Knowing the importance of employee benefits is essential, whether you’re in charge of hiring for a large firm, looking for staff to run your newly purchased business or taking your online business to the next level. While challenging jobs with a competitive salary are always in demand, today’s employee also expects more from a prospective employer.
You may be surprised at the variety of programs and perks that fall under the umbrella of employee benefits. Whatever you choose to offer requires a substantial investment from the company, so it’s important to consider what you’ll get in return.
We’ve created this handy guide to help you figure it all out. Read on to learn about the different types of employee benefits, and how they affect workers, employers and the overall success of your company.
What are employee benefits?
Employee benefits are any form of compensation given to employees above their regular salary or wages. Most people are familiar with commonly offered benefits like paid time off for sick leave or vacation days, and health insurance and disability insurance.
Many companies offer some or all of these additional benefits for free or for a reduced price that is withdrawn from the employee’s paycheck at regular intervals. They include:
- Business expenses
- Childcare benefits
- Commuting/travel assistance
- Dental insurance
- Employee assistance
- Free or discounted products or services
- Life insurance
- Maternity and paternity leave
- Profit sharing
- Retirement benefits
- Tuition reimbursement
- Vision insurance
In recent years, companies have become more competitive and wide-ranging in their benefit offerings. The most popular startups offer employees flexible work schedules, telecommuting options, gym memberships, free meals or snacks, and student loan repayment assistance.
Why should my company offer employee benefits?
There are many positive outcomes from offering benefits to employees in addition to their salary. While benefits have simple tangible effects like easing healthcare costs or increasing income for employees, they can also have more far-reaching effects on mental health, motivation and productivity.
Here are 20 ways that employee benefits can contribute to your company’s success.
1. You can attract better employees
Job candidates with impeccable credentials and extensive experience typically have several options for employment. While your mission statement and success can do a lot to attract top-level prospects, offering both essential benefits and bonus perks is an excellent way to set yourself further above the competition.
Modern employees are especially interested in flexible time and remote work benefits. They also look for any on-site health and recreation offerings that make long hours at the office more bearable.
2. It helps with employee retention
A recent CareerAddict study explored the reasons why employees quit and discovered that 77% of respondents would consider leaving due to poor benefits.
Indeed, it’s not unusual for a worker to leave for a similar job with a comparable salary at another company just to land better health insurance or bonus opportunities. To combat this, investigate what other businesses in your industry are offering, and aim to be competitive.
3. It improves morale
Most employers know that good workplace morale is important for productivity, teamwork and the overall success of the company.
It’s also important for each worker’s wellbeing. The American Psychological Association reports that unhappy employees are almost twice as likely to be diagnosed with depression. The increased stress levels at work also put them at greater risk of heart disease and other health problems.
Offering a comprehensive benefits package boosts morale in several ways. Employees feel more secure and stable in their work and personal life when they know they have enough sick days, vacation time and good medical coverage. They feel valued when their hard work is rewarded with bonuses and other perks.
Additional benefits like health club memberships and a robust employee assistance program directly help staff members maintain both physical and mental health. The better the benefits, the happier and healthier your employees will be.
4. Employees are more willing to problem-solve
Just as workers are more likely to leave a job with poor benefits, they’re also more likely to strive to hold on to a job with good benefits.
If there’s a feeling of mutual respect with management, employees will problem-solve their way through a variety of workplace issues. If your employees don’t feel valued, however, they’re more likely to let a minor problem snowball, or quit over a disagreement with management or an issue with a difficult coworker.
5. It improves employee engagement
A workplace with good morale, where employees are happy to be at work and to collaborate with their colleagues, is essential to company success. A workplace with high employee engagement is even better.
Employees who are engaged in their work are more focused and motivated, and they feel like there’s a purpose to what they’re doing. They’re willing to go the extra mile to get the job done.
This is where employee benefits like flexible schedules, remote work and on-site childcare come in. Acknowledging a worker’s individual needs makes them feel appreciated. It also addresses problems that might otherwise lead to tardiness, missed days and distraction at work.
Even smaller perks can affect employees, like offering free lunches with healthy and vegetarian options in containers made with recycled materials. Employees are more inspired to work for companies that share their values.
