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What’s in an Employee Benefits Package?

Comprehensive and competitive benefits packages help you create a company that attracts and retains talented employees. When pay is similar between two jobs, employees often look at the benefits packages to see which one has the edge. Learn what a benefits package is, what they include, strategies for managing them and frequently asked questions regarding employee benefits.

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What is a benefits package?

Benefits packages for employees include all the nonwage ways a company compensates its employees. They’re the little perks and extras that employees get as a standard part of the job offer. Some benefits are required while others are optional, allowing companies to customize what they offer.

All companies offer some type of benefits package, but the job benefits that make up these packages vary depending on the country, industry and values of the employer. For example, a company may pay for an annual company-wide retreat as part of their benefits package to encourage adventure and interpersonal relationships among their staff.

A company that values volunteerism might offer employees paid time off to volunteer. Smaller businesses or startups that are on a limited budget typically offer smaller benefits packages than corporations with larger benefits budgets.

Basics of employee benefits packages

Although employers can provide creative benefits outside of this realm, the benefits that are most commonly (and in some cases mandatorily) included in employee benefit packages are:

  • Insurance
  • Retirement plans
  • Paid time off
  • Additional compensation

It’s important that you comply with any state and federal regulations in these categories. Offering additional perks can set you apart from competitors and help you attract more candidates.


Insurance is a foundational benefit for most benefit packages for employees and can be offered in several forms, such as:

  • Health insurance: Health insurance is often considered the preferred benefit for most employees. If you can only afford to offer employees one benefit, you should make it health insurance. You can choose to pay some or all of the premiums for your employees. The remaining premiums each employee owes will come out of their paychecks.
  • Short-term disability insurance:This ensures that employees continue to earn a percentage of their income if they’re unable to work due to an injury or sickness.
  • Long-term disability insurance:Sometimes referred to as LTD, this insurance policy protects employees if they’re unable to work for an extended amount of time because of an accident, injury or illness.
  • Dental insurance:Often offered in comprehensive benefits packages, dental insurance helps employees cover the costs of preventative and emergency dental care.
  • Vision insurance:Vision insurance is sometimes added to health policies to pay for the vision examinations of employees. It might be part of the main health insurance plan or a separate supplemental policy.
  • Life insurance: Life insurance is an appreciated addition to an employee benefits package. It shows employees that their employer cares about them, as well as their families, by providing a sum to the family to help them cover funeral costs if the employee dies. Many companies let employees choose how much life insurance they want to purchase through the company plan, and the employee pays the associated premium.
  • Flexible spending accounts: While not technically insurance, flexible spending accounts can help employees plan for healthcare and childcare expenses. Healthcare FSAs let employees save pretax dollars from their paycheck to use on qualifying medical expenses. There’s a limit on the amount they can contribute, and they have to use the money for expenses in that year. Some companies offer a dependent care FSA, which can pay for childcare, adult daycare and other dependent care costs.

Retirement plans

A 401(k) plan is the most common type of retirement plan offered through employers. Each employee decides whether they want to participate and how much they want to contribute. Many companies match at least some of the employees’ contributions to help their retirement funds grow faster.

Paid time off

Paid time off from work is an important aspect of any comprehensive benefits package. Traditionally, employees receive different types of leave, such as sick leave and vacation time. Some leave types have restrictions on how employees can use them.

Some examples of types of leave that are commonly offered are:

  • Bereavement leave
  • Paid personal days
  • Paid sick days
  • Paid vacation days
  • Paid holidays

Many companies are switching to general paid time off that employees can use for any reason. This option gives employees more flexibility, and it’s easier for you to track since you don’t have to worry about different leave categories.

Additional compensation

This is an employee benefit that encompasses any money that’s offered apart from an employee’s normal wages. It’s usually used as part of an incentive program that’s designed to encourage productivity and performance. It can include things like:

  • Indirect compensation, such as profit-sharing and stock option plans
  • Gifts for exemplary achievements at work
  • Awards for company-wide or individual performance
  • Sales commissions
  • Annual bonuses

Creative perks

If you want to set yourself apart, consider adding unique perks to your benefit package. These perks can be anything you want to offer that would make your employees happy. Some ideas include:

  • Free gym memberships
  • Commuter benefits
  • Pet-friendly office
  • Child-friendly office
  • Discounts to local businesses
  • Healthy snacks in the breakroom
  • On-site health screenings or massages
  • Company nap room
  • Flexible working arrangements
  • Company cell phone

Talking to your employees can help you figure out what types of extra benefits they might appreciate. Consider the needs of your employees. For example, if you have a lot of parents on the payroll, offering childcare benefits, flexible schedules or a child-friendly work environment would keep your staff happy.

