What are employee benefits?

Most employers know benefits matter. But according to our own survey data, four in five employees say a benefits package is a deciding factor in whether they accept a job offer, making it as important as base salary in many hiring decisions. Offering quality compensation packages that include robust benefits is crucial to an organization’s success. Employee benefits help keep workers happy, making them a valuable tool in engaging your workforce.

Yet many small and midsize employers still rely on one-size-fits-all group plans or bare-minimum compliance offerings. This blog post covers what employee benefits actually are, which ones are mandatory under the law, and which are optional.

In this blog post, you’ll learn:

• What employee benefits are, and which perks are mandatory and voluntary.
• How a competitive benefits package can improve recruitment, retention, and workplace morale.
• Strategies for designing and managing your company’s benefits package.

What are employee benefits?

Employee benefits are any form of perks or compensation that an organization provides workers in addition to their base salaries and wages. In short, any indirect compensation that employers offer their staff, either mandatory or voluntary, can be an employee benefit.

A robust employee benefits package may include non-wage compensation, such as:

• Health insurance benefits
• Life insurance benefits
• Paid time off (PTO)
• Profit sharing
• Retirement benefits
• Flexible work arrangements, such as remote work, hybrid arrangements, or a 9/80 schedule.
• Pet insurance

The law requires business owners to offer certain employee benefit plans. For example, employers must contribute to their employees’ Social Security and Medicare. Additional benefits beyond the mandatory requirements are often called employee perks or fringe benefits.

Each state’s benefit requirements differ, such as the rules on sick time or remote work expenses. However, there are some standard benefit regulations all employers must follow.

Under federal law, employers must do the following:

• Provide health insurance benefits if you have 50 or more full-time equivalent employees (FTEs)
• Under the Affordable Care Act (ACA), only applicable large employers (ALEs) must provide eligible employees and their dependents with an affordable health insurance plan that meets minimum essential coverage (MEC).
• Provide employees with time off to perform military service
• Pay state and federal taxes toward unemployment insurance
• Comply with the Family and Medical Leave Act (FMLA)¹

Employers aren’t federally required to provide the following benefits to employees:

• Retirement investment plans
• Dental insurance or vision plans
• Life insurance benefits
• Paid time off (PTO), such as paid vacation, holiday, or other types of paid leave
• Our 2024 Employee Benefits Survey found that 64% of employees “often” or “always” use their employer’s PTO benefits.
• Wellness benefits
• Severance benefits (unless there’s a written severance policy)
• Workers’ compensation insurance, though every state except Texas requires it

Even though many employee benefits aren’t mandatory, it’s still a good idea to incorporate them into your team’s compensation package. When designing your benefit package, consider the type of job seekers you want to attract. What employee perks would they enjoy? You’ll also want to ensure the benefit plans meet your budget and that your human resources department can manage them accordingly.

No matter your choice, benefits are an impactful way to entice potential employees and foster a positive company culture.

Why are employee benefits important?

Offering employee benefits has several advantages for businesses of all sizes, and the numbers prove it. Our PeopleKeep survey found that 81% of employees say an employer’s benefits package is an essential factor in whether they accept a job.

Simply put, you must offer an attractive benefit package to showcase your organization’s worth and increase morale.

It helps you recruit and retain employees

A generous benefits and perks package is crucial for recruiting and retaining talented employees. Ninety-two percent of American businesses say retaining high-performing employees is their main priority in 2026.² So, if you’re struggling with your retention rate, boosting your benefits package is an excellent place to start.

More than 90% of employees tie their job satisfaction to their benefits³. According to Indeed, 61% of job postings advertised at least one employer-provided benefit plan as of October 2024. This is up from less than 40% in late 2020.⁴ This means that providing benefits for employees and listing them in your job ads is an integral part of successful hiring efforts.

According to our PeopleKeep survey, employees find the following five benefits to be most important:

1. Health insurance benefits
2. Dental insurance
3. Paid leave
4. Retirement plans
5. Vision insurance

These employee perks aren’t mandatory for all organizations. But adding voluntary benefit plans to your compensation package can give your company a competitive edge.

You can highlight your organization’s values

Today’s successful companies know that they must instill great company values to engage employees. Your employee benefits package should reflect your company’s values to 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. Or you can offer health insurance plans that support your employees’ mental health and physical conditions while providing financial stability.

The types of employee benefits you offer send a message about your organization’s beliefs. A good benefit package also shows you support your employees' wellbeing outside the workplace.

It shows employees you care

Comprehensive benefits are an active way to make employees feel rewarded and appreciated. Showing your employees that you care about their personal needs can also improve employee morale. Improved morale can lead to a better workplace environment.

