Employee benefits

Employee benefits are forms of non-wage compensation provided by an employer. These are given to staff members in addition to their regular salary or hourly wages. They are also known by several other names. Some people call them fringe benefits, perquisites, or simply "perks." These benefits serve a very important purpose for both workers and companies. They help increase the economic security of employees. By providing this security, companies can improve worker retention, which means employees stay with the organization longer.

There are many different ways these benefits function within a workplace. Some arrangements involve salary packaging or salary exchange. In these cases, an employee chooses to trade some of their cash wages for a different type of benefit. Most types of employee benefits are taxable to some degree. This means the government may require taxes to be paid on the value of the benefit. Managers often view these benefits as indirect expenses. They use them as tools to attract new talent and motivate their current staff.

Benefits can be divided into different categories based on how they are provided. Mandated benefits are required by law or regulation. Employees often view these as rights or entitlements. Discretionary benefits are not required by law. Instead, employers offer them to inspire loyalty and increase job satisfaction. Some benefits are also described as "perks." These are often discretionary gifts given to employees with seniority or high performance. Common perks include company vehicles, hotel stays, or free refreshments.

History shows us how the term "fringe benefits" became part of our language. The term was coined by the War Labor Board during World War II. At that time, industries were prohibited from increasing direct wages. To attract and keep workers, companies devised various indirect benefits instead. This allowed businesses to support their staff without violating wage rules. Today, benefits have become a massive part of global reward management. They are a central component of how companies value their human labor.

Different countries have developed unique systems for managing these benefits. In Canada, employer-sponsored health and dental plans often act as a "top-up." This means they coordinate with existing provincial coverage to provide extra support. In the United States, benefits include things like 401(k) retirement plans and relocation assistance. Some U.S. benefits, like certain health plans, can be excluded from an employee's gross income. This means they are not subject to federal income tax. In the United Kingdom, employers use "core benefits" and "flexible benefits."

Flexible benefits, or "flex schemes," allow employees to make choices. In a flex scheme, workers might receive a budget to spend on specific needs. Some companies use salary sacrifice arrangements to fund these. In this setup, an employee gives up part of their cash pay for a non-cash benefit. Popular examples include childcare vouchers and pensions. A 2012 survey found that 62% of UK employers offered flexible benefit packages. This growth has coincided with better access to the internet for managing these plans.

In the United States, the availability of certain benefits varies by company size. While paid time off is not required by federal law, many businesses offer it anyway. Approximately 86% of workers at large U.S. businesses receive paid vacation days. However, only 69% of employees at small businesses receive them. Sometimes, companies face economic challenges and must reduce these offerings. A 2023 article used the term "perk-cession" to describe this trend. This happens when businesses cut amenities to focus on efficiency and cost-saving. Such changes can negatively impact a company's culture and employee morale.