How to manage employee benefits

One of the most important administrative duties of the human resources department is coordinating employee benefits. However, there are a few ways that you can improve the efficiency and effectiveness of managing these benefit plans to save time and reduce mistakes. Here are some things to consider:

  1. Review legal requirements.State and federal laws dictate the types of benefits you have to offer and how you administer those benefits. Some of those requirements depend on your company size or type. For example, if you have 50 or more employees for 20 or more workweeks during the year, you have to offer your employees FMLA leave. Review the requirements that apply to your business to avoid legal issues.
  2. Hire an employee benefits specialist. It’s a good idea to hire an external resource, such as a benefits broker, or an internal staff member, such as a benefits administrator, to handle your employee benefits. Working with someone who specializes in managing benefits lets you delegate the responsibility to someone who can devote more time, energy and expertise. They can help negotiate benefit prices, calculate costs and gains and determine the best benefits packages to balance your budget and your employees’ needs.
  3. Find a good employee benefits information software.The right technology makes managing your benefits program much easier. Software specially designed to manage employee benefits information lets you keep track of which employees receive certain benefits, administer benefits and export statistics. Some systems integrate into your existing talent acquisition software, allowing you to streamline many of your HR processes.
  4. Set a budget. When you determine a salary for an employee, don’t forget to factor in the cost of employee benefits packages. Knowing how much you can afford for salary and benefits helps you maximize what you can offer while keeping it affordable. Review your budget regularly to see if you have room for additional benefits.
  5. Keep track of the benefits and costs.Measure and collect data that correlates with the costs and gains of benefits packages. This allows you to develop long-term, sustainable strategies for the benefits offered to employees.
  6. Include descriptions of the benefits offered in your employee handbook.Keep employees informed about available benefits by incorporating a section in the employee handbook that explains their benefits.
  7. Monitor the needs and wishes of the employees.It’s important to be aware of any changes in the needs and priorities of employees. For example, certain benefits could be desirable for younger staff members but less relevant to older employees. Constantly assess the effectiveness of the benefits offered and make changes as needed.

FAQs about employee benefit packages

Here are answers to some frequently asked benefit package questions:

Why are benefit packages important?

By offering generous benefits packages to your employees, you communicate that you’re invested in their health, happiness and future. This will help you attract and retain talent as your company grows. Many benefits, such as insurance, make life more affordable for your employees. Other benefits can decrease employee stress, which makes them more productive and happier.

What is a benefits package worth?

Having a strong benefits package increases the overall compensation the employee gets. The salary might be average, but a stellar employees benefits package can add enough value that your company comes out ahead of competitors. The exact value depends on what you include. For example, if you pay $500 of an employee’s insurance premiums each month, that benefit alone is worth $6,000 per year.

You might offer commuter benefits worth $150 per month for a yearly value of $1,800. Calculate the value of each benefit you offer to assign a monetary value to the benefits package, but keep in mind that it also adds personal value by making the job more appealing.

Can employees negotiate the benefits package?

A new hire can negotiate any part of the job offer, including the salary and the employer benefits packages you offer. They might ask for more time off, for example. You have the option to accept or decline the additional benefits the employee or job candidate requests.

If you offer a job to someone and they try to negotiate a higher salary, you might offer them more benefits instead. When negotiating, keep your budget and the total costs in mind.

Do all employees receive a benefits package?

Benefit packages for employees might vary depending on the person’s position and employment status. Part-time employees might not receive all benefits. They might get a prorated amount of paid time off, or you might not offer them health insurance.

Higher-ranking employees might get extra benefits, such as a company vehicle or a company-provided cell phone. Determine package components that make sense for your employees while ensuring you comply with all regulations and stay within your budget.

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