Organizational Wellness

Employee Benefits Guide

Apr 26, 2023
Last Updated Oct 30, 2023

Employee benefits are an important but often overlooked component of your organization's employee value proposition. 

In an extremely tight talent market, employees are re-evaluating their relationships with work and seeking organizations that don't just offer competitive pay, but also provide more holistic support for them and their families. Leaders who want to attract and retain top people are reassessing their approach to employee benefits to ensure they contribute to a culture that will do just that.

This guide will explore in greater depth what employee benefits are (they may not be what you think they are), what is the purpose of employee benefits, and how to optimize and modernize your benefits package to increase employee satisfaction, engagement, productivity, and retention. 

What are employee benefits?

Employee benefits are a collection of programs, services, perks, and rewards that employers offer to employees in addition to their regular wages. The most obvious are the traditional “core” benefits — medical, dental, and vision. But the definition has expanded greatly in the last few decades, and especially in the last few years.

The benefits provided to employees can include a wide variety of offerings including, but certainly not limited to, different types of insurance, retirement savings accounts, vacation days, all sorts of wellness programs for physical, mental, and emotional wellbeing, and programs to support work-life wellness and career development, such as child care referrals and educational assistance.

Why are employee benefits important?

You might be asking yourself: How important are employee benefits? Why do companies offer benefits? Are employee benefits really necessary?

The benefits offered to employees can make a real impact on organizational culture and drive talent attraction, inclusion, and engagement. And not a moment too soon. According to the Bureau of Labor Statistics, we are in a period of historically low unemployment. 

In a talent shortage like this, employees are harder to attract and retain for two reasons: They have more options than ever before, and they are looking beyond salaries when choosing who to work for - according to our latest State of Work-Life Wellness report, 78% of US employees believe their wellbeing at work is just as important as their salary.

Additionally, your employees are more sensitive than ever to issues around accessibility, discrimination, and inequity in your corporate benefits package. Accessibility matters across the board. For example, if your organization has an onsite gym, you should consider finding a way to offer local gym access to remote employees who likely won't set foot in the corporate gym.

It's very easy for unconscious biases and assumptions about what our people want to negatively affect any corporate benefits program. We recommend getting feedback from a representative group of employees to ensure all voices are heard. Additionally, offering more flexibility and personalization in your benefits package can go a long way to ensuring employees from all backgrounds can get the employee experience they want.

When we ask ourselves “what is the purpose of employee benefits?”, it should be about more than checking a box. Employer benefit packages should also contribute to a culture of diversity, equity, and inclusion where your people feel valued and supported whoever they are and wherever they sit in the organization. Don't underestimate the importance of employee benefits in recruiting, engaging, and retaining your people. According to a study by Glassdoor, 63% of job seekers say they pay attention to the benefits offered by potential employers . As for current employees, 92% of them consider employment benefits as important for job satisfaction. 

What are the common types of employee benefits?

When people think of benefits, they usually think about health insurance plans, pensions, and paid time off. However, workers' benefits vary widely depending on the type of work or industry, employee demographics, and of course the culture and outlook of the organization itself. Most traditional employee benefits fall into four overarching categories: 

