The two primary tools to attract and keep talent are salary and benefits. The benefits package is what makes an employee likely to stay with a company as it adds additional security and gives them considerable savings.
It’s important to be aware of the popular benefits, especially among whichever group you try to attract. This will help you to be more successful at getting and retaining excellent employees.
Key Takeaways:
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The benefits the company offers is a major way to attract and retain top talent.
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A comprehensive benefits package provides an employee with policies and services that ensure their financial well-being and health.
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Some benefits are mandatory due to laws, including the Family and Medical Leave Act (FMLA), minimum wage, and worker’s compensation.
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Although the federal government mandates certain benefit protections, many are determined by state governments. This causes significant variation between states.
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Optional benefits, such as schedule flexibility and retirement plans, are determined by the employer.
What Is a Benefits Package?
A benefits package is the set of policies and services that an employer provides for the sake of their employees’ mental and physical well-being, financial security, and family needs. This package makes up a part of an employee’s total compensation.
Most large companies and almost all government employers provide comprehensive employee benefits packages. Small businesses typically offer fewer benefits than large ones, but there are still mandatory benefits that all employers must offer.
Businesses have significant leeway in determining what benefits to offer their employees. In order to retain top talent, businesses need to be aware of what their employees are looking for. A comprehensive benefits package is a major selling point, as is the company culture and leave policies.
Required Benefits
There are several laws on the books that are offered to protect employees. That means that businesses are required by law to offer certain benefits to their workers. It’s important to note that this will vary depending on what state the business is incorporated in, as different states have stricter guidelines than federal ones.
Here is an overview of the benefits that employers are legally required to offer:
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Family leave. The Family and Medical Leave Act (FMLA) states that employers with more than 50 employees must provide up to 12 work weeks of unpaid leave during any 12-month period for specified family and medical reasons. In order to qualify, the employee must have worked 1,250 hours in the past year.
Included in this provision is that the employee’s position must still be available to them when they return. The position needn’t be exactly the same, however, it must have equal pay and benefits. Health insurance benefits are also required to remain in place for the duration of the leave.
Employees are entitled to leave for the following circumstances:
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For a new baby. While commonly called maternity leave, there is also paternity leave for a new father. While this isn’t required to be paid, 30% of companies offer paid paternity leave, while 34% offer paid maternity leave, as per a study by SHRM.
It should be noted that California, New York, New Jersey, and Rhode Island require paid parental leave under certain conditions. It’s important to check state regulations.
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To care for an ill family member. In the case of an ailing parent, spouse, sibling, or child, workers are allowed to take medical leave to care for them.
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To see to their own health. Medical leave isn’t only to care for others, but also if the employee suffers a serious injury or illness. Personnel is entitled to take their medical leave in order to devote time to their recovery.
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For a family emergency. In the case of a sudden illness, accident, or death, employees are allowed to take leave in order to take care of their families.
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Minimum wage. While not typically seen as a benefit, there are restrictions on pay. As mandated by the Fair Labor Standards Act (FLSA), the federal government requires paying a wage of at least $7.25/hour.
Some states have laws setting a higher minimum wage than this. Since the federal minimum wage is the baseline, states’ minimum wage can only effectively be higher than $7.25/hour.
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Overtime pay. According to the FLSA, nonexempt employees must be paid at least time and a half for each hour they work over 40 hours in a workweek. As with other federal laws, some states require paying employers more than time and a half for overtime, or for fewer hours than 40.
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Workers’ compensation. If an employee is injured or becomes ill as a result of their work or work environment, they’re entitled to file a workers’ compensation claim and receive partial wages. Usually, this ends up being two-thirds of their normal wages, as well as having their expenses covered.
Workers’ compensation is almost exclusively regulated on the state level, meaning what you’re required to cover can vary greatly.
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Health insurance. Under the Affordable Care Act (ACA), organizations with 50 or more employees must provide healthcare plans to their full-time employees. A full-time employee is defined as one who works over 30 hours per week. Failure to comply will result in a fine.
In addition, the Consolidated Omni-Budget Reconciliation Act (COBRA) requires employers to continue providing medical benefits to former employees for up to 18 months after termination. These benefits must also continue to cover the former employee’s family.
This regulation only applies if you employ more than 20 people. Depending on the state that you’re incorporated in, it may still be enforced with fewer employees or for a longer period of time.
Optional Benefits
While it’s important to include all of the legally required benefits, optional benefits are where you work on attracting and maintaining talent. Generally speaking, the better the benefits package, the more inclined employees are going to be to work for you, as well as keep working for you.
Remember that while there is a minimum requirement on the benefits listed above, that doesn’t prevent your business from offering a more generous package. That is another way to attract talent beyond offering non-required benefits.
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Paid time off (PTO). PTO is a common additional benefit. Included in this can be vacation days, sick days, and personal days. Some employers separate them out, though that is falling out of favor. Most employees prefer not to differentiate them – so long as the net total remains the same.
Unlike sick days or vacation days, PTO days are typically accrued over a certain duration, and employees with a long history at the company usually receive more PTO than their newer counterparts. If you want to wow potential employees, opt for unlimited PTO.
If you do choose to limit it, be sure to have employees’ time roll over to the next year, so you don’t get a mad dash of people taking time off at the end of the PTO period.
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Retirement plan. Help with planning retirement is a staple benefit for most companies. Most will match contributions to a 401(k) or similar retirement plan up to a certain amount or percentage. This helps both in terms of compensation – it’s like additional pay – but also in terms of the company looking out for them long-term.
Along with health insurance and PTO, these retirement plans are a cornerstone of any genuinely competitive benefits package.
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Health insurance. While this often falls under the mandatory category, for employers with 50 or fewer employees, this benefit is technically optional. That being said, if you can afford it, health benefits are one of the primary motivators for employees choosing to work for a company.
