Besides a base salary, employee benefits are additional compensation perks to attract, entice, and retain good employees. These benefits increase employee morale and motivate them to stay longer with an employer, increasing employee retention rate and reducing overhead costs of constant turnover.
A typical employee benefits package can include the following:
- Health insurance (or medical insurance)
- PTO - Paid time off (vacation, maternity/ paternity, sick leave)
- Flex time
- Tuition reimbursement
- Pre-tax commuter cost benefits
- Pre-tax medical cost benefits (FSA)
- Pre-tax medical cost benefits (FSA)
- Year-end bonus
- Retirement plans - social security, 401K, IRA, pension
- Life insurance (usually for very senior hires)
- (and rarely) Occupational perks like travel costs, car lease, wardrobe stipend (in show business), client entertainment budget (for client-facing roles)
Candidates need to discuss these benefits with the HR team before employment and request to have them written in the hiring contract.
However, they must be careful in bringing up and negotiating some of the benefits mentioned above, as the employer may rescind the offer, especially when the position is not uniquely special. Here is a brief outline of each benefit:
1. Health Insurance
Health insurance covers costs associated with the health care of self and family, generally including preventative doctor visits, lab work, other essential checkups, pre-existing conditions, surgery, hospitalization, pregnancies, and prescription medications. A comprehensive health insurance plan usually includes dental and vision plans and mental health provisions.
In the 1980s and the 1990s, employers often fully paid for medical plan premiums; however, nowadays, employees have to chip in for the premiums, which may depend on their seniority.
2. Paid time off (PTO)
Paid time off refers to 'earned' sick or vacation leave employers offer. Labor law mandates periodic breaks for hourly part-time workers and a set number of paid public holidays for 40-hour full-time workers.
Offering paid time off sends a message that employers care for the mental and physical state of the employees by giving them needed breaks in work and not losing any salary over it. PTO is a significant boost to increase employee morale. It increases the productivity of employees who come back refreshed after a well-deserved time away. It is often another decisive factor for candidates when selecting between multiple job offers.
3. Flexible work schedule (FLEX work)
A flexible work schedule may include remote, hybrid, or other flexible work structures like shorter hours in summer, work-from-home days, or more flexibility around holidays. FLEX work has been in demand since 2020. This has profoundly changed employee morale, saving them time and money for commuting and creating allowances to attend to family obligations.
4. Tuition Reimbursement
Tuition reimbursement allows employees to take training classes and improve their skills to stay current in the job market. It can be offered for certification or non-certification courses at accredited universities, even online courses. Reimbursement may be at 100% or a percentage match, sometimes dependent on proof of completion with a specific passing grade.
Instead of tuition reimbursement, companies sometimes offer in-house training or professional development opportunities to boost one's career.
5. Pre-tax commuter cost benefits
Companies can offer enrollment in a pre-tax account provided by the government, allowing commuting employees to pay for their work commute out of pre-tax money, thus reducing the employee's income tax burden to the IRS at the end of the tax year. The commuter cost pre-tax limit is $315 per month as of January 1, 2024. This site addresses some commuter benefit FAQs.
6. Pre-tax medical cost benefits (FSA account)
FSA stands for Flexible Spending Account, a government program allowing pre-tax salary to cover specific health and dependent care expenses during the 'current tax year.' FSA accounts can fund any health-related item like over-the-counter medicines, reading glasses, birth control, and sunscreen; also for child care, summer camp, nanny costs, senior care costs, etcetera.
Most employers offer this benefit since the administrative cost of managing such an account on behalf of employees is minimal. Tax laws keep changing, and in the past, the government kept any excess funds in such an FSA account; hence, if joining at the end of a year, employees need to carefully assess their need for medical costs until the end of a year. There have been talks of allowing FSA funds to be rolled over to subsequent years.
7. Bonuses and Performance-based Incentives
Employers sometimes offer bonuses or performance-marked incentives as part of the employment perks in addition to an employee's salary. Incentives can include quarterly or annual bonuses, commissions, profit sharing, spot bonuses, performance bonuses, team or group bonuses, retention bonuses, and sign-on bonuses. These are subject to employer discretion and contingent on active employment at the time of payout or meeting a set personal or company-wide performance criteria. Generally given at the end of a quarter, year, or project phase, the incentive motivates employees to enhance production.
8. Retirement Benefit
Retirement benefits are financial plans offered to employees to save for their retirement. Besides the government-mandated social security plan, other optional retirement saving plans employers offer may include 401K, IRA, SEP, pension plan, profit sharing, or stock options. Retirement plans come with exceptional investment and tax advantages.
See this SOFi site for details of each optional retirement plan.
Employers can offer to match or contribute a defined amount to an employee's retirement account. The contributions accrue over the years, and the payout can significantly increase depending on the funds' investment and management style. Different banks and brokerage firms offer expertise in managing such retirement accounts for individuals.
9. Life Insurance (for very senior hires)
Life insurance benefits can be a fully paid perk or a partial match. For example, a junior employee may be offered a game on a $10,000 life insurance plan while employed by the firm, vs. a senior employee can be provided a $100,000 fully paid life insurance policy to keep even after leaving the employment.
The employee benefits package depends on the industry, role, seniority, and negotiated terms.
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