What is an employee benefits package?
An employee benefits package is a form of employee compensation consisting of non-wage perks. Not all companies offer benefits, and employers that offer benefits packages can customize them depending on their needs. The United States federal government requires companies with more than 20 employees to offer medical benefits and unpaid family leave to full-time employees, and some states have additional requirements.
Why is it important to offer benefits?
Many employers choose to provide competitive benefits that include a range of additional features beyond the legal requirements. Offering benefits has many positive effects on a company, including:
Businesses that can’t afford to pay a high salary can make up for lower wages with excellent benefits. Employees who have good benefits at their job have an incentive to stay longer, reducing turnover and limiting the cost of hiring and training new employees.
Advertising a strong benefits plan generates interest in your company, drawing in a diverse range of candidates to choose from. Having great benefits indicates a positive company culture and could be the deciding factor for a top candidate who has received multiple job offers. Some candidates value their benefits package more than their salary itself, giving them an incentive to work with your company even if you have a limited budget for wages.
An attractive benefits package gives employees a strong reason to stay with your company once they are hired. Many companies offer cumulative benefits that grow in value the longer an employee works at their company, encouraging long-term growth within the company. Great benefits help employees feel valued and appreciated, improving company culture and reducing the chance of burnout or frustration with management.
Improving work ethic
Benefits motivate employees to work hard and invest time and energy in your company’s success, especially if you offer benefits that other companies don’t. The extra compensation shows employees that you’re dedicated to their long-term happiness and growth, which in turn boosts morale and productivity.
Supporting healthy habits
Benefits encourage employees to take care of themselves outside of the workplace, allowing them to bring their best selves to work. Health insurance, paid time off and other wellness benefits let employees take care of their mental and physical health before it starts to negatively impact their performance at work.
Standard elements of a benefits package
When creating your employee benefits policy, choose from a range of offerings based on your budget and goals. While specific benefits terms vary from company to company, there are a few types of benefits that employees expect. Here are some of the common elements of a benefits package to consider when creating your own:
Because most Americans rely on their job to give them affordable medical coverage, medical benefits are extremely important to people looking for work. According to the Affordable Care Act, any employer that has 50 or more employees must offer medical insurance as part of their benefits package. Some employers cover health insurance costs, while others offer tiered plans that employees pay for themselves at a discount. Health insurance can also include health savings accounts, flexible spending accounts and health reimbursement accounts.
Dental insurance gives your employees the ability to get regular checkups, teeth cleanings and emergency orthodontic care. While many medical plans do not have dental care included, it may be worthwhile to purchase a separate dental plan to support your employees. Small dental issues can quickly develop into chronic pain that prevents employees from being able to focus at work. Dental insurance usually costs employers about $20 to $50 per person each month depending on the premium.
Employers don’t always offer vision as part of their benefits plan, so purchasing vision coverage can make your business stand out from others. Vision insurance covers all or part of your employee’s costs for glasses, contacts and vision checkups.
The Family and Medical Leave Act (FMLA) is a legal provision that gives protected unpaid leave to employees if they or their family gets sick. While employers don’t have to sign up for a plan to offer FMLA benefits, they’re responsible for informing employees of their right to take sick leave. FMLA benefits guarantee up to 12 weeks of unpaid leave for any of these reasons:
- Birth, adoption or foster placement of a child
- Serious health conditions
- Military placement of a spouse, parent or child
- Family members with serious health conditions who need care
Not all employees are eligible for FMLA benefits, so familiarize yourself with the requirements when creating a benefits plan.
Employers can offer paid sick days, flexible time off and vacation as a form of compensation. Paid time off (PTO) is a popular form of benefits because it is low-cost and gives employees a break to relax and de-stress from work, allowing them to be more productive when they return from their break.
Workers’ compensation insurance helps employees cover the costs of work-related injury and illness. It reimburses employees for medical bills and guarantees a percentage of their income if they are unable to work while they recover. Some states require workers’ compensation, so make sure to review your local laws to understand your obligations.
Life insurance is a popular benefit that allows employees to designate a beneficiary to receive payment in the event of death or dismemberment. Many employers offer a base amount of coverage and provide employees with the option to sign up for a more extensive policy on a voluntary basis.
401(k)s, pension plans and other retirement savings plans are a benefit that helps employees save for their future. Some employers choose a plan where they match employee contributions up to a certain amount, but generally employers aren’t required to make contributions. You can further incentivize employees to stay with your company by choosing a policy where you only match retirement contributions for employees who have stayed with the company for a certain amount of time.