According to SHRM, the most common plans are preferred provider organizations (PPOs), which have higher premiums but more flexibility in coverage than their health maintenance organization (HMO) counterparts.
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Dental and vision insurance. While neither dental nor vision is required to be included in healthcare plans, it’s an excellent way to beef up your benefits package. Both are major expenditures for most people, and keeping your employees healthy keeps them more productive – not to mention more likely to stick around.
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Alternative healthcare options. As healthcare is a major motivator, offering employees choices and more extensive benefits is a great way to attract talent. These include things like flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs).
While employers can contribute, FSAs are usually employee-funded tax-free accounts that can be used for expenses that the health insurance doesn’t cover. HRAs, on the other hand, are entirely employer-funded accounts that allow employees to be reimbursed for healthcare costs not covered by their insurance.
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Disability insurance. While working in many of the same ways as workers comp, disability insurance doesn’t require that the illness or injury be caused either by work or in the workplace. In addition, it also doesn’t cover any medical expenses, instead covering a portion of the worker’s lost income.
There is both long and short-term disability insurance. Depending on what sort of business you have and how secure you want your employees to feel, you can choose one or the other.
The idea behind this is to keep your employees and their family financially healthy while they can’t work. That’s good for the well-being of your employees and gives them a sense of security and a sense that their employer cares about them as people.
It should be noted that New York, New Jersey, Rhode Island, California, Hawaii, and Puerto Rico legally require short-term disability insurance (though terms and conditions differ state by state).
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Life insurance. Life insurance policies grant peace of mind by providing beneficiaries with money in the event of the policyholder’s death. If you want to offer life insurance benefits, the company can cover either a portion or the entirety of the premiums for the employees who sign up for it.
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Tuition assistance. Many workers just starting out have a great deal of college debt that they’re dealing with. If you’re looking to attract young talent, then offering tuition assistance or help with paying down their loans is an excellent way to get people’s attention.
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Company car. This is a specialized benefit in the majority of cases. Leasing a car on behalf of an employee is a major expenditure, so it’s often only done if someone regularly travels by car or for high-level executives.
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Employee discounts. If your business offers products that your employees might want to purchase, offering an employee discount is a simple benefit. A surprisingly large percentage of employers (42%, according to the SHRM study) offer employee discounts on services or products.
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Paid parental leave. While a few states do mandate paid parental leave, they’re in the minority. But if you’re looking to attract younger workers and keep them, then offering parental leave is a sought-after benefit.
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Telecommuting. The pandemic shifted jobs that didn’t need to be done in person towards telework. Right now, there’s a struggle going on as to whether or not to shift back. The majority of employees say no, so if you’re looking for an attractive, inexpensive benefit, the ability to telecommute is an excellent choice.
If full-time telework seems intimidating, you can also shift to a part-time system, such as working from home two days a week, or alternating weeks.
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Flexible scheduling. In many ways, this is a riff on telecommuting, and telecommuting can even be a part of it. Work-life balance is important for everyone, but younger workers are emphasizing it more than their older counterparts. If you’re looking to attract young talent, giving them flexible work schedules can be a big seller.
So long as what you’re looking for is results rather than having your employees sitting at their desks, allowing flexible schedules seems more and more reasonable. Flexible work and working from home are becoming increasingly popular, meaning that it’s a benefit that people will actively seek out.
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Severance packages. No one ever hopes to need a severance package, but they work wonders as a safety net. While they may seem disadvantages to employers, it’s a matter of what you want to prioritize. Do you want your employees to feel secure? If you’re required to lay them off, do you want them to not be resentful?
Most severance packages offer the former employee pay for a set amount of time, typically determined by how long they’ve worked for the company. Many will also extend healthcare benefits through that period so that the employee doesn’t immediately lose their salary and health insurance.
A handful of states do require severance packages, including Idaho, Maine, and Massachusetts. The exact requirements of them will depend on the individual state.
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Bonuses. While bonuses can be considered a part of pay, they’re also a benefit. If bonuses are a semi-regular thing at your company, that can be an incentive for employees to work for you or to hang around.
Bonuses can take a number of forms such as annual anniversaries, referrals, spot bonuses, incentives, retention bonuses, signing bonuses, and stock options. It’s the sort of benefit that gets potential employees’ attention and makes them more likely to stay.
Comprehensive Benefits Packages FAQ
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What should a comprehensive benefits package include?
A typically comprehensive benefits package will include health insurance coverage, retirement benefits, as well as vacation, and sick time. Many good benefits packages also include dental or vision insurance, life insurance, disability insurance, and PTO.
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How much does the average benefits package cost?
The average benefits package costs roughly a third of an employee’s monetary compensation. That means that with a $50,000 salary that at least $16,000 is spent on the benefits package. That means that their entire compensation will actually be $66,000
This can vary depending on the job and circumstances. Some positions may have a lower take-home pay to have better benefits or the opposite. Most jobs in the public sector focus more on benefits, while the private sector focuses more on take-home pay.
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What are the benefits of a comprehensive benefits package?
Having a comprehensive benefits package has the advantage of being able to attract better talent. Besides the salary, the benefits package is one of the primary motivators for a candidate to choose to work for your company. Spending on what is covered can also foster employee loyalty, as they feel that they’re being taken care of.
Having excellent health insurance can also have the benefit of encouraging preventative care on the part of your employees, meaning that they’re less likely to get a longer-term illness, as they’ll be able to get treatment right away.
Author
Di Doherty
Di has been a writer for more than half her life. Most of her writing so far has been fiction, and she’s gotten short stories published in online magazines Kzine and Silver Blade, as well as a flash fiction piece in the Bookends review. Di graduated from Mary Baldwin College (now University) with a degree in Psychology and Sociology.
