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 benefits 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 benefits. Different benefits 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 benefits 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.
- Employee programs and services benefits: Typically, this includes providing free coffee, snacks & beverages, a break room, or a kitchenette. It can also be offering annual company outings or offering volunteering programs.
- Employee recognition programs: This is basically to reinforce value of the employee and showing appreciation for them. It is important to recognize both big and small achievements. From rewarding excellence to celebrating the service anniversaries, rewards can be monetary or non-monetary.
- Family-friendly working benefits: This includes services and financial support to assist employees with their families. Some examples are offering counseling support, lactation support services, childcare, and eldercare.
- Financial benefits: Typically, these are employee referral bonuses, financial counseling, interest-free building loans, and more. It can also be insurances such as pet insurance, life insurance, and disability coverage. It can also include discount programs, student loan refinancing, and personal loan solutions.
- Flexible working benefits: Proper work-life balance results in higher productivity and more engaged employees. Offering options such as work-from-home, flexible working hours, and compressed workweeks encourage work-life balance.
- Health-related benefits: It could be that the company provides full healthcare coverage or shares the costs of healthcare with employees.
- Paid leave benefits: This may include paid vacation leave, holidays, sick leave, parental leave, and leave for personal reasons. Offering paid leave benefits helps reduce stress among employees and improves relationships.
- Professional and career development benefits: This means providing employees with professional development opportunities. Offering professional memberships, mentoring programs, certification & recertification fees, professional license application & renewal fees are some typical examples.
- Wellness benefits: Wellness programs, such as yoga and meditation, help employees manage work-related stress, a leading workplace health problem. It also reduces anxiety in employees. When people feel more physically energized, emotionally connected, mentally focused, stress-resilient, they are much more engaged and productive.
Some other common benefits are retirement savings and planning benefits, sabbaticals, transportation assistance, technical assistance, etc.
However, putting in a benefits program is not enough. Communicating to employees about the benefits available to them and their value is crucial.
Tying benefits 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 benefits 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 benefits 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 benefits package that makes the difference in winning a new talent or retaining an old employee.