Your overtime policy outlines whether employees can earn a higher rate for working more than 40 hours per week. Non-exempt employees are legally entitled to time-and-a-half pay for any overtime hours. As an employer, you can choose to offer additional overtime pay or cover employees who fall outside of the legal requirements.
Who is eligible for benefits?
Any employee can be eligible for a benefits package, though employees who average more than 30 hours per week are legally entitled to benefits. Employers can delay benefits for up to a 90-day administrative period where they calculate employee eligibility and enroll new hires in benefits programs.
How to set up an employee benefits package
Use these steps as a guide to set up an employee benefits package at your company:
1. Set goals
Before getting into the details of your employee benefits package, think about your goals and motivation for offering an employee benefits package. If you want to cut costs while supplying a benefits plan that meets legal requirements, your benefits plan may look different from one designed to be competitive and attract the best possible employees. Clear goals provide a guide for your policy choices as you develop the different parts of your benefits plan.
2. Determine your budget
Examine your finances to determine what you can afford to spend on benefits. PTO is one of the more affordable benefits, while health insurance can have significant costs. When creating a budget, make sure to keep track of your tax liability. You may have to withhold taxes on some benefits, which you can determine by reading through the IRS benefits tax guide.
3. Know your legal obligations
Read through federal and state laws so that you understand what benefits your employees are entitled to. Depending on your state, you may have to provide time off for your employees to perform civic duties like voting and jury service. Full-time, part-time and freelance employees all have different rights, so spend time categorizing your employees based on the benefits you must offer.
4. Choose a provider
Next, research different insurance providers to partner with. Professional employer organizations (PEOs) are a popular coverage option for small businesses. PEOs group employees from multiple companies and organizations to cut costs overall for each of their clients. They manage legal compliance and administrative support on your behalf. PEOs allow you to customize your overall benefits plan to include the types of insurance you want. You can also reach out to individual service providers to select more specific kinds of coverage.
5. Develop internal policy
Create personnel policies to explain benefits that don’t require an outside provider. Optional benefits give you the opportunity to differentiate yourself from competing employers, target certain values and build a company culture that attracts your ideal employees. Free lunches, flexible breaks, employee bonuses, casual Fridays, time off, stock options, employee discounts and wellness initiatives are all examples of benefits that you could outline in internal company policy.
6. Use benefits technology
Consider implementing and managing employee benefits using human resources software. HR software can automate the process of onboarding employees and signing them up for different benefits packages. Many kinds of HR software have features to track time-off requests, record deductions, remind employees when it’s time to renew their policy and manage payroll. As your business grows and you hire more employees, benefits tracking software can maintain accuracy, efficiency and communication.
7. Communicate with employees
Inform your employees about your benefits policy through a meeting or memo. Your benefits policy should be clearly outlined in an accessible employee handbook. Any time you make changes to benefits offerings, communicate updates to your team and spend time answering any questions.
8. Seek feedback
Ask employees their opinions on what benefits matter the most. Regularly asking about employee satisfaction with their benefits package gives you insight into what employees value and what benefits employees aren’t as excited about, allowing you to cut those benefits and focus on the ones that give employees the most value. As your business grows, find ways to improve your benefits program based on what perks they would most like to see.
Unique benefits to consider
Look into non-traditional benefits to make your benefits package more attractive to employees and set yourself apart from competing companies. Some unique benefits to try in your office include:
Keep your employees happy by supplying beverages and snacks in the workplace. Providing employees with access to a range of treats and healthy foods lets them stay energized throughout the day. Coffee and tea stations help employees stay alert and get going in the morning, plus they can be a central location for employees to socialize and boost team morale.
Pets in the office
Pet-friendly offices are becoming more popular as a way to create a fun and welcoming company culture. People love being around their pets, and even occasional bring-your-pet-to-work days can help employees feel more at home at your company.
Offer free or discounted memberships to a local gym to give employees the perk of affordable and accessible workouts. Some companies have in-office workout rooms to make it even more convenient for employees to release stress and stay healthy.
Regular professional development opportunities, tuition reimbursement, free classes and other career development perks are a great way to attract motivated professionals who want to grow with your company.
Having an on-site daycare or offering a childcare stipend for working parents shows employees that your workplace is family-friendly. Sponsoring childcare also allows you to retain current employees if they decide to start or grow their family and need a workplace that accommodates that change.