17 Types of Employee Benefits You Should Offer

Are you offering enough to keep your employees engaged?

Employees today are looking for more than just a paycheck. In a job market where lifestyle fit is increasingly important, a six-figure salary alone won’t be enough to attract or retain top talent. If you’re serious about finding and keeping the best people, it’s time to reassess what you’re offering.

Employee benefits are now the battleground for winning and retaining talent, and your company’s approach could be the deciding factor.

To manage these offerings effectively, many companies use benefits administration software.  These tools streamline the process of managing employee benefits packages, ensuring compliance, and delivering a seamless experience for employees, all while helping you stay competitive in the war for 'who gets better talent'.

Types of employee benefits

The term "employee benefits" encompasses a wide range of offerings that enhance the overall compensation package for employees.

These benefits often form a crucial part of a company's compensation and benefits support program, encompassing everything from health insurance to unlimited paid time off (PTO). Here are three different types of employee benefits:

Employee benefits required by law:

These are mandatory benefits that employers must provide according to local, state, or federal regulations. Common examples include Social Security, unemployment insurance, workers' compensation, and family and medical leave. Compliance with these legal requirements is essential for all employers to avoid penalties and ensure the welfare of their employees.

Employee benefits not required by law but considered industry standards:

While these benefits are not legally mandated, they are commonly offered within specific industries to attract and retain talent. Examples include health insurance, retirement plans (like 401(k) matching), and paid sick leave. Providing these benefits can help companies stay competitive and enhance employee satisfaction.

Employee benefits offered as added perks or fringe benefits:

These are additional benefits that organizations provide to enhance their employees' overall experience and well-being. They can vary widely and may include options such as flexible working arrangements, wellness programs, professional development opportunities, childcare assistance, gym memberships, and even pet insurance. Offering such perks can improve employee morale and foster a positive workplace culture.

What types of employee benefits are required by federal law?

Federal law requires employers to provide a handful of employee benefits to their employees. These benefits are a set standard across states and industries. Every employer must offer them to stay compliant with laws created by the U.S. Department of Labor.

As with any rule, there are exceptions for each of these topics. This list should act as your guide for the different types of employee benefits programs, but under no circumstances should it be considered the letter of the law. If you have any questions about the legal requirements of employee benefits, you should consult a lawyer who specializes in employment law.

1. Social security and medicare contributions

Most employers don’t consider social security and medicare contributions to be employee benefits, but they are. These are long-term benefits that both employees and employers pay into, with the knowledge that the employee will have access to them in the future.

2. Workers' compensation insurance

Workers' compensation insurance is a form of insurance mandated by the U.S. Department of Labor for employees who get sick or injured at work. It provides employees with supplemental income and medical benefits that they no longer receive due to their injury.

3. Minimum wage and overtime pay

As of July 2009, the federal minimum wage is set at $7.25 per hour. As an employer, you are required to pay employees at the federal minimum wage with some exceptions to this rule for employees who work for tips. Your local state laws may have a higher minimum requirement than the one set at the federal level.

Most federal and state laws set the required hourly threshold at 40 hours per workweek. Federal overtime laws require employers to pay employees a wage greater than their regular rate for hours worked beyond their normally required threshold.

As with the minimum wage laws, there are exceptions based on the type of employee and state laws. Every circumstance is unique, and you should consult your state and local laws for more information about what you’re required to provide for your employees.

4. Unemployment compensation contributions

Employers must pay for unemployment insurance for every employee, regardless of whether they work full-time or part-time.

A combination of taxes at both the state and federal levels requires employers to pay into an Unemployment Trust Fund wherein eligible employees are paid out should they qualify for unemployment.

5. Employee benefits required for employers with 50+ full-time employees

Depending on the size of your company, you may have additional requirements for what employee benefits you must offer your staff.

These two employee benefits are not required by every employer, so we will cover them in more detail in the next section. It’s important to note that they're mandatory for any employer that passes the 50+ full-time employee benchmark.

What types of employee benefits are considered an industry standard?

We spent some time above covering the federal requirements for employee benefits. Let's look at employee benefits that aren't required by law but are standard across industries. Most companies offer many of the employee benefits listed below to some extent.