  1. Legally required benefits: In the US, all employers with more than a defined number of employees must provide certain benefits to employees. The requirements may differ from state to state, but they usually include payroll benefits like state and federal tax withholding, workers' compensation coverage, and short-term disability insurance. 
  2. Employer-sponsored insurance: In most states, employers are not required to provide this benefit. However, many employers offer medical, vision, dental, life, and even pet insurance as a way to attract and retain employees. Employers have to decide for themselves what percentage of health insurance premiums they will cover for employees, which is a balancing act between trying to do the right thing for employees while keeping company costs under control. As the workforce ages, companies that offer employees these kinds of benefits should expect health, dental, and vision insurance to stay at or near the top of employee priorities when they evaluate their benefits packages. If your organization wants to differentiate itself from its competitors for talent, consider supplementing traditional health insurance offerings with programs that augment or “double-down” on the theme of health. From voluntary employee benefits and offering healthy snacks to building an entire wellness program, you can create a throughline of health and wellness in your company culture that builds employee trust and engagement.
  3. Retirement benefits: Employer-sponsored retirement plans come in two general varieties. Defined benefit plans (or pension plans) may or may not involve employee contributions and offer a fixed or “defined” benefit when an employee leaves the company. Defined contribution plans allow employees to make pre-tax contributions from their wages up to federally allowed maximums, and employers can match part of those contributions also with tax-deferred dollars. Usually, this benefit takes the form of an individual retirement plan such as a 401(k) or 403(b). 
  4. Additional Compensation: Employers often use alternative forms of compensation to boost loyalty, engagement, and performance. Examples include sales commissions, paid sick leave, paid time off (PTO), individual and company-wide performance awards, and maternity/paternity leave.

What are some alternative benefits offered by companies?

As the makeup of the workforce and their demands for employee support change, progressive organizations are increasingly investing in non-traditional benefit offerings to attract and retain the talent they need. Some examples of alternative benefits include: 

  • Wellness benefits for employees, such as gym memberships, fitness classes and wellness apps, as well as mental health programs and financial wellness benefits.
  • Fringe benefits, such as adoption assistance, employee stock options, and employee discounts.
  • Flex benefits, which allow employees to choose the perks and benefits that are most meaningful or important to them.
  • Flexible working arrangements, such as the option to work remotely some or all of the time.
  • Flexible spending accounts (FSAs) allow employees to set aside pre-tax wages each month and use those funds for approved healthcare expenses (depending on the type of plan).
  • Health savings accounts (HSAs) are interest generating accounts that can be used for healthcare expenses and (if the employee is willing to pay 10% taxes on the withdrawal) non-healthcare expenses. HSAs rollover each year but are only available to employees enrolled in a high deductible health plan (HDHP).
  • Tuition reimbursement benefits are a way for employers to help their people continue their education by reimbursing them for a fixed amount or percentage of their tuition.

What benefits do employees value most?

Given the diverse nature of the modern workforce, it's hard to identify one kind of benefit that always matters more than any other to employees. However, health insurance continues to be one of the major deciding factors for most employees. According to a Fractl research report, 88% of job seekers reported giving health, dental, and vision benefits “some” or “heavy” consideration when choosing between a high-paying job and a lower paying job with better benefits. Beyond these traditional mainstays however, there are several trending benefit offerings that are gaining popularity among employees. A few examples of these benefits include: mental health benefits, flexible scheduling, remote/hybrid work, and pet insurance. Your benefits strategy should aim to include a variety of benefits to all needs.

What benefits matter most to different generations?

Balancing the needs of a multi-generational workforce is a challenge to be sure. Depending on an employee's age and life circumstances, work flexibility and 401(k) employer matching contributions may matter more to one employee than another who, for example, is more motivated by a generous health insurance plan and personal wellness benefits .  Let's look briefly at which types of benefits matter most to different generations of employees . 

  • Baby Boomers (born between 1946 and 1964) tend to value benefits focused on retirement, health insurance, and most wellness.
  • Gen X (born between 1965 and 1980) prioritize retirement planning, caretaker benefits, and a more flexible work life.
  • Gen Y/Millennials (born between 1981 and 1995) are focused on flexible work, student loan repayment assistance, mental wellness, and parental benefits (parental leave, child care assistance, etc.).
  • Gen Z (born between 1996 and 2012) expect benefits that support diversity, mental health, and flexibility.

These generational differences may encourage some organizations to make their entire benefits package more flexible and adaptable to the needs of individual employees.

How much do employee benefits cost a company?

