How Employee Benefits Work

Friday, February 10, 2023 16:13 Posted by Admin
How Employee Benefits Work

Employee benefits have gotten better with time and most companies offer employee benefits packages with improved value. Job seekers often target job openings with the best employee benefits, as such benefits can greatly reform their lifestyle.

The more exceptional employee benefits packages are, the easier it is to maintain a happy, fulfilled workforce that consists of loyal employees. Find out how employee benefits function so you can figure out the best package options for your staff.

What Is An Employee Benefits Package?

An employee benefits package is a set of bonuses given by employers apart from an employee’s salary. Also called fringe benefits, the purpose of a good benefits package is to elevate an employee’s standard of living beyond the bare minimum that a simple salary provides.

Some common employee benefits include health insurance, life insurance, paid time off, and medical insurance.

The Importance Of Employee Benefits

In a study organized by the Society of Human Resource Management, 92% of employees agreed that employee benefits are relevant to their level of job satisfaction. So, why exactly are employee benefits important and what role do they play in job satisfaction?

What Is An Employee Benefits Package

Benefits Boost Morale

The first reason why offering a good benefits package is important is that it can help your employees feel better about their lives and their job. When employees receive competitive benefits that advance their lives and job experience, their morale will be affected positively.

Job satisfaction is directly tied to employee productivity because the happier a person is with their job, the more likely they are to go the extra mile to give an enhanced output. A company with satisfied employees has a high chance of outperforming its competitors and accomplishing visible progress.

Attract and Retain Employees

The importance of competitive benefits becomes evident during employee recruitment. Providing a good benefits package shows that you are ready to take care of your staff, and as a result, more potential employees will be drawn to your company.

Apart from just gaining more attention among prospective employees, you will be able to attract individuals that are skilled since they know that their worth will be appreciated by your establishment. The more talented and experienced workers you have, the better the performance of your establishment.

In addition, when you offer the right benefits package, your current employees will stick with you rather than run off to a competitor. The longer employees stay in a company, the better they impact that company’s growth, making employee benefits important.

Healthy Staff

Insurance plans are some of the most common employee benefits, and they are directly tied to the quality of an employee’s financial, mental, and physical health. A proper benefits package will include medical/health benefits, making it easier for employees to receive healthcare.

Health-related benefits will result in a workforce that can prevent and treat any health issue quickly and at a minimal cost. If you have healthy workers, the need to grant sick leave will reduce. Fewer sick days means more productive hours for your company’s benefit.

Mandatory and Non-Mandatory Employee Benefits

Employee benefits are split into two main categories: legally required benefits and voluntary benefits. Legally required benefits are employee benefits that should be included in every company’s benefits package according to law, while voluntary benefits are optional.

Mandatory Benefits For All Companies

The employee benefits required by law are Social Security, Medicare, Unemployment Insurance, and Workers’ Compensation.

Medicare and Social Security cover retirees and disabled people who are unable to work. Medicare reduces the cost of medical expenses including medication and medical procedures while Social Security is a monthly allowance given to recipients.

Unemployment Insurance is a form of compensation for employees who lose their jobs without being at fault. On the other hand, Workers’ Compensation is money given to employees to cover medical bills, rehabilitative costs, and lost income if they get a work-related injury or illness.

Mandatory and Non-Mandatory Employee Benefits

Mandatory Benefits For Large Companies

Apart from the four compulsory benefits that apply to all companies in the US, large companies are also expected to provide additional benefits. A large company is one with 50+ full-time employees – people working for more than 30 hours weekly or 130 hours monthly.

Health Insurance

Health insurance benefits are perhaps the most common employee benefit that any notable company offers. While it is a voluntary benefit for small companies, large establishments (50 or more full-time employees) are required by law to provide health coverage.

A health insurance plan supports an employee when they need to pay for access to various forms of healthcare including hospitalization, tests, and some medical procedures. By offering health insurance plans in an employee benefits package, employers simplify employee access to healthcare.

Both employers and employees pay for a health insurance plan by contributing monthly premiums that are a certain percentage of the employee’s salary.

Family and Medical Leave

Large companies are also subject to granting leave to employees who need time off for medical or family reasons. Family/sick leave applies to employees that have worked for up to 12 months. The usual duration of medical leave is 12 weeks within a 12-month period.

Some common reasons why employees need sick leave as an employee benefit include childbirth, caring for a family member with a serious medical condition, and managing a health issue that prevents the employee from working.

According to Federal law, companies are not expected to pay an employee when they go on medical leave, even though some states require continued payment. Offering paid time off so they can attend to a medical or family issue is a great way to reward your employees.

Voluntary Employee Benefits

Many employers go beyond the bare minimum by offering benefits that are not required. Providing benefits asides from the traditional benefits proves that a company values its employees and wants them to have better lives.

Disability Insurance

When a person develops a disability, the condition might stop them from working, and usually, no work equals no pay. Disability insurance caters to people in this category who are liable to lose their source of income due to an unavoidable condition.

Employees under a disability insurance plan will still receive an income when out of work due to a disability. A company might offer short-term or long-term disability insurance benefits to its employees, and this prevents an employee from suffering financially because of an illness or disability.

Retirement Plan

A retirement benefits plan helps workers to save money over a long period, ensuring that they have some financial security after retirement. A retirement plan might be sponsored by an employer, an employee, or both, and the retirement savings are sent to retirement accounts.

By calculating carefully and creating goals, an employee knows how much money will be put away on a monthly basis. After employees stop working, they will be able to withdraw money from their retirement accounts in the form of retirement benefits.

Life Insurance

Employers offer life insurance to protect the family members or dependents of an employee in case the employee dies. Life insurance is an attractive benefits package because, in a worst-case scenario, relatives of an employee will get some financial relief.

Wellness Programs

Wellness programs are put together by employers to help employees gain stability in various aspects of their life. There are several mental, physical, and financial wellness programs that employees can choose from to empower their staff with self-development skills.

Dental And Vision Insurance

Vision and dental insurance are both forms of medical insurance benefits, but they provide specific types of healthcare. Vision and dental insurance plans focus on eyesight and oral healthcare respectively.

How Do Employee Benefits Work

Occasionally, an employee might need to take some time off, either for personal reasons or for a regular break in their work calendar. As a forward-thinking employer, you can pay your employees while they are away. Paid time off can include paid vacation and paid medical leave.

Gym Memberships

Helping employees pay for their gym memberships, either partly or fully, can increase their chances of staying fit and healthy physically.

How Much Do Employee Benefits Cost?

The Bureau of Labor Statistics released a report on the value of compensation costs for civilian workers in September 2022:

  • On average, the total compensation costs were $41.86 per hour for that month.
  • Regular salaries were worth 69% of the total cost ($28.88) while employee benefits made up the remaining 31% of the total cost ($12.98).
  • Insurance was valued at $3.46, which is 8.3% of compensation costs.

Written by Todd Taylor

Todd Taylor

Todd Taylor oversees most of the marketing and client administration for the agency with help of an incredible team. Todd is a seasoned benefits insurance broker with over 35 years of industry experience. As the Founder and CEO of Taylor Benefits Insurance Agency, Inc., he provides strategic consultations and high-quality support to ensure his clients’ competitive position in the market.

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