18 types of employee benefits to offer to your employees

Today’s job market is competitive. Employees stay on average just four years at each post, and job boards and professional networking platforms like LinkedIn make it easier than ever to cross-shop employers. More often than not, pay alone won’t cut it if you want to attract, engage, and retain top talent. To do that, you’ll need to offer an attractive, comprehensive benefits package.

According to a survey of 2,000 workers by Fractl, more than 80% of job seekers give some or heavy consideration to certain benefits. And it’s no wonder: For employees, benefits can be the key to quality healthcare, comfortable retirement savings, and the flexibility to work from home. Benefits are important for businesses, too. Satisfied employees can be more productive and engaged, and thus less likely to quit.

Not all benefits are created equal, however. Let’s explore the different types of employee benefits to offer employees in depth—and why they matter so much for your business.

What are employee benefits?

Employee benefits are non-monetary compensation given to workers on top of their pay. These can include things like health and life insurance, paid time off, gym memberships, access to certain services such as retirement planning, and employee development programs such as annual education credits. 

Some benefits are mandated by law; others are discretionary and used as a perk to attract and retain talent. If you’re looking to get a firm grasp on employee benefit options, a good place to start is to understand what’s mandatory and what’s discretionary in the country or state where your business is located.

Mandatory benefits vs. discretionary benefits 

Mandated benefits vary based on location. States and countries have different laws and regulations around which benefits must be included in a compensation package. In the US, for example, employers with more than 50 full-time employees are required to offer health insurance to comply with the Affordable Care Act. In Germany, in addition to national health insurance, employers must offer long-term care insurance. It all varies from market to market.

The most common forms of discretionary benefits aim to improve an employee’s health and well-being, and contribute to their long-term financial security. Think discounts or credits for fitness, contributions to employee retirement plans, and reimbursements for things like home-office equipment. Even a flexible work-from-home policy counts as a benefit. 

2 key types of employee benefits with examples

If you’re looking for a list of employee benefits, here are some to consider across both mandatory and discretionary categories.

Mandatory benefits

Mandatory benefits are the ones you must provide according to federal, state, and local laws. You’ll need to research which laws govern benefits in your state or country, but here are the basics to consider:

Overtime compensation

Overtime laws vary from place to place, but generally speaking, overtime is a higher wage paid to eligible employees for any hours worked above what’s considered full-time. In the US, the Fair Labor Standards Act (FLSA) requires one-and-a-half times the rate of pay to eligible employees for any hours worked above 40 in a work week, though some states have their own laws.  California and Nevada, for example, have rules that trigger overtime pay once an employee works a certain number of hours in a day, for example. To that end, make sure you’re compliant with both federal and state guidelines.

Minimum wage

Minimum wage is the lowest possible wage you are required to pay an employee. It varies widely depending on where the employee is staffed, and sometimes federal laws deviate from state and local ones. Minimum wage in the U.S. is $7.25 an hour, but it’s $16 an hour in New York City and some surrounding counties. In California, fast food workers earn $20 an hour at minimum—but that’s $4 more than other minimum wage workers in the state.  

Unemployment insurance

Mandatory in the US and many other developed countries, unemployment insurance covers a portion of eligible workers’ wages if they lose their job due to layoffs. The Federal government sets minimum requirements for state-run programs, but each state sets its own rules for things like eligibility, payment amounts, and the duration of benefits. 

Most commonly, benefits typically last for up to 26 weeks, and anyone collecting unemployment insurance must prove they’re actively looking for work to receive a payout. Employers fund the program through a mix of state and federal payroll taxes.

Medicare contributions

Everyone in the US is responsible for paying medicare tax on their earnings. The tax rate is 2.9%, split between employees and employers. It’s a benefit because self-employed workers are on the hook for the full 2.9%. Income over $200,000 for single folks and $250,000 for married couples is taxed even higher, but the employer split is not mandatory beyond those thresholds.

Workers’ compensation

Injuries can happen in the workplace—and if they’re severe enough, they can jeopardize someone’s ability to work and earn a living in the short or long term. Workers’ compensation provides medical care and cash compensation if someone suffers an injury as a result of their job.

Fringe benefits

Fringe benefits are discretionary benefits that employers choose to provide to workers at will. They are part of a broader compensation package that includes the mandatory benefits listed above and salary or wages. Often, they’re designed to keep workers healthy, ease any costs associated with getting to and from work, and boost productivity and morale. Fringe benefits can include but are not limited to:

Wellness programs

A healthier workforce is often a more productive one. Studies show that investments in wellness programs can pay dividends in the form of reduced healthcare expenses and absenteeism. Wellness programs vary greatly from employer to employer, but often they aim to encourage physical fitness and promote behaviors that can lead to improved well-being. Gym memberships and incentives tied to using them are a common benefit, but wellness programs can include everything from healthy-living seminars to annual flu shots.

