According to Wikipedia, employee benefits are “various types of non-wage compensation provided to employees in addition to their normal wages or salaries.” Why do organizations offer compensation & benefits and not just compensation?

Organizations offer benefits to retain employees and attract new talent. One of the main reasons for providing perks is to reduce turnover, which in turn reduces associated costs.

Employee turnover can cost employers 33% of an employee’s annual salary. This is attributed to the cost of hiring a replacement. It is understandable why organizations would aim to keep their turnover rate low. 

Additionally, companies save money by offering perks. Different perks are of different values to different people. By offering flexible benefit plans, employees can gain maximum value without additional cost on the employer’s part.

It can also serve as a substitute for financial compensation. It adds value to the employee without additional costs for the employer. Most bonuses are not taxed, which means both company and employee can save on taxes. The company Patagonia makes a great case for this.

Given these facts, we can conclude that benefits are an important element of the total compensation package. Here are some popular and common benefits from around the world. 

Some other common advantages are retirement savings and planning benefits, sabbaticals, transportation assistance, technical assistance, etc.

However, putting in a bonus program is not enough. Communicating to employees about the benefits available to them and their value is crucial.

Tying perks to the values and culture of the company is a great way to connect with employees. It can be a way to show employees commitment from the company’s side to their wellbeing.

How advantages are communicated can make a difference in whether a program is successful or not.

Identifying which benefits are the most important to the employees and understanding their satisfaction level concerning the current benefits is crucial.

By assessing the importance and satisfaction with current bonuses, companies can make informed decisions and update their benefits program accordingly.

While larger companies can take advantage of economies of scale in providing benefits that many small or mid-sized companies lack, smaller companies can tout their startup environment, which offers more flexibility, autonomy, and higher impact.

Oftentimes even with a very competitive salary, it is the right bonus package that makes the difference in winning a new talent or retaining an old employee.

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