1. Health insurance

Health insurance is one of the most popular employee benefits offered by employers. However, because of the Affordable Care Act (ACA), employers with more than 50 full-time employees must offer medical insurance through their employee benefits programs.

Medical insurance usually covers three main things: health insurance, vision insurance, and dental insurance. An employer often bundles these three offerings and offers them to the employee.

Health insurance can also include a health savings account (HSA), flexible spending account (FSA), or health reimbursement account (HRA). Some companies offer one or all three of these options. It’s important to explain to your employees the difference between each option and why they might benefit from each one. 

Deciding which of the following additional health insurance programs is best for your employees is best left between you and your corporate insurance provider. Each of these programs will benefit companies in a different way, so it’s important to inform yourself of your choices.

2. Family and medical leave (FMLA)

As mentioned above, employers with 50+ full-time employees must offer Family and Medical Leave (FMLA) to any qualifying employee.

The FMLA dictates that any eligible employee is allowed to take up to 12 workweeks of unpaid leave during any 12-month period to care for a new child, a sick family member, or any family-related emergency without their employment being put at risk.

State and local laws may dictate that employers require additional time for employees who qualify for FMLA. You should consult your local employment laws to ensure your HR department is compliant with updated FMLA laws.

3. Disability insurance

In addition to health insurance, many employers often employees the chance to opt for disability insurance. In short, disability insurance is wage protection. It protects the employee and your employer from unforeseen circumstances that may prevent the employee from working for an extended period of time. There are two types of disability insurance: short-term and long-term.

Short-term disability insurance

Short-term disability insurance covers injuries or circumstances that can put an employee out of work for a short period, like a few weeks to a couple of months. The types of situations that could be included for short-term disability are a broken limb, outpatient surgery that requires recovery time, or sometimes even cover pregnancy or maternity leave.

In any situation where an employee is out for an extended time period, they will first use their short-term disability option. It’s not until they have exhausted the short-term disability options that they will turn to their long-term disability insurance.

Long-term disability insurance

If any employee has an injury or circumstance that exhausts their short-term disability options, they'll begin pulling from a long-term disability insurance plan. The time frame for this is usually anywhere from three to six months.

The types of situations that could be included for long-term disability are cancer, mental illness, or medical problems that require multiple surgeries.

Which states require employer-sponsored disability insurance?

As with many employee benefits, the state and local laws will impact what is required of employers. Before you decide which disability options to provide to your employees, check your state and local laws to see your business’s requirements.

If you are an employer in any of the states mentioned above, you should check your local laws to ensure your company is compliant.

4. Retirement savings

Retirement savings options are another staple of nearly every employee benefits program. Over the last couple of years, 401(k) plans have overtaken pension plans as the most popular retirement planning option.

Whether you choose to offer your employees a pension or a 401(k) retirement account, most employees expect an option for their retirement savings to be included in their employee benefits.

5. Life insurance

About 85% of companies now offer group life insurance options to their employees. In many cases, these policies offer provisions covering accidental death and/or dismemberment. These policies can be paid out to a beneficiary designated by the employer and can include the employee's partner, children, or extended family members.

These plans are not recommended as an employee's only source of life insurance. Rather, they should supplement other life insurance plans and options.

6. Paid time off (PTO)

While not required by law, many employers offer employees some form of paid time off (PTO) to remain competitive with other companies. Paid time off is a pretty broad term, but it can be summarized as any time when an employee doesn't work and still receives pay. This can include paid vacation time, sick days, company holidays, and so on.

In many cases, paid time off is accrued by employee overtime and has a monetary value behind it. Depending on your state, employers can be on the hook for paying out accrued PTO once an employee quits or retires.

7. Stock options

An employee stock option is when an employer allows employees to buy a certain number of shares in company stock at a pre-set, often reduced price over a certain period of time.

Thirty years ago, stock options were offered to the highest-performing employees as a perk for a job well done or decades of loyalty to a company. Nowadays, stock options are becoming a way for companies that haven’t gone public yet to fuel company growth.

Popularized by start-up companies, this trend of allowing employees to invest in a company during its early stages is becoming more popular. We’re seeing established brands open up stock options to employees at every level as an added employee benefit.

What types of employee benefits are considered fringe benefits?

