You might think of compensation as the paycheck that hits your checking account every two weeks. However, employee benefits are a major part of the compensation package when looking for a job.
Companies offer employees contracts with a wide range of benefits to attract top talent and increase employee satisfaction. Some benefits, like sick leave, are required by law. Some are nice to have, like gym memberships and remote work.
If you’re in the process of looking for a job or negotiating a new position, take time to become familiar with the wide variety of employee benefits that are out there.
Here’s your introduction to what employee benefits are and the different types of employee benefit plans to consider when job hunting, from health benefits to retirement benefits and beyond.
What are employee benefits?
Employee benefits are non-salary compensation employers offer their staff and potential candidates. These benefits vary from company to company and are provided in addition to your paycheck to help create a competitive package for the potential employee (and increase employee retention).
Employee benefits are most commonly offered to full-time staff members, while part-time employees often won’t have a benefits package included with their pay. However, part-time jobs offer government-mandated benefits like workers’ compensation insurance, Social Security, and short-term disability insurance.
From an employee’s point of view, a strong benefits package increases the value of the work itself, contributing to their overall wellness and their families. For an employer, good benefits keep employees happy and committed, lowering their chance of leaving and working elsewhere.
Why are employee benefits important?
According to the U.S. Department of Labor, employee benefits account for just under 30% of a total compensation package.¹ Offering comprehensive employee benefits has several advantages on both sides of the table. For the employer, it keeps them competitive on the hiring market, bringing top talent and increasing both employee satisfaction and employee retention.
On the employee end, of course, benefits are a huge part of why someone might choose one job offer over another – and keep that job long-term. Although salary might be the main element you consider, benefits can lower your overall cost of living by subsidizing your healthcare costs, creating opportunities for professional development, increasing your retirement funds, improving your work-life balance, and more.
Types of employee benefits
1. Required by law
There are a handful of employee benefits employers are required by federal or state law to provide their employees. All employers must offer these in their benefits plans to stay compliant with U.S. Department of Labor laws.
Here are some of the federally required benefits that must be offered by benefits administration professionals in the U.S.:
- Worker’s compensation insurance
- Social Security and Medicare contributions
- Medical benefits (Corporations with over 50 or more full-time employees must provide medical insurance to 95% of their full-time employees.)²
- Minimum wage requirements
- Unemployment insurance benefits
- Disability insurance
- Family and Medical Leave (FMLA), which mandates certain sick leave benefits
2. Industry-standard
There are also benefits that aren’t required by law but are fairly standard across most industries. Many companies offer the following benefits to some extent:
- Medical insurance, dental insurance, and vision insurance benefits
- Life insurance
- Flexible Spending Account (FSA)
- Health Savings Account (HSA)
- Retirement benefits, including 401(k)s or pension plans
- Paid time off (PTO)
- Paid holidays
3. Fringe benefits and perks
Many companies have expanded their benefits to stand out and attract candidates. These benefits can vary between industries.
Benefits like remote work arrangements can be viewed as industry standards in fields like tech or project management, but not necessarily for those working in a field such as healthcare. These additional benefits are also sometimes referred to as “fringe benefits.” Fringe benefits are essentially any additional perks an employer will offer that are not required by law but are considered an added bonus. These perks can include:
- Wellness programs
- Tuition reimbursement
- Commuter benefits
- Remote work options
- Bonuses and profit-sharing
- Employee stock options
- Childcare benefits
Employee benefits: 9 common examples
Let’s look at 9 of the most common employee benefits an employer may offer. You may want to consider these when looking for a new job.
1. Medical insurance
Medical insurance is one of the most popular employee benefits companies offer. Because of the Affordable Care Act (ACA), employers with more than 50 full-time employees must offer medical insurance through their employee benefits programs to full-time employees only.³ A medical insurance plan will cover your typical physical health needs, excluding vision and dental.
Some medical insurance plans offer more comprehensive coverage, including:
- Transgender healthcare, like hormone therapy and surgical procedures, that can help alleviate gender dysphoria
- Fertility benefits, like in vitro fertilization (IVF), which can help couples who are struggling to conceive naturally
- Mental health benefits, like talk therapy or psychiatric evaluations, either through a third party or through employee assistance programs (EAPs)
- Prescription medication coverage, which can lower the cost you pay for drugs deemed medically necessary by your doctor
Some companies will cover the total cost of your medical insurance premium, but, in many cases, you’ll have to cover some of it on your own. If your company offers different levels of coverage, choosing the right plan for your situation will depend on several factors, such as the state of your health or the number of family members on the plan.
Find out when your coverage will begin when starting a new job. Some companies require an employee to work for at least 90 days before being able to utilize coverage.
2. Retirement plans
Retirement plan options are another common benefit. There are several different common account types.
- 401(k)s and 403(b)s are the most common types of employer-offered retirement accounts. Which is available to you depends on whether your employer is for-profit or non-profit. Both of these are tax-advantaged ways to save for retirement. The Internal Revenue Service (IRS) allows you to contribute up to a set maximum, which changes from year to year. (Keep in mind, too, that the contribution limit may be different if it’s a Roth plan.) When analyzing the 401(k) plan that your company offers, find out what percentage of your salary you can set aside and what your investment options are as well. Also, many employers will provide a 401(k) match, which matches employee contributions up to a certain amount.