Commuter benefits

Commuter benefits aim to help employees save time and money on the ride to and from work. Many employers allow employees to make pre-tax contributions toward commuting expenses like transit passes or parking fees. The IRS allows up to $315 per month in 2024. Some companies will offer services that load up prepaid cards or rail passes automatically for employees, and some go as far as providing private shuttles to and from certain pickup points. 

Remote work

Remote setups can range from fully remote employees to hybrid structures. Remote work exploded during the pandemic, and a large share of employees appear to be settling into hybrid arrangements, which as of 2024 account for 53% of jobs that are remote-capable, according to Gallup. Some employers offer a stipend to help employees set up their home offices. 

Educational reimbursement

An education benefit is a great way to attract motivated, growth-minded employees while encouraging your existing workforce to upskill. Plus, it sets the tone that your workplace values advancement, which can improve retention, since employees wouldn’t have to switch employers to develop in their careers. These programs can range from an annual stipend, say $500 or enough to cover an online class or two, to full sponsorship for advanced degrees. 

Travel expenses

It’s standard for employers to cover the cost of business travel, but every company has its own corporate travel policy stipulating what employees can expense and up to what limits. A generous policy may include higher per diem rates, so employees can travel comfortably. Other aspects of your policy likely include coverage for incidentals, transportation, and lodging. It’s up to you which types of hotels and transport are permissible for booking.

Employee discounts

If your employees are also your customers, an employee discount can be an enticing perk—and one that staff might expect. The amount you offer depends on your business model, your product, and the degree to which employee purchases are necessary to carry out the job. For example, clothing retailers that want staff to wear their apparel might offer a substantial discount, especially if the merchandise is expensive, to incentivize employees to wear it. 

Some employers are also able to negotiate discounts with other retailers or service providers. 

Insurance benefits

Some insurance benefits are mandatory in certain markets, such as health and unemployment insurance, but employers can offer supplemental insurance plans that staff can enroll in at will. Among them: 

• Life insurance
• Accident insurance
• Dental and vision coverage
• Disability insurance
• Hospitalization insurance
• Coverage for certain illnesses like cancer or kidney failure

Retirement plans

They’re not mandatory, but some 98% of workers expected employers to offer retirement benefits in one recent survey. The good news is that technology and benefits solutions make it easier than ever to offer these to your workforce. 

Pensions are a shrinking part of the private sector retirement equation in the US, so most employers offer tax-advantaged, employee-funded contribution plans like 401(k)s or Simplified Employee Pension (SEP) plans. To sweeten the deal, you can opt to match employee contributions up to a certain percentage—say, the first 3%—or make an annual profit-sharing contribution. 

Equipment benefits

An often-overlooked way to stand out to job seekers is with the equipment you provide for workers. That can mean ergonomic chairs and keyboards or even an upgraded computer. These might not sound like the most compelling perks, but they can make a difference in employees’ day to day.

Global employee benefits

International expansions can unlock business growth and tap into foreign talent, but operating in more than one market adds a layer of complexity to benefits administration. Every country has its own set of mandatory benefits that companies need to monitor compliance with, and workers in different countries often have different expectations for perks. In France, staff might expect lunch vouchers. In Sweden, extra paid time off is highly coveted. You can accommodate these and other desirable perks to attract and retain top talent internationally.

Remote work stipends

Remote work is on the rise in the US and throughout international markets. You can leverage this trend as a way to provide a fringe remote-work benefit, either by offering stipends to cover things like work-from-home office expenses, or “workcations” that blend work and leisure.

PTO, sabbaticals, unpaid leave, and career breaks

Time off above and beyond the minimum legal requirement can be paid and unpaid. Some firms offer sabbaticals, for instance, after a certain tenure. Others are willing to extend extra PTO to senior employees. Others may let employees take an unpaid year off and hold their position until they come back. You can get creative with time off to suit local preferences and retain top talent.

Vision plans

Glasses and vision care can be expensive. A vision benefit that offers vision checks and discounts on prescription eyewear, for instance, can be an enticing fringe benefit if vision services are not covered by national health plans in foreign markets.

The importance of employee benefits

Employee benefits can help you recruit better employees, empower them to be more productive, and retain them for as long as possible. Here’s a look at why assembling a competitive benefits package matters for your employees and business alike.

Employee engagement and retention

Benefits can boost employee engagement and reduce turnover. Both can have a massive impact on the bottom line. According to data from Gallup, engaged teams are 14-18% more productive than disengaged ones, and replacing employees who churn can cost anywhere from 1.5 to two times their annual salary.  

Legal compliance

It’s critically important that you operate in accordance with local, state, and federal laws governing benefits and compensation. Failure to do so can result in costly penalties that vary based on which rule you’re breaking, and some violations could even result in jail time.

A better company reputation

A robust benefits package can signal to prospective employees—not to mention the wider market—that your company values its workers. That’s a boost to your brand. Strong benefits packages also telegraph financial health and corporate maturity, which can be appealing to job-seekers seeking stability in their next employer.