6. Your company will earn more positive employee reviews
Social media and job-hunting sites offer ample opportunities for ex-employees to dish dirt on their former employers. Even workers who left on good terms, to relocate or pursue a different career, can reveal the negative aspects of the job.
Desirable candidates seeking new opportunities at your firm may read reviews that make them think twice about applying. Customers may also question doing business with a company that reportedly treats its workers poorly.
A solid benefits package will help your reputation. Peruse online company reviews, and you’ll immediately see that employees list the benefits and perks they most appreciated, even if they didn’t like other aspects of the job.
Workers who enjoyed ample paid leave, bonuses and travel expenses are also more likely to leave glowing reviews. It can even inspire current employees to post positive comments.
7. It helps build trust
One of the essential ways to increase employee happiness and engagement is by establishing a relationship of trust.
Workers who trust their employer are much more open to trying new procedures, taking risks and being innovative on projects, and readily adapting to changes in their job role.
If you’re not offering your workers essential benefits, they won’t trust that you have their best interests at heart. They’ll see management as only concerned with profits, and not the wellbeing of their staff.
Offering employee benefits that support them and reward their hard work is a simple first step to building that necessary trust.
8. Employees won’t come to work when sick
Sometimes, company owners or managers assume that limiting sick days will result in a full staff operating at peak productivity each day. Unfortunately, it just means that workers are forced to come to work sick, and their diminished health negatively affects their job performance, while they may infect others, causing a cascade of ill and unproductive workers.
This is why paid sick leave and personal days are such essential employee benefits. Companies like Netflix and Virgin Group believe in this so strongly that they’ve instituted unlimited paid time off programs. Employees have less stress about requesting leave, and can address their health and wellness concerns as needed.
So far, results are promising. Employees don’t come to work sick, and they’re more engaged and enthusiastic when they return from leave.
9. You’ll have financially stable employees
Many modern companies conduct background checks of prospective employees. Hiring managers are often wary of workers with bankruptcy issues, because those employees may be more susceptible to theft, bribery or other damaging behavior. They may also be less productive due to distractions from their financial situation.
These same issues are just as relevant with current employees, and offering good benefits can help them avoid financial difficulties.
As CNBC reports, 66.5% of 2018 bankruptcies filed in the US were due to medical issues. This often includes a combination of insurmountable healthcare costs and missed time from work.
Providing employees with good medical coverage and ample paid leave helps them stay financially solvent. Smaller companies, meanwhile, should consider a shared pool for paid time off, allowing employees to take the time they need without added expense for the company.
10. Employees are more invested in the company’s success
While health coverage, sick days and maternity leave are vital benefits, there are other important employee perks that can contribute to your company’s success.
Many businesses offer investment opportunities like profit sharing or stock options, including companies that are entirely employee-owned. Employees benefit financially, above their salary, and employers typically receive tax benefits from sharing the wealth with their workers.
Employees who receive a share of the company’s profits are naturally more invested in the company’s success. In fact, studies from the National Bureau of Economic Research have shown that those workers identify with the company more, perceive management more favorably, and exhibit more commitment and loyalty than those on fixed-pay arrangements.
Employees who have an actual stake in the company even subtly police their coworkers to keep them on task and productive.
11. It boosts productivity
Employee productivity is contingent on a number of things: meaningful work, autonomy, growth prospects, good work–life balance and, of course, a sense of reward. Your team members will want to feel that the effort they’re putting in is proportional to how they’re rewarded.
One way to ensure that your employees are happy with the perks you’re giving them is to provide the option of personalized benefits. Giving team members the option to choose which benefits are most relevant and useful to them can keep them happy — not to mention also cut costs for you.
That’s right: as PeopleKeep’s Employee Benefits Survey Report revealed, employers often spend money on benefits that their employees don’t really care for. It’s wiser to invest that amount elsewhere!
12. It improves your team’s work–life balance
Flexible hours and remote or hybrid work arrangements can go a long way in maintaining people’s work–life balance. And work–life balance has a number of benefits, including greater job satisfaction, increased productivity, lower stress levels, and even better physical and mental health.