- 457(b) plans are most commonly available to government employees and certain nonprofit employees, and work similarly to 401(k)s in that both employers and employees can make contributions.⁴
- Pension plans are a nice perk for those who have access: a pension guarantees you regular payment throughout your retirement until the end of your life, without your needing to save up for it ahead of time.⁵
3. Life and disability insurance
Life insurance is another benefit employers offer that will cover funeral expenses and other costs in the event of an unexpected death. Sometimes, this is automatically available when you start working at a new company; other times, you must sign up for this benefit yourself. You can also find out how much of a premium your employer will cover and if you’re eligible to purchase additional coverage. Remember that the company you work for is ultimately the policy owner, so you’ll likely lose that coverage if you leave your job.
Disability insurance is also an important benefit that many companies offer. If you were to get injured in an accident or develop a serious illness, this type of insurance can help replace a part of your income if you’re unable to work for an extended period of time. Some companies may offer long-term and short-term disability insurance.
4. Flexible Spending Accounts (FSA) and Healthy Savings Accounts (HSA)
Flexible Spending Accounts (FSAs) allow you to put a portion of your paycheck into a spending account that helps reduce your taxable income. The money in this account can be used for medical expenses and gives you some tax advantages.
FSAs are available with most health insurance plans. However, they come with a “use it or lose it” clause. This means that if you claim $2,000 for the year but you only use $1,700 of it, you then lose $300.
Health Savings Accounts (HSAs) are more like savings accounts for medical expenses — however, you can use those funds whenever you want. The money you put into your HSA is pre-taxed, meaning it also has tax advantages. The money in your HSA builds up over time, and you’re allowed to use it indefinitely, even after switching health plans. The restriction is that the contributions you make are only tax-free when you’re enrolled in a High Deductible Health Plan (HDHP).⁶
5. Paid time off
While not required by law, many employers offer employees some form of paid time off (PTO) to remain competitive with other companies. Paid time off is any time when you aren’t working but still receiving pay. This can include paid vacation time, personal days (as differentiated from required sick leave), and company holidays.
Your company can separate PTO time by vacation, personal, and sick days, or they might bundle it, which means there’s one bank of paid leave you can use. Make sure you’re aware of your company’s PTO policy and if you have to use it all in a calendar year or if you can roll over unused time to the following year.
6. Tuition assistance
Some employers reimburse people for furthering their education while working at a company. These reimbursements can help reduce student loan debt for employees who qualify for these programs.
A company might offer a set amount toward continuing higher education or cover a percentage of your tuition. In either case, you’ll probably be required to stay with your company for a certain period of time after you finish your degree, so be sure to read the policy carefully.
These student loan relief programs are ultimately a win-win for employees and employers. They help lessen the financial burden of student loan debt on employees and encourage them to pursue more training – and professional development that can help both your individual career and the goals of the company you work for.
7. Remote work and flexible schedules
Remote work options and flexible working schedules are cost-effective employee benefits that have become more common since the pandemic. In fact, according to one study, as many as 62% of U.S. workplaces are offering remote work flexibility.⁷ Some companies are adopting hybrid in-office and work-from-home policies for their employees.
8. Childcare benefits
For working parents, one of the biggest obstacles is the lack of affordable childcare. And that’s no surprise: According to care.com, the average cost of childcare adds up to a whopping $18,000 per year.⁸
One way companies can support their employees is by providing on-site daycare or tuition discounts to help with childcare costs. By offering contributions toward the high costs of childcare, companies can avoid having to rehire or fill positions for those who have to leave due to this hardship.
9. Paid holidays
The law doesn’t require employers to provide their employees with paid leave for holidays. However, many employers make sure that their employees get time off for holidays to spend time with friends and family. Companies choose different paid holidays based on their own discretion.
Holidays like Christmas, Thanksgiving Day, and Memorial Day are common days off, but beyond that, other paid holidays are chosen by the employer.
Reviewing your employee benefits package
Take the time to consider if a job and its benefits package will be the right fit for you.
We’re all unique, so the benefits you want to consider will depend on what’s important to you. For example, if you want to make sure you have a bigger cushion when retiring, a 401(k) plan may be most important to you. If you have health issues, a good medical insurance plan may be your main priority.
When negotiating a job offer, remember you can negotiate your benefits. You may also be able to negotiate details like a flexible work arrangement or a more extensive PTO plan.
Employee benefits do more than sweeten the deal
Employee benefits can get confusing, especially when some companies offer so many different types. Yet all benefits are an important part of the overall compensation package used to attract new employees, and keep those who currently work for the company. As you’re on the search for new employment opportunities, be sure to keep employee benefits in the back of your mind when interviewing or accepting new offers.
Want to learn more about one of the most popular contemporary work perks? Our work-from-home guide has you covered.
FAQs
Are wellness benefits considered standard?
Wellness benefits aren’t mandated by law and typically aren’t considered industry-standard either. However, these types of benefits are becoming increasingly common, especially among larger companies, as people continue to prioritize their well-being and overall health.⁹
Is my salary more important than benefits?
Some people value their employee benefits more than their salary. But, at the end of the day, this depends on what you value as a person and an employee. For one person the amount they’re getting paid month to month may take priority, while for someone else, the benefits offered might be the defining factor.
Are there part-time jobs that offer benefits?
Many part-time jobs don’t offer benefits to their employees, as employers usually only offer them to full-time staff.¹⁰ However, some part-time positions can come with a few benefits.
Usually, part-time employees in a larger organization who work over 30 hours a week will receive medical insurance.¹¹ Part-time employees may also be able to take advantage of retirement plans and paid unemployment, depending on the company policy or rules.
Do government jobs offer better benefits?
In some cases, government jobs might offer a more comprehensive benefits package compared to the private sector. These benefits can include a better health care plan with lower costs, or a retirement package with a higher return.