What are employee benefit expenses ? According to the Bureau of Labor Statistics, benefits make up 31% of total employee compensation. Drilling down further, insurance benefits made up 8.3% and legally required benefits accounted for 7.1% of total compensation respectively. That means, on average, organizations spend about half their benefits budget on these two categories.  In challenging economic times, all organizations have to think carefully about how to construct their benefits package to have the biggest impact on employee engagement, retention, and performance — without overspending. Small and medium-sized businesses do not have the resources of large organizations, but the right benefits package can have a sizable impact without breaking the bank.  Here's a few examples of cost-effective benefits and perks that might be right for a company of any size:

Flexible Schedules and Hybrid Work Arrangements

More and more, employees want autonomy to determine when and where they work. It might not be feasible for all organizations, but it is a major priority for many job seekers.

Tickets or Company Outings to Events and Entertainment

As a one-time expense, going to a local sporting event or amusement park as a group can improve morale and create valuable connections between employees. 

Student Loan Assistance Programs

Approximately 44.5 million Americans have student loan debt today. Even if you only offer to contribute a small amount each month toward employees' student loan debt, this kind of benefit can make an outsized impact on employee satisfaction and retention. 

Wellness Apps

Recent research suggests that 62% of participants in wellness programs report increases in productivity. Scalable, flexible wellness apps can add to this value because they are accessible to all employees everywhere and don't require the expense of in-person services.

How do I effectively manage employee benefits?

Building, implementing, and maintaining an effective employee benefits program takes time and effort. If you don't already have someone to take ownership of these programs, and HR doesn't have the bandwidth or expertise, we recommend hiring an employee benefits consultant. This can reduce HR's administrative burden and improve the employee experience as well.

Understanding your workforce and what they need is an important first step in managing your employee benefits for optimal impact. Consider deploying an employee benefits survey to understand how well your current benefits package aligns to employee preferences. The valuable data this survey will generate can help you optimize your benefits package and increase employee satisfaction and retention in the long term .  Finally, building an online employee benefits portal  can be an effective channel to ensure employees have easy access to benefits information and the services they need. However, it is important that your portal has a compelling and low-friction user-experience. Otherwise, you may instead frustrate your people and actually hurt the employee experience. 

Why should you start building your employee benefits program today?

Like most employers, you’ve probably noticed turnover is high and candidates aren’t as receptive to job offers as they used to be. Investing (or reinvesting) in an employee benefits program that is tailored to the needs of your people can go a long way toward increasing engagement, retention, productivity, and lowering absenteeism. Over time, this investment in your people will also contribute toward a culture that attracts top talent. 


Should I offer benefits to part-time employees?

If you have the budget, offering benefits to part-time employees is a great idea. It’s a positive method for enhancing your employer brand, as well as attracting skilled employees who may not otherwise consider working for you. No matter how limited, perks and benefits can make part-time employees feel valued and therefore more loyal.

How do I make the case for increasing our spend on employee benefits and enhancing our benefits package? 

Business leaders already know they need help attracting and retaining talent. Come prepared with data and a viable plan to show senior leaders why making this investment now is the smart move. If necessary, consider a pilot program first to build momentum and identify best practices. 

How do I choose good benefits partners?

Don’t look for vendors that have the shiniest toys and use all of the latest buzzwords. Look instead for partners that can understand and share your vision for building a culture of engagement and performance for your unique situation and organization. Look for partnerships that will deepen your understanding of your people and help you fine-tune your benefits program.


Your organization’s ability to attract, engage, and retain top talent is of strategic importance. Talent shortages and burnout are too high for business leaders to ignore the incredibly positive impacts that a good mix of benefits can make for attracting, engaging, and keeping great people. If you can’t retain the people you have on board today, and you can’t attract the right people to fill the right positions now, your company simply can’t operate effectively.

Effective, flexible, personalized benefits programs have the potential to attract and retain the right people for your organization. All you need to do is start asking the right questions and looking for opportunities to differentiate your organization from other employers. 

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Wellhub Editorial Team

The Wellhub Editorial Team empowers HR leaders to support worker wellbeing. Our original research, trend analyses, and helpful how-tos provide the tools they need to improve workforce wellness in today's fast-shifting professional landscape.


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