In a nutshell, preserving your employees’ work–life balance can greatly benefit your organization, preventing burnout among your team members and boosting your retention rates.
13. Employees become more committed
Although being loyal to your employer was once considered a virtue amongst working professionals, the concept has been all but fading away in recent decades. The COVID-19 pandemic only added fuel to the fire, with job-hopping becoming increasingly more common since then, especially among Millennial and Gen Z employees.
It seems that workers are no longer willing to stick around unless they’re getting the recognition and compensation that reflects their performance. So, the more competitive your benefits, the higher the chances of nurturing a loyal, committed workforce.
14. It contributes to a healthier workforce
When employees feel valued and empowered, and don’t have to stress about money and time as much, their mental and physical health can improve dramatically.
Every year, absenteeism and presenteeism cost the US economy over $225 billion. So, doing what’s in your hand to preserve your employees’ wellbeing will only work in your favor!
The better your workers feel, the more satisfied they are with what you’re offering them, and the less likely they’ll find excuses to miss work — or spend half their workday on taking coffee breaks, scrolling on Instagram or procrastinating tasks.
15. It enhances your reputation
We don’t just mean your employer reputation here. After all, your former and current employees are not just employees — they are parents, friends, brothers and sisters.
If you treat them fairly, the people in their circle will know about it — and the same goes for if you don’t. This can have a ripple effect on who you attract as clients or customers, as consumers are becoming more conscious.
Essentially, people will be likelier to support your business if they hear great things about your organization, including how you treat your workers.
16. It creates a positive organizational culture
A great corporate culture consists of many elements: communication, accountability, transparency, fairness, and a unified sense of purpose among its workers. Your employee benefits, therefore, play a big role in building and maintaining a healthy, positive culture.
As we’ve seen, rewarding your employees fairly not only helps you stand out as an employer and boost your reputation more generally, but it also keeps your staff happy. A people-centric approach can make employees feel grateful and motivated to be coming in to work every morning!
17. It increases job satisfaction
Job satisfaction is determined by a number of factors, like work–life balance, recognition, room for growth and fair remuneration. With the right benefits, you can make your employees feel valued and rewarded, which plays an essential part in enhancing their job satisfaction.
According to a survey by Gallup, 42% of voluntary employee resignation is preventable, yet leaders often ignore the signs and fail to take action to keep it from happening. The majority of the respondents in the same survey also cited inadequate benefits and compensation as the top reason for leaving their companies.
18. It can increase inclusion and diversity
According to HBR, “Corporate programs that support work–life balance promote productivity, reduce turnover, and improve employees’ mental and physical health. That much is well-known. But our research has revealed another benefit: They can also boost your organization’s diversity.”
This makes sense, considering that minority groups around the US have access to fewer resources. The more you can relieve employees’ psychological and financial pressures through unique benefits packages, the more diverse candidates you can attract.
19. It reduces stress
Imagine a worker who has no access to healthcare, retirement plans and paid time off. For that person, life is bound to get pretty stressful, right?
Healthcare costs are a major source of stress for many people; so are the emotional and physical burdens of caring for family members. If you help your workers take care of these needs, then you’ll be significantly improving their quality of life and lifting a heavy weight off their shoulders.
This, in turn, can have a positive impact on their productivity.
20. It reduces interpersonal conflict
Since supporting and rewarding your employees can help boost their physical and mental health, that can be reflected in the way they behave towards you as well as one another. After all, our mood and circumstances can greatly influence the way we speak and relate to others.
An engaged, happier, less stressed workforce is a calmer workforce. And, since conflict can be extremely costly to businesses, it’s in your best interest as an employer to keep the waters from stirring, so to speak.
Final thoughts
If you came to this article wondering “Why are employee benefits important?”, we hope our answers have now got you covered!
As you can see, there are many ways that offering employee benefits is good idea for your business. Protecting and investing in your workers creates an environment of trust, engagement and loyalty that will greatly contribute to your company’s success.
What benefits does your company offer, and how have they affected employee recruitment and retention? Join the discussion below and let us know!
This article is a partial update of an earlier version originally published on August 1, 2020, and contains contributions by Electra Michaelidou.