Why Are Employee Benefits Important? Types and Advantages

By Indeed Editorial Team

Updated February 22, 2021 | Published January 13, 2021

Updated February 22, 2021

Published January 13, 2021

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

The benefits included in a company's compensation package can be significant factors when searching for a job. Benefits help employees pay for healthcare, save for retirement and take time off work when needed. Understanding the importance of benefits packages can help managers provide more comprehensive packages to find and keep talented employees and help employees and candidates determine their priorities in a role. In this article, we explain the importance of employee benefits and common types.

What are employee benefits?

Employee benefits are types of compensation companies provide their staff in addition to a salary. Certain federal and state laws may require employers to offer benefits such as:

  • Family and Medical Leave

  • Social Security and Medicare tax payments

  • Unemployment insurance

  • Disability insurance

  • Workers' compensation

  • Time off for civic duties, such as voting and jury duty

Companies can choose whether to offer other common benefits such as paid vacation, health insurance, life insurance and retirement plans. Organizations typically provide additional benefits to be competitive when hiring and to keep their employees happy, healthy and productive.

Related: 25 Types of Employee Benefits

Why are employee benefits important?

Employee benefits increase the value of working for a certain company and can improve your or your team members' health and quality of life. When applying for jobs, candidates may look at the benefits each organization offers and take those into consideration along with salary when deciding where they want to work. Advantages of employee benefits include:

Job satisfaction

A good benefits package shows that a company cares about its employees. Benefits such as paid time off, workplace perks, wellness programs and tuition reimbursement can make employees feel valued. This can lead to employees who are happy to be in their job, loyal to the company and motivated to do good work.

Employee benefits are also important for workplace morale because a happy and positive team is likely to be productive and work well together. Also, job satisfaction from good benefits reduces turnover rates, leading to stronger, more stable dynamics within a department.

Work-life balance

Work-life balance, or the harmony between your career and your personal life, has become increasingly important to employees. Benefits that improve work-life balance include vacation time, unlimited or generous paid time off, flexible hours and the ability to work from home. These types of benefits can help reduce employee stress and fatigue and prevent burnout. Employees are likely to be more productive at work and at home as a result.

Benefits such as flexible hours and vacation time also allow employees to spend more time with their families and friends, allowing them to have more fulfilling personal lives. They are also particularly important for parents who must balance their career with child care or other family commitments.

Related: The Ultimate Guide to Work Life Balance

Health coverage

Benefits typically include some form of healthcare coverage, which is important for keeping employees, and often their families, healthy and helping them pay for medical expenses. The Affordable Care Act requires companies with more than 50 employees to provide health insurance to 95% of full-time employees or pay a significant fee to the IRS.

Health benefits help employees and their families afford regular wellness exams, preventive care, prescription medications and medical treatments. If a candidate or of their dependents requires regular healthcare, they might prioritize jobs that offer comprehensive health insurance plans. Further, if employees are encouraged to stay healthy and given the tools to do so, they are likely to feel more energetic, have fewer sick days and be more effective at work.

Increased productivity

Benefits can improve focus and productivity. A good benefits package that offers perks such as paid time off, health insurance and disability insurance can prevent employees from worrying about things like finances, medical expenses and child care. If employees are more confident about personal matters before, during or after work, they can better focus on their tasks and career advancement.

Related: How to Be More Productive

Saving for retirement

Some companies offer retirement benefits such as employee pension plans and 401(k)s, which allow employees to put a pretax percentage of their earnings toward their retirement savings. An employer might contribute to or match a certain amount of those funds. Other types of retirement plans include profit-sharing, stock bonus, employee stock ownership and cash balance plans.

Retirement benefits can help provide employees a well-organized and reliable way to save money and plan their financial futures for themselves and their families. When employees do retire, they will have a predetermined budget to live on depending on how much money they saved through their employer's retirement plan or other retirement options they pursued.

Related: Employee Benefits: Examples of the Most Common Employee Perks

What are some of the most important benefits to employees?

The most important benefits for employees are generally those that support their personal and financial health. The more comprehensive a company's benefits package, the more competitive it's likely to be in the workforce. Some of the most popular and important benefits to employees include:

  • Healthcare: Companies can offer a range of health insurance packages, including preferred provider organization, point of service, health maintenance organization, indemnity and health savings account plans. Each policy's purpose is to reduce an employee's out-of-pocket costs when paying for medical procedures or expenses.

  • Paid time off: Companies generally give employees paid holidays such as Labor Day, Independence Day, Thanksgiving, Christmas and New Year's. They might also give employees a set number of days to use for religious holidays or a certain number of personal hours per year.

  • Vacation time: Full-time employees typically receive one or two weeks of paid vacation time each year. Some companies offer more or unlimited vacation time. Employees may gain weeks of vacation time the longer they work for a company.

  • Family and Medical Leave: Companies are required by law to give employees up to 12 paid weeks off for the birth of a child or a serious medical condition. These requirements vary by state.

  • Retirement plans: As mentioned, companies can offer various retirement plans, but all involve saving a set amount of your earnings for retirement.

  • Flexible hours: A company might allow employees to set their own hours rather than work strictly from 9 a.m. to 5 p.m.

  • Remote work: Companies might give their employees the flexibility of working from home or the office and telecommuting. This might be for special circumstances, on certain days of the week or month or as a full-time option.

  • Wellness programs: Office wellness initiatives might include policies and activities designed to keep employees healthy and educate them about physical well-being. They might also include a free first-aid or nurse station.

  • Tuition reimbursement: Organizations might support their employees' professional development by paying for a certain amount of their continuing education tuition. Typically, companies set restrictions on course types, ensuring the courses taken relate to their role at the company, or require employees to continue working for a certain amount of time after completing their coursework or degree.

  • Life insurance: Life insurance plans pay a preset amount of money to help support an employee's family in the event of that person's death.

  • Disability insurance: If an employee develops an illness or a disability that affects their ability to work, the company continues to pay a portion of that employee's salary.

  • Performance bonuses: A company's benefits might include pay raises or bonuses based on good performance or goals and milestones met.

  • Relocation assistance: Companies might cover the cost of moving to a new city to attract skilled employees from other regions.

  • Workplace perks: Other office benefits might include free meals, gym memberships, pets at work, child care, company cars, employee retreats and free massages.

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