.

The Internal Revenue Service (IRS) offers rules about the tax implications of certain fringe benefits, indicating that certain incentives are reflected in an employee's gross income, while others may be exempt.

Employee benefits can be advantageous with a total rewards strategy, which helps attract and keep top talent by aligning pay, benefits, and career growth with business goals to boost engagement, employee retention, and productivity.

Why should you offer employee benefits?

Employee benefits help attract and keep skilled workers by boosting job satisfaction and motivation. In competitive markets, a strong benefits package is key to retaining top talent and reducing turnover. Benefits also build loyalty, improve workplace culture, and contribute to long-term business success.

Research found that 75% of employees view benefits as a critical factor in job satisfaction, with health insurance being the most valued. Employees with comprehensive benefits packages were more likely to stay with their current employer, showing greater engagement and loyalty to the company.

Examples of common employee benefits

Below are the common examples of employee benefits that companies offer to their employees:

• Health Benefits: This includes medical insurance, dental, and vision coverage, which helps employees manage healthcare costs. Employer contributions toward health insurance coverage can significantly reduce out-of-pocket expenses for employees.

• Retirement Benefits: Employer-sponsored retirement plans such as 401(k) or pension plans that help employees save for their post-work years. Employer contributions to retirement savings can further enhance employees' ability to plan.

• Bonuses and Incentives: Performance-based bonuses, profit sharing, and stock options that reward employees for their contributions to the company's success.

• Paid Time Off (PTO): This includes vacation days, sick leave, and personal days, allowing employees to take time off for rest or health needs without losing pay.

• Wellness Programs: Initiatives promoting physical and mental health, such as gym memberships or stress management programs.

• Education and training benefits: Refer to employer-provided support for employees' professional development and access to skill-building programs or courses.

• Commuting benefits: Refer to employer-provided support for employees' transportation needs, such as subsidies for public transit, parking fees, or company vehicles.

• Disability insurance: This provides income protection to employees unable to work due to a qualifying disability. The IRS states that sick pay, which can include certain disability benefits, is generally taxable and must be included in gross income, depending on the source of the payments.

Benefits that are mandated by law

Certain employee benefit offerings are required by federal law to ensure protection and security for workers. These mandated benefits provide financial and medical support during critical life events.

• Social Security: A federal program that provides financial assistance to retirees, disabled individuals, and survivors of deceased workers, helping them maintain income stability and contribute to their retirement savings plans.

• Medicare: A federal health insurance program for individuals aged 65 or older and certain younger individuals with disabilities, covering essential medical expenses such as hospital stays, doctor visits, and prescription drugs.

• Federal unemployment insurance: A government program that provides temporary financial assistance to workers who lose their jobs through no fault of their own, offering financial security while maintaining work-life balance during job transitions.

• State unemployment insurance: A state-administered program that provides temporary financial assistance to unemployed workers due to reasons beyond their control.

• Workers' compensation: A state-mandated insurance program that provides medical benefits and wage replacement to employees injured in the course of their work, helping them cover medical expenses and recover without financial strain.

Tips to improve your employee benefits package

Improving your employee benefits package is crucial for attracting and keeping outstanding employees. Here are some tips to improve your employee benefits package:

1. Implement flexible work arrangements

   Providing adaptable work schedules, remote work opportunities, and further workplace flexibilities can markedly improve employee satisfaction and productivity. The U.S. Office of Personnel Management (OPM) asserts that these programs serve as vital management tools that are beneficial to both agencies and employees.

2. Enhance health and wellness programs

   The implementation of extensive health and wellness efforts, including worksite health programs and Employee Assistance Programs (EAPs), enhances employees' physical and mental well-being. OPM emphasizes that these initiatives assist employees in adjusting their habits for optimal wellness.

3. Ensure compliance with tax regulations for fringe benefits

   Appropriately organizing fringe benefits in alignment with IRS regulations guarantees compliance and optimizes tax benefits for both companies and employees. The IRS offers comprehensive information regarding the tax implications of diverse fringe benefits.

4. Strengthen cybersecurity measures for benefit plans

   Establishing strong cybersecurity measures to safeguard employees' retirement and health benefit data is essential. The U.S. Department of Labor has released recommendations for optimal cybersecurity measures in benefit programs.

Regularly evaluating your benefits program ensures it remains competitive, cost-effective, and aligned with employee needs and business goals.

FAQS

Here are some common questions regarding types of employee benefits:

What are the three common forms of employee benefits?

Rewards for workers encompass diverse types of non-wage compensation offered to employees alongside their standard salary or wages. Three common forms of employee benefits include healthcare insurance, retirement plans, and paid leave.

What is the most common type of employee benefit?

The U.S. Bureau of Labor Statistics (BLS) reports that paid leave is the predominant form of employee benefit. By March 2024, 79% of private sector employees and 92% of state and local government employees have access to paid sick leave. Furthermore, 81% of private sector employees and 68% of state and local government employees have access to paid holidays.

Should benefits be included in the salary?

The IRS stipulates that all fringe benefits are taxable and must be incorporated into the recipient's earnings, unless otherwise exempted by law. This indicates that although specific benefits are regarded as components of an employee's overall salary, they are generally recorded independently from the base income.

Additionally, the U.S. Department of Labor (DOL) specifies that certain incentives and advantages may be omitted from an employee's regular rate of pay when determining overtime compensation. This signifies that not all benefits are immediately incorporated into the wage but are acknowledged as distinct elements of the comprehensive compensation package.

What benefits do employees value most?

Employee choices for benefits may differ according to personal needs and conditions. However, according to the U.S. Bureau of Labor Statistics (BLS), as of March 2024, some of the most commonly available benefits to private industry workers include paid leave, retirement plans, and medical care plans.