Almost 80% of employers plan to maintain or increase funding in their benefits package in 2026.⁵ Benefits that support a healthy work-life balance, such as vacation time and the ability to work from home, can help lower stress and prevent burnout. Your staff will likely be more productive at work, and in return, employee satisfaction will increase.

How much do employee benefits cost?

Cost is one of the most important factors to consider when building your benefits package. Examining the price and value gained for each employee benefit plan can help you decide what to include.

A U.S. Bureau of Labor Statistics report states that employee benefits comprise 31.4% of total compensation costs. Insurance benefits comprised 8.3% of compensation costs, and legally required benefits accounted for 6.9%.⁶

What can seem like a financial burden at first saves you money in the long run. For example, a 2024 Wellhub report found that 91% of HR leaders saw a decrease in medical benefit costs as a result of implementing their wellness program⁷.

Not only do these programs boost morale, but they also help you avoid indirect additional costs, like missed work due to illness and low productivity.

What are popular types of employee benefits?

You may ask yourself, “What employee benefits do people value the most?” The simple answer is that it depends on the type of employees you want to hire.

Popular benefit plans in the U.S. vary depending on employee makeup, industry type, and other factors. But a good start is to check out a list of common employee benefits that most companies offer.

A few common types of benefits include:

• Education benefits, such as professional development opportunities
• Commuter benefits
• Employee stock options and discounts
• Flexible work arrangements
• Employee stipends
• Financial literacy programs
• Employee assistance programs (EAPs)
• Paid parental leave

When designing your employee benefits package, it always helps to find out what your employees want. You can ask for employee feedback via an online survey to generate customized benefit plan ideas.

Additionally, some employers create benefits packages according to the demographics of their workforce. For example, employers may offer student loan repayment to entice Gen Z and Millennial job seekers.

Finding the right combination of benefits that will have the most impact while not breaking the bank plays a key role in your business’s success.

How to manage your employee benefits effectively

Employee benefits can vary depending on your company type. But regardless of which kinds of benefits an organization is considering, employers must understand how they’re structured.

Employers have two ways to structure employee benefits, including:

• Organizational-oriented benefits, also known as defined benefit plans, which are benefits that are employer-owned and employer-selected, such as:
• Traditional group medical insurance
• Pension plans
• Employee-oriented benefits, also known as defined contribution plans, which are benefits that are employer-funded and employee-selected, such as:
• Health reimbursement arrangements (HRAs)
• Health savings accounts (HSAs)
• Flexible spending accounts (FSAs)
• Health insurance stipends
• 401(k)s

Managing employee perks impacts your benefits administrator, especially if there are compliance regulations. But there are ways to manage a benefit plan to save 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 benefits administration software, such as PeopleKeep by Remodel Health for HRAs
• Measure benefit plan costs carefully
• For example, group plan health insurance rates typically rise during renewal time. Keep an eye on your upcoming insurance premium changes in case the benefit plan becomes unaffordable, and you need to switch to a different health benefit, like a cost-predictable HRA.
• Include a description of all benefits and perks in your employee handbook
• Track your employees’ wishes and needs regarding benefits
• Analyze benefits utilization data so you know where to make improvements

While most employers discuss their benefits packages during the final interview or after they extend a job offer, managing your benefits package is an ongoing process. The right benefit package can give you an edge over your competitors, so having the best tools in place is essential to staying ahead of the curve.

Conclusion

A quality employee benefits package is vital for today’s workers. Organizational-oriented benefits are the traditional choice. But many employers incorporate employee-oriented benefits to better meet the needs of their employees. Offering employee benefits may cost more upfront. But the long-term advantages outweigh the costs by contributing to your business's success.

If you want to offer employee benefits to your team, a personalized health benefit is a great place to start. Instead of offering traditional group health insurance benefits, offer an HRA through PeopleKeep by Remodel Health. Contact us today to learn how we can help your employees pay for their out-of-pocket medical expenses.

This post was originally published on December 16, 2020. It was last updated on June 8, 2026.

References

1. Family and Medical Leave Act

2. The AI Talent Retention Problem HR Leaders Aren't Solving (Yet) - citing a Wellhub survey

3. Intuit QuickBooks and Allstate Health Solutions Survey

4. Indeed’s 2025 US Jobs & Hiring Trends Report: What To Expect When You’re Expecting a Soft Landing

5. Working Advantage Survey: Nearly 80% of Employers Plan to Maintain or Increase Benefits in 2026

6. BLS - Employer Costs for Employee Compensation

7. Wellhub Study Reveals Strong Return on Investment for Corporate Wellness Programs