Employee Benefits
The Jawnt Guide to Employee Benefits
Everything an employer needs to know about implementing an employee benefits package.
June 8, 2023
Everything an employer needs to know about implementing an employee benefits package.
The value of a business is in its people. As such, businesses aim to attract and retain top talent using employee benefits. A great benefits package is a differencemaker in a competitive job market, and can foster higher worker engagement and productivity.
In other words, employee benefits are a key lever for scaling businesses. In this blog post, we’ll dive deep into the world of employee benefits and provide strategies and practices to maximize the value of your benefits offering.Â
Let’s start with the basics. Employee benefits are any kind of non-cash compensation given to employees as part of their employment with an organization. Employee benefits are typically only offered to full-time employees, and not contractors or freelancers. Â
The most common example of an employee benefit is health insurance, but there are several categories of benefits offered to employees today, including:
Some benefits, like social security and workers’ comp, are required by law. Others, like health insurance and paid time off, aren’t legally required but are considered “industry standard” in many full-time roles. Benefits like a wellness stipend or Employee Assistance Program are known as “fringe” benefits,” in that they’re an added benefit or perk that isn’t standard in many roles.
As previously mentioned, employers offer benefits as a means of attracting and retaining top talent. According to the Society of Human Resources Management (SHRM), 92% of employees say benefits impact their overall job satisfaction.Â
Certain employee benefits have become so ingrained in professional culture that candidates won’t even consider a role that doesn’t provide them. Per SHRM, employees today give “heavy consideration” to a company’s health, vision, and dental insurance package. A 2020 SHRM survey also found employees value “generous paid time off,” “flexible and remote working options,” and “paid family leave” as the most desirable non-insurance benefits.Â
That’s not to say there’s a one-size-fits-all approach to offering employee benefits. Generally there’s a correlation between the job title and industry and the types of employee benefits offered. For example, the tech sector, which hires lots of highly skilled knowledge workers, is known for lavishing extravagant benefits upon its workers.Â
Larger and more established companies also tend to have better benefits packages given they can invest more in employee compensation. These factors notwithstanding, selecting an employee benefits package is ultimately a question of culture, as the types of benefits provided to employees will impact the composition of the workforce.Â
As previously mentioned, there are four main categories of employee benefits:
Let’s examine the types of benefits that are included in each category:
49% of Americans are insured through an employer-sponsored insurance plan. Typically, employer-sponsored insurance plans include healthcare, dental, and vision insurance. Employers often offer employees several options of health insurance plans, including PPOs, HMOs, and HDHPs. Employees have the option to select the health insurance plan that makes the most sense for their budget and medical needs.Â
Disability insurance ensures that, if an employee gets sick and can’t work, they’re still able to receive payment. Life insurance provides compensation to an employee’s family in the event of the employee’s death.
COBRA, short for Consolidated Omnibus Budget Reconciliation Act, is a law that allows employees to continue to receive their employer-sponsored health insurance coverage for up to 18 months after leaving or being dismissed from their role. Most private sector employers are required to offer COBRA insurance.Â
A health savings account (HSA) allows employees to set aside pre-tax money to pay for qualified health expenses. Some employees pair an HSA with a high-deductible healthcare plan to cover medical expenses like co-payments and coinsurance.Â
Similar to an HSA, a flexible savings account (FSA) lets employees pay for out-of-pocket medical expenses using pre-tax dollars. Employees can decide how much they want to set aside for their FSA, up to a limit set by their employer. If employees don’t spend the entirety of their FSA within a given year, they may only be able to carry over some of the remaining funds into the next year.Â
The key difference between an HSA and an FSA is that HSA’s are owned by the employee, whereas FSA’s are employer-sponsored. This means the employee can take their HSA with them to a new role. HSA’s also typically have higher contribution limits.Â
This is a blanket term used to describe any kind of employer-provided programs or compensation that relate to physical or mental health. Common examples include coverage for a gym membership, in-office yoga or meditation sessions, or reimbursement on wellness-related expenses like a massage or spa visit.Â
Employers may provide various forms of support for employees with parents, such as the flexibility to work from home as needed, reimbursement for qualified childcare costs, or even an on-site facility parents can bring their children to during the workday.
An EAP is a benefit that can connect employees with a mental health professional if they’re experiencing work-related mental health difficulties. EAPs offer treatment for a variety of mental health ailments, such as anxiety, depression, and relationship issues.
Outside of their health insurance, employers may also provide employees with access to a telehealth service they can dial to receive over-the-phone treatment for a variety of physical or mental conditions, free of charge.Â
A retirement plan allows employees to set aside money each pay period to be contributed towards an account the employee can access when they reach retirement age. There are generally three different types of retirement plans an employer may offer, each with their own rules and regulations:
Some employers, particularly for professions that require extensive schooling, will reimburse part or all of an employee’s tuition cost, provided they complete all coursework with a passing grade. Tuition reimbursement may be used for one-off training or even a full college course.Â
Employees can receive discounts on the goods or services offered by their employer. This is a common benefit given to employees in retail or consumer goods.
This is a monetary bonus given to employees, typically at the end of a company’s fiscal year, to reward them for good performance, and to incentivize them to keep up the good work.
