As of 2020, there were approximately 123.19 million people working full-time in the United States. With increased job competition occurring in nearly every field, it can be difficult for businesses to find and draw the best talent to their door; add in the concerns that come with a global pandemic and you’ve got a recipe for benefit and compensation expansion. 

What Are Employee Benefits Packages and Why Do They Matter?

Compensation refers to an employee’s direct pay or wage. Benefits, on the other hand, are defined as perks given by businesses in addition to salary, also known as indirect pay. They serve two main functions: to entice prospective new hires to join the company and to keep current employees satisfied enough that they’ll stay in their position. While wages can be offered through an hourly, weekly, or monthly rate, and certainly play a significant role in bringing new employees on board, they aren’t the only thing candidates look at when deciding between potential jobs. 

From the perspective of a job seeker, benefits are incredibly advantageous; depending on the personal wants, needs, and circumstances of the individual, a comprehensive benefits package can be the deciding factor between joining one company and another. Although a benefits package can cost businesses a considerable amount, the role they play in recruitment and employee retention is indispensable. 

Employee Motivation

The work environment influences a number of aspects of business life, from productivity to overall employee happiness. Since finding, interviewing, and training new talent can be quite costly, both in time and money, it is vital that companies understand what is motivating their employees not only to join the team but to stay throughout the years. Offering competitive compensation and an extensive benefits package can go a long way in achieving these goals. 

The four main benefits typically provided by businesses are:

  1. Health coverage: Under the Affordable Care Act, known as the ACA, or more commonly known as Obamacare, businesses with 50 or more full-time employees are legally required to provide health insurance for their workers. Companies that fall below that number are at a serious loss if they don’t voluntarily offer health insurance; rises in the cost of healthcare, as well as the continuation of the global pandemic, means that many current and prospective employees are looking for jobs specifically because they offer medical coverage. This can include dental insurance, which typically covers annual exams, cleanings, and X-rays, and vision insurance, which covers routine eye exams, prescription glasses, and contact lenses.  

  2. Life Insurance: Life insurance provides a payout -- also known as a death benefit -- to the beneficiaries of a deceased employee, usually equating to the employee’s annual salary. It is particularly valuable for employees with families, ensuring they have a financial safety net in place in the event of an unfortunate and unplanned accident that can help the surviving members cover funeral costs and ongoing bills. 

  3. Disability Insurance: Both short and long-term disability insurance can be offered to employees, guaranteeing financial protection in the event that an employee falls seriously ill or becomes injured and is unable to work as a result. It is designed to cover expenses, such as the cost of bills, groceries, and other household expenses, up to a certain length of time.

  4. Retirement planning: Nobody wants to work forever. While businesses in the old days used to offer traditional defined benefit pension plans to employees, these have all but been replaced with defined contribution plans, 401(k) type plans. 401(k) retirement savings plans have taken their place in companies that still offer retirement benefits. The main advantage here is flexibility, control and a possible employer contribution percentage match; if an employee is making annual contributions to their 401(k), some companies will match that contribution up to a certain percentage, the current average of which is 4.3%.

While these are the most common and valued benefits offered by businesses, many will go above and beyond the call of duty to reward their best employees and lure prospective talent. 

Additional perks include:

  • Paid vacations, sick days, or holidays

  • Company cars

  • Education assistance

  • Child Care assistance

  • Tuition reimbursement

  • Rewards and recognition programs

  • Stock options

  • Employee discounts

  • Wellness programs such as onsite gyms, extended/paid lunches, etc.

Some of these benefits serve to fund employees’ “emotional salary,” referring to emotional rather than financial gains while others do provide additional financial support. Though they come with additional costs and paperwork, they can increase employee happiness, motivation, and loyalty. 

Total Rewards Model

Many businesses turn to the total rewards model when trying to figure out the best way to make their workplace desirable. This system blends monetary and non-monetary rewards with the aim of increasing productivity and loyalty; in short, it does everything that compensation and benefits are supposed to do when working in tandem. 

The total rewards model is based on five main pillars: wages and salaries, benefits that go beyond the bare minimum, a healthy work-life balance (which greatly improves employee morale), the implementation of a performance recognition program, and career development support. Compensation and benefits make up the foundation of the total rewards model by providing employees with more than just the basics; when employees feel heard and supported, both financially and emotionally, businesses are set up to thrive.

The importance of compensation and benefits cannot be overlooked in modern society. Now more than ever, individuals are looking for jobs that offer more than just a livable wage; full health coverage, 401(k) offerings, and financial protection in the event of death or disability is essential for businesses trying to draw and keep the best talent.

Although these benefits may seem like frivolous, unnecessary expenses to the average company, they represent an extremely important investment in a business’s most valuable asset: its workers. Overall, the benefits these benefits provide are well worth the cost.

Want more to read? Click here to read 5 ways employee benefit plans can attract and retain diverse talent.