Best practices for offering employee benefits

Employee benefits programs are not easy to assemble. To get it right, you’ll want to invest time upfront in putting together a suite of benefits that makes sense for your market, your industry, and the workers you hope to attract. Here are a few starters to set you on your way:

Review the benefits competitors are offering

If you’re deciding which benefits to offer employees, start by looking at your closest competitors or at companies you admire in similar industries. You can check the “Life at” sections of their websites, read the job ads they post, and dive into reviews on third-party ratings sites like Glassdoor. You’ll quickly get a sense of what the norms are, what job seekers in your industry might expect as they apply, and how you might be able to stand out among competitors as a great place to work.

Focus on legal compliance and cost management

Consult local, state, and federal resources—along with any staff or contracted HR experts—to ensure your planned benefits package meets minimum legal requirements. Noncompliance is both a financial and brand risk, so it’s important to get mandated benefits sorted out before moving onto discretionary.

As you expand into fringe benefits, you’ll need to weigh the costs associated with those against their potential benefit from a recruitment or employee-retention perspective. Make sure it’s clear what kind of overhead they’ll add to each hire, and how costs might shift as your workforce grows and changes. 

You may opt for fewer but higher-quality benefits, stressing the advantages with current and prospective staff. If you forgo a free gym membership at the local luxury gym but green-light a 3% match to 401(k) plans, emphasize that the latter could be worth tens or even hundreds of thousands of dollars long-term as it compounds over decades.

Communicate benefits clearly and effectively

Data from insurance trade association LIMRA points to a major gap between employer benefits and employees’ knowledge of them. Less than 60% of employees surveyed in a 2022 study reported being certain of whether medical benefits were available to them, for instance, and the numbers only get worse from there. Only half were in the know about vision benefits, and less than a third reported certainty about mental health, financial wellness, and tuition assistance benefits.

Moral of the story: it’s not enough to simply offer benefits; you’ll need to communicate them early and often. The same study found that more than half of employees want to hear about benefits not just during open enrollment, but a few times or more throughout the year. 

Easily manage employee benefits with Rippling

Rippling's Benefits Administration software consolidates all your benefits—medical, FSA, HSA, dental, 401(k), and more—into one system, automating enrollment, deductions, and administration. 

If you're looking to streamline your startup's benefits administration, Rippling is designed to make retirement plans like 401(k) more accessible and easier to manage for both you and your employees.

Rippling makes it easy and automatic to report your insurance coverage information to the IRS, and to generate and send 1095-C forms to your employees. 

With Rippling, you can:

• Gather relevant information about your company for reporting to the IRS
• Generate and file 1094-C forms for your company
• Submit reporting forms to the IRS and any relevant state agencies on time
• Generate 1095-C forms for all eligible employees and add them to your employees’ Rippling profiles
• Track all your compliance information, including plans that were offered, insurance-eligible employees, enrollment information, and more—all in one place

Employee Navigator

Rippling’s integration with Employee Navigator’s Benefits Administration system is a joint solution that streamlines HR and benefits management, automating time-consuming manual work for brokers and employers.

It’s easier than ever for our mutual users to eliminate this manual work. Now, our users can:

• Instantly sync new hire data from Rippling to Employee Navigator during onboarding
• Automatically update payroll deductions in Rippling when new hires choose benefits in Employee Navigator
• Keep employee demographics up-to-date across systems by automatically syncing changes
• Use Rippling credentials for single sign-on (SSO) to access Employee Navigator

Rippling can also compete feature-to-feature with robust platforms like ADP Workforce, BambooHR, and Ease so you won’t have to switch systems as you grow. What’s more, Rippling can support employees and contractors in all 50 states and internationally—so you only need one system for a global workforce.

FAQs on types of employee benefits

Which employee benefits are best?

There is no “best” benefit, per se, because everyone values benefits differently based on factors like age, life stage, family needs, financial situation, and other considerations. That said, a survey of employees from Forbes Advisor found that employees said the most desirable benefits are sometimes the most basic ones—healthcare coverage (67%), life insurance (45%), and retirement plans (34%). Mandatory paid time off and mental health assistance were close behind.

What is the most expensive employee benefit?

Generally speaking, health insurance is the most expensive employee benefit. According to 2023 data from the Bureau of Labor Statistics (BLS), health insurance costs U.S. employers some $2.84 per hour, or about 25% of the total hourly benefits cost per employee. 

How much should a company spend on employee benefits?

The exact amount you spend on employee benefits will vary depending on factors like geographic location, the demographics of your workforce, and the benefits you choose to offer. But for perspective, benefits account for roughly 30% of labor costs on average for U.S. employers, according to the BLS; wages and salaries make up the rest. The average private-sector employer spent $13.02 per labor hour on benefits compensation in 2023.

This blog is based on information available to Rippling as of September 16, 2024.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.