Stock options are a form of equity compensation that give employees the right, but not the obligation, to purchase stock in the company at a predetermined price at a predetermined date (typically after the employee has been at the company for at least a year). Stock options are a popular employee benefit within high-growth tech startups.
Some publicly traded companies offer their employees stock purchase plans, which allow employees to purchase company shares at a discount to the fair market value.
Workers’ compensation insurance is a legally required employee benefit that provides financial assistance to employees who get injured on the job.
Another legally required employee benefit, unemployment provides compensation for employees who have lost their job due to circumstances beyond their control. Unemployment is designed to help out-of-work individuals cover basic living expenses as they search for a new role.Â
Paid sick leave is a company policy that allows employees to take a day off if they’re feeling unwell, while still being compensated. State laws require most employers to provide a certain amount of sick days to employees. In Pennsylvania, employees typically receive 5 paid sick days per calendar year.
Employers are required to give employees up to 12 weeks of job-protected unpaid leave for certain family and medical reasons, per the Family Medical Leave Act (FMLA). Some employers go beyond this mandate by offering paid family leave for qualified events, such as the birth of a child.
PTO allows employees to take time off from work at no cost. PTO is often used for vacation or sick days, if the employee has already used all their paid sick leave. Most employers provide between 2-4 weeks of PTO per year, although some employers allow for unlimited time off, assuming the employee can still meet the core responsibilities of their role.Â
Certain employees are legally entitled to overtime pay if they work more than 40 hours in a given week. The federal overtime pay rate is 1.5x. To determine which employees are entitled to overtime pay, check out this guide.Â
Sabbatical is a period of extended paid leave from a job. Sabbaticals are common in academia as a reward for years of dedicated service. A sabbatical can last anywhere from a few months to a full year.Â
Similar to a tuition reimbursement, a learning stipend is any sort of compensation an employer offers that encourages employee growth and development. An example might be reimbursing employees for book purchases or paying for an employee’s membership in a professional organization.
A pre-tax transit benefit program allows employees to deduct their monthly commuting costs from their paycheck before taxes are applied. This means employees are taxed on a smaller portion of their income, allowing them to take home more of what they make. Additionally, pre-tax transit benefit programs have been shown to boost employee morale and encourage employees to work from the office. Some cities and states also require certain employers to offer pre-tax commuter benefits.
Interested in setting up pre-tax transit benefits for your business? Visit our website.Â
If an employee or candidate is required to relocate for a job, some employers will cover the cost (or part of the cost) of their move. Relocation support can encourage a prospective candidate to accept an offer, or retain an employee who is being asked to relocate to a new locale. Relocation support can be used to cover travel, storage, and moving-related expenses.Â
This is a blanket term used to describe any sort of non-work-related material benefits an employee might have access to by coming into the office. Examples might include free food and drink, nap rooms, game rooms, happy hours, employer branded swag, etc.Â
With the shift to remote work, some employers have given their employees a stipend to cover the cost of setting up their home work station. This may include compensation for monitors, a desk, a computer chair, laptop stand, or other materials that can help an employee work productively from home.Â
A flexible or remote work perk allows employees to work outside the office either some or all of the time. While remote work has become commonplace in a post-COVID world, it wasn’t so long ago that the ability to work outside the office was considered a luxury not afforded to most workers. While many employers still allow employees to work remotely at least some of the time, there’s now a broader push to encourage workers to return to the office.
Pet insurance helps cover the cost of visits to a veterinarian or illness for an employee’s pet. Pet insurance has become an increasingly popular benefit in recent years, with 53% of employees saying their employer does not offer adequate pet insurance.Â
According to the Bureau of Labor Statistics, employee benefits make up roughly 29.5% of an employee’s total compensation. As of December 2022, the average private sector worker earned $40.23 per hour worked, with $11.86 of that going towards employee benefits. Here’s how that cost breaks down across various benefit categories:
To keep the cost of employee benefits affordable, many small businesses work with a Professional Employer Organization (PEO) to provide employee benefits to their workers. These organizations become the employer of record for a company’s workers. The PEO pools employees together from all their other client companies to secure benefits packages at rates typically reserved for large organizations.Â
Good employee benefits administration starts with understanding which benefits matter most to your workforce, as well as which benefits are required by law in your state. The “right” benefits package for your employees depends on a variety of factors, including where your business is based, the demographic makeup of your employees, the competitiveness of the job market, the types of roles you’re hiring for, and a host of other factors. A good way to get started is by surveying employees on what perks mean the most to them, and learning about the employee benefits offered by comparable businesses in your industry.
Administering and managing employee benefits is a crucial function that carries both employee retention and regulatory risk. As such, most companies do a handful of things to ensure they’re managing benefits effectively:
In today's competitive job market, offering an attractive employee benefits package is a critical factor in attracting and retaining top talent. If you’re ready to get started, consider the following steps:
Employee benefits are not just an expense—they’re an investment in your organization’s human capital.Â
If your organization is ready to implement a pre-tax commuter benefit program into its employee benefits package, consider working with Jawnt. Jawnt's unified transit platform that makes it easy for employers to implement transit benefits for employees. From hassle-free enrollment to comprehensive support, Jawnt’s user-friendly platform enables both employers and employees to get the most out of their pre-tax transit benefit. To learn more, visit our website.
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