What are employee benefits?

Written by: Elizabeth Walker
Published on March 25, 2022.

Given today’s tight labor market, quality compensation packages are becoming more crucial to an organization’s success. Strong employee benefits and perks keep workers happy and less likely to send their resumes to your competition.

Employee benefits come in many forms. Some are required by law, while others are optional—either way, your compensation package can be a valuable tool in attracting and retaining employees.

If you’re responsible for employee benefits in your company, it’s good to be familiar with the wide variety of benefits that are out there.

In this blog, we’ll explain employee benefits, why they’re important, and how much they cost. We’ll also go over the popular types of employee benefits and how to manage them effectively.

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What are employee benefits?

Employee benefits are any benefits provided to employees in addition to their base salaries and wages. A complete employee benefits package may include health insurance, life insurance, paid time off (PTO), profit sharing, retirement benefits, and more. Simply put, any non-wage benefit offered to an employee, either mandatory or voluntary, can be classified as an employee benefit.

Some employee benefits are required by law. For example, employers must pay into their employees’ Social Security and Medicare. Additional benefits beyond the requirements are often called perks or fringe benefits.

Each state’s benefit requirements are different, such as the rules regarding sick leave or covering remote work expenses. However, there are standard benefit regulations all employers must follow.

Required employee benefits include:

  • Provide employees time off to vote, serve on jury duty, and perform military service
  • Comply with all workers’ compensation requirements
  • Pay state and federal taxes towards unemployment insurance
  • Contribute to state short-term disability insurance
  • Comply with the Family and Medical Leave Act (FMLA)

Employers aren’t required to provide the following benefits:

When considering an employee benefits package, think about the type of employees you want to attract, what perks they would enjoy most, and what benefits your budget can allow. No matter what you choose, benefit coverage is an impactful way to entice employees and create a positive workplace culture.

Why are employee benefits important?

Offering employee benefits has several advantages for business owners of all sizes, and the numbers prove it. Simply put, if you want to attract and retain top talent, show your organization’s worth, and increase morale, you must offer an attractive benefits package.

Recruit and retain employees

Due to the Great Resignation, a generous benefits and perks package is crucial. According to research from Zenefits, 63% of companies say retaining employees is harder than hiring them. If you’re struggling with your retention rate, boosting your benefits package is an excellent place to start.

The Society of Human Resource Management (SHRM) also found that 92% of employees say their benefits are important for their overall job satisfaction.

In a related article, 63% of job seekers surveyed say they pay attention to what benefits a company offers. This means that offering benefits, and listing them in your job ads, is an integral part of successful hiring efforts.

Highlight your organization’s values

Today’s successful companies know that to attract and retain employees, they must define and instill great company values. Your employee benefits package can be a reflection of your company values and entice top talent who share the same core values as you.

For example, you may launch a corporate responsibility initiative offering PTO to your employees so they can volunteer in their community.

Ultimately, the benefits you offer send a message about your organization’s beliefs. A good benefits package shows that you recognize your employees’ needs outside the workplace and want to support their overall well-being.

Show employees you care

Coverage through benefits is an active way to make employees feel rewarded and appreciated, making them more likely to stay at your company. Showing your employees that you care about their personal needs can also improve employee morale leading to a better workplace environment.

For example, benefits that improve work-life balance, such as vacation time, flexible hours, and the ability to work from home, can help lower employee stress and prevent burnout. Employees are likely to be more productive at work with higher job satisfaction in return.

How much do employee benefits cost?

One of the most important things to figure out when building out your benefits package is the cost. Examining the costs and gains for each employee benefit can help you decide what to include in your plan.

According to a U.S. Bureau of Labor Statistics report, employee benefits make up 31% of total compensation costs. Insurance benefits made up 8.3% of compensation costs, and legally required benefits accounted for 7.1%.

What can seem pricey at first might save you money in the long run. For example, a UnitedHealthcare survey found that 62% of participants in wellness programs say their productivity has improved and 56% have had fewer sick days. These programs are known to boost morale, but they also help you avoid indirect costs, like missed work due to illness and lower productivity.

Find out the cost of health insurance in your state with our comparison chart

What are popular types of employee benefits?

You may be asking yourself, “What employee benefits do people value the most?” The simple answer is that employees value all benefits. But ultimately it depends on what type of employees you’re looking to hire.

Finding the right combination of benefits that will have the most impact while not breaking the bank is critical for your business’s success.

Popular benefits in the U.S. range depending on employee makeup, industry type, and other varying factors. But checking out a list of common benefits offered by most companies is a good place to start.

When designing your employee benefits package, it never hurts to investigate what your employees specifically want. Asking for employee feedback via an online survey can be a great way to poll for customized benefit ideas.

Additionally, some employers create benefits packages according to the demographics of their workforce. For example, employers may offer a student loan repayment benefit to attract and retain millennials.

Find out what your employees want most by sending out an employee benefits survey with our template

How to manage your employee benefits effectively

Depending on the type of organization you’re in, employee benefits can vary. But regardless of the different types of benefits, employers must understand how benefits are structured.

Employers have two ways to structure employee benefits, including:

  • Organizational-oriented benefits
    • Benefits that are employer-owned and employer-selected, such as a group health insurance marketplace plan, a pension plan, or 401(k)
  • Employee-oriented benefits

Managing employee benefits can significantly impact your human resources team, especially when compliance issues are involved. But there are ways to effectively manage a benefit plan to save you time and reduce the likelihood of errors.

Consider the following when managing your employee benefits package:

  • Hire a dedicated employee benefits specialist
  • Find the right benefit administration software, like PeopleKeep for HRA health benefits
  • Measure benefits and costs carefully
  • Include a description of all benefits and perks in your employee handbook
  • Consistently monitor your employees’ wishes and needs in regards to benefits

While employee benefits packages are typically discussed during the final interview or at the time an offer is extended, managing your benefits package is an ongoing process. The right benefits package can give you an edge over your competitors, so it’s vital for employers to have the best tools in place to stay ahead of the curve.


A well-rounded employee benefits plan is essential for today’s workforce. Organizational-oriented benefits have traditionally been used by themselves, but many employers are incorporating employee-oriented benefits to better meet their employees’ needs.

Offering employee benefits may cost a bit more upfront, but the long-term advantages outweigh the costs by contributing to the success of your business. Comprehensive benefits attract better employees and retain them for the long haul—meaning employers benefit from a more productive and satisfied workforce.

This post was originally published on December 16, 2020. It was last updated on March 25, 2022.

Originally published on March 25, 2022. Last updated March 25, 2022.


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