The war on talent has pushed some companies to think outside the box when it comes to employee benefits. Everything from ‘Beer Friday’ at advertising agencies to catered lunches during the workweek, it seems there isn’t a thing employers won’t try to attract and retain top talent. While most of these employee benefits haven’t gone mainstream quite yet, they just might be the next big thing in employee benefits.

1. Wellness programs

Employees spend more time at work than they do anywhere else, and as a result, more and more companies are investing in corporate wellness programs.

Corporate wellness programs can include various things, including employee assistance programs, access to therapists and crisis counselors, mental health assistance, access to nutritionists, discounted gym memberships, and more.

The idea behind a corporate wellness program is that employers invest in the well-being and wellness of their employees and see the benefit of that through employee happiness and overall improved employee well-being.

2. Tuition reimbursement and student loan repayment

The student loan crisis is something we’ve all seen discussed in the news over the past several years. There are nearly 42.9 million Americans currently burdened by $1.59 trillion in student loan debt, and your employees are undoubtedly among them.

Some employers offer tuition reimbursement and student loan repayment programs to their employees to proactively combat the problem. These programs help lessen employees' financial burden and encourage them to pursue advanced degrees.

How does this benefit your company? Employees who aren’t financially burdened are less likely to leave their jobs for a company that will offer higher pay. On top of that, employees who pursue more education will learn more and bring additional value to their current role. An investment in your employees’ education and future is an investment in your company.

3. Relocation and housing options

Some companies located in areas considered "talent deserts" are taking the next step to recruit new talent by offering relocation and housing options. In April 2019, Omaha, Nebraska, launched an ambitious plan to offer $10,000 in relocation services to candidates willing to move for work. While this may seem like an extreme case, the practice is becoming more common.

Relocation and housing options can include a lot of things. The most common incarnation of this plan is offering financial assistance to employees looking to move. It can also include partnering with local housing agencies to help apartment hunt for out-of-state employees.

Companies are looking outside their own talent pool in their own city or state to attract the best and brightest to work for them. Offering top-tier employees financial assistance may be the push they need to relocate.

4. Commuter benefits

In cities that have large public transportation systems, employers are offering tax-free commuter benefits. This program allows employees to purchase pre-tax transportation credits directly from their employer. This helps reduce the employee cost for commuting expenses such as train or Metra tickets, rideshare apps, and work-related parking costs.

5. Unlimited PTO

Unlimited PTO is quickly becoming the hottest new trend in employee vacation benefits. As the name suggests, an unlimited PTO policy is a vacation policy in which employees are not given a predetermined number of days off. Employees can take as many vacation, sick, personal, or mental health days as they need, so long as their manager approves their time off.

This employee bonus started as a trendy perk available to start-up employees and is quickly being adopted by more established, larger companies. While there are always risks and rewards to offering a perk, such as unlimited PTO, many companies see it as an additional recruiting and retention tool.

6. Telecommuting and work from home options

This employee benefit may seem fringe for companies that don’t currently offer it, but it’s actually become part of the mainstream.

If your company doesn’t offer flexible work hours or telecommuting options to your employees, you may want to rework your current policy. Technology is making it easy for employees to get work done outside the office. Employees are more likely to take a job that allows them the flexibility to get work done on time and in a way that accommodates their lifestyle.

How should your company track employee benefits?

The sheer volume of different types of employee benefits can make administering employee benefits difficult. The wrong benefits administration software can keep your company from offering some of the innovative employee benefits mentioned above.

The good news is that regardless of your company size, there is a software solution that’ll work for you. Benefits administration software enables HR managers to administer benefits packages, track employee benefits, and encourage healthy usage among employees.

If you’re not happy with your current benefits administration software, you should consider exploring your options. Whether you’re a company of five or 500, the right benefits administration software solution is out there to fit your budget and needs.

Make your employee benefits work to your benefit

Stop thinking that employee benefits are a requirement and start looking at them as a recruiting and retention tool. When you offer your employees a workplace that cares about them as people, you create an environment where they want to stay.

Learn about job burnout that your employees are most likely to be exposed to due to work-related stress and steps even you can take to cool off some steam and restore work-life balance.

This article was originally published in 2022. It has been updated with new information. robust