What are employee benefits?
Employee benefits are perks and advantages employers offer to attract the right individuals to a business. Find out what employee benefits mean for you.
Many employers offer employees various benefits to help them feel appreciated and rewarded for their work. From 401(k) plans to healthcare insurance, finding the right role and employer can help you land many attractive benefits.
What are employee benefits?
Employee benefits are compensation packages offered to employees to help them feel appreciated and rewarded by their employer.
Benefits can be anything from non-cash financial incentives to retirement plans and health insurance. Although these rewards can all boost individuals, businesses that offer the right compensation packages often hire and retain talented people.
Employee benefits have come under the spotlight since the pandemic. More than 50 million workers quit their jobs in 2022, mostly in search of better workplace benefits elsewhere, so exactly what businesses do and don’t offer their people can be the difference between attracting the right employees and missing out.
Why are employee benefits important?
From a business perspective, offering a good benefits package can be the difference between successfully hiring somebody and failing to do so. All businesses, whether large or small, need the right people to achieve their goals, so companies need to do everything they can to recruit well. Offering the right workplace benefits is a big part of that.
From an individual’s perspective, a good benefits package can be a vital way of planning for the future. Employees may be able to secure better work flexibility, helping them better balance their work and family commitments. Or, through a good health or disability insurance package, employees can secure a much-needed source of income if they fall ill and cannot work.
What are the different types of employee benefits?
For businesses and individuals, there are several key benefits to both offer and be on the lookout for:
Employee retirement plans
Retirement plans are some of the most common benefits offered to employees. From defined benefit plans to 401(k)s, offering employees a retirement safety net can help organizations hire effectively. The most common retirement plans are defined contribution or defined benefit plans. While a defined benefit plan guarantees an income for the rest of an individual’s life, a defined contribution plan delivers returns based on investments made.
The two retirement plans most likely to be offered by an employer are a 401(k) and a pension plan. A 401(k) is a defined contribution plan where employees can make regular contributions from their salary to an account where their deposits are invested in various options. Employers can also make contributions. Over time, the value of this account can grow, providing a retirement fund. Alternatively, some businesses may prefer to offer you a pension plan, which guarantees employees an income once they have retired; however, these plans are much rarer today.
Health insurance
Having a good health insurance policy means that employees can cover some or all of their medical costs without significant expense. Healthcare benefits can take many forms, so you should study any policy closely to understand how it works. For instance, some policies may only be limited to physical injuries and illnesses and may not offer much coverage regarding mental health care.
The two main plans offered to employees are a Health Maintenance Organization (HMO) and a Preferred Provider Option (PPO). An HMO policy allows you to see a chosen doctor who is contracted to your firm. This option is usually cheaper, but it also means that you may not always be able to see your preferred doctor and may need to visit different hospitals.
On the other hand, a PPO allows you to continue visiting your chosen doctor in a preferred medical setting, with most costs covered. There may be additional out-of-pocket charges, but this option also has more flexibility.
Other notable employee benefits
There are a wide range of different benefits that a business could offer. These are some notable benefits you could be offered:
Disability insurance provides employees financial support if they become injured or sick and cannot work for a set period.
Dental insurance can often be rolled into an employee’s healthcare plan and covers the costs of preventative and common dental procedures.
Life insurance pays out some of your income to your family if you die while employed.
Childcare benefits can help ease the costs of childcare for working parents.
Tuition reimbursements are particularly attractive to young workers with sizable tuition loans to repay. Some employers can choose to pay part or even all of an employee’s tuition costs incurred while working for the business.
How do you choose the right benefit for you?
If a potential or current employer is offering you a range of benefits, but you aren’t sure which to choose, it’s important to assess each option before making a final decision. While most employers will allow you to change your benefits around a year after making your selections, it can save you time and effort to make as accurate a decision as possible the first time around.
Your personal circumstances will be a big influence on which benefits you choose. For instance, if you have recently graduated from college or are planning to undertake a new course during your employment, opting for tuition reimbursement could help minimize the outstanding tuition costs you must pay. This could allow you to save toward your future more effectively. Depending on your financial goals, you could also opt into non-cash financial incentives, including stock options or share-ownership schemes that reward you if the business performs well.
Or, if your main concern is work flexibility and spending more time with your family, you could choose benefits that allow you to work alternative hours, work from home more often, or even give you more paid time off (PTO).
Whether financial, family, or health-based, you could be entitled to attractive employee benefits through your workplace. But, if you need help determining which benefits are right for you and what they could mean for your finances, speak to a financial advisor.
Senior Content Writer
Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.