Everything you need to know about employee benefitsUpdated June 1, 2022
If you work for a company or organization, you likely have the option of choosing an employee benefits package. While you’ve probably heard about health insurance options or other related coverage, it might surprise you that there are a lot more offerings available than you may think.
Employee benefits are services and offers that can save you big money in the long run, especially in terms of health and wellbeing, health care, absence and parental leave, disability and illness, retirement, and more. Part-time employees and full-time employees can experience the advantages of these services for a small fee taken out of their salary each month, or for a portion of their taxable income. Because prices are often lower in an employee benefits plan than buying these individual services yourself, it’s important to understand how you can leverage these plans to work for you.
Employers and benefit providers
The person you work for, your employer, can offer you benefits in addition to paying you salary. Because employee benefits make a company more profitable and popular, most employers agree to work with a benefit provider to make these options available to their employees.
There are several different types of benefit providers that your employer can choose to work with, depending on the size of the company, the number of employees, and the plan they want to offer. Knowing which benefit provider(s) your employer is working with can help you better understand what type of coverage you may opt into.
Some of the most popular types of benefit providers include:
- Professional Employer Organizations (PEO): Serve businesses with ten to fifteen employees, have the most benefits available
- HR Software: Serve businesses with ten or more employees, include basic benefit offerings like medical and life insurance
- Payroll Software: Serve businesses with more than one employee, track benefit deductions along with payroll
- SHOP Exchange: Serve businesses with five or more employees, provide health/dental benefits through Affordable Care Act
- Alternative Benefits Providers: Serve businesses with more than one employee, offer more unique benefits
Still other companies choose to simply work directly with insurance companies or brokers, agreeing on lower premiums to offer their employees.
Types of employee benefit plans
If you know what type of benefit provider your company is working with, you can determine what types of plans your employers are offering you. PEOs usually offer just about everything, while other providers like SHOP Exchange and Alternative Benefits Providers only offer certain coverage options like health care and wellness programs.
The employee benefit plans these providers offer range from standard health insurance to paid time off and fringe benefits. Not only are these employee perks cheaper than individual personal plans, but signing up can actually decrease your taxable income since the benefits deduction comes out of your wages (pre-tax basis). This can result in more total compensation and less spending, as well as saving you numerous out-of-pocket expenses.
Following are some of the most common benefit plans employers offer their employees. There are exceptions and case-specific details as to which plan each provider offers, so be sure to check with your company or provider to make sure you’re getting all the benefits you want before signing up.
The most common form of insurance offered to employees, a health benefits plan covers either whole or part of the cost of medical bills, surgical expenses, treatment for illness and injury, and other medical-related situations that may come up. Employers commonly offer this plan since it covers the most basic health needs most people require. Depending on the type of health insurance plan your provider offers, coverage may extend to annual examinations, routine blood work, blood pressure monitoring and screening, immunizations, and other health plans.
Health insurance is offered by most benefit providers.
Many dental plans cover diagnostic and preventative care, which includes yearly checkups, X-rays, routine cleaning, and other maintenance. A plan may also offer perks for basic procedures like tooth removal, cavity fillings, and repair including root canals. While most dental insurance plans do come with a small copay after each visit, it’s nothing compared to what a full appointment would cost.
Dental insurance is offered by most providers except Alternative Providers.
Like dental insurance, vision insurance provides coverage for preventative care like annual eye exams and prescription glasses or contacts. You can also get huge discounts on glasses frames and different coatings for the lenses. Depending on your plan, vision insurance can additionally offer compensation for surgical procedures like cataract surgery or LASIK eye surgery.
Vision insurance is offered by most providers except SHOP Exchange and Alternative Providers.
Life insurance is especially beneficial for employees with children or who are older. By requiring a premium payment each month, life insurance promises to pay out a sum of money after a set period of time or after the insured employee’s death. This money can be used for any medical costs incurred, or may be passed down to children in the case of death or severe injury.
Life insurance is offered by PEO, some HR, some Payroll, and insurance companies.
While it comes at a low cost, disability insurance can have high value for employees – especially those prone to illness, disease, or health problems in the future. It offers income protection to employees who have become disabled and can no longer work. Disability insurance covers accident-related injuries, major health events like a stroke, heart attack, or cancer, and some preexisting conditions.
Your disability doesn’t have to be permanent to get these benefits and perks, either. With short-term disability insurance, you can typically get up to 52 weeks of coverage in order for you to have time to heal, go through therapy, or seek other treatment. Short-term disability benefits include being able to go back to work after your recuperation period ends. If your disability is permanent, long-term disability insurance will pay a percentage of your salary for a longer period of time – usually a number of years set forth in your policy.
Another facet of disability insurance includes workers’ compensation, in which business owners must pay you in the event of a work-related injury. However, it is important to note that workers’ compensation is a separate benefit than disability insurance – signing up for disability benefits will not get you workers’ compensation. Inquire more about how you can get workers’ compensation with your employer or benefit provider.
Disability insurance is offered by PEO, some HR, and insurance companies.
401K and Retirement Plans
You might not be thinking of retiring right now, but benefit packages that offer 401K and retirement plans can help you plan for the future. These plans allow you to deposit a portion of your wages into individual accounts, which you can put on hold until you retire. This money may be used for long-term care (nursing homes, assisted living) in your future, and maybe even eliminate the need for long-term care insurance, which covers those same costs.
Some employers match this amount or contribute a percentage of your retirement plan payments, so over time your retirement fund will grow substantially – just in time for you to enjoy your retirement benefits! There is also the option of a nonqualified plan, which is a tax-deferred, employer-sponsored retirement plan that meets specialized retirement needs. Because the employer contribution can vary with any retirement plan, it’s important to check with your company about how much money will be shared with you over your career.
401K and retirement plans are offered by PEO, some HR, and insurance companies.
Health Reimbursement Accounts (HRAs) and Flexible Spending Accounts (FSAs)
Some employers may opt to create an HRA, which is an account used to cover employee medical expenses not applicable to the company’s standard insurance plan. An HRA is funded solely by the employer and may be used with the standard employee-bought health insurance to cover any out-of-pocket cost or surgery expenses.
On a similar note, an employer may offer an FSA to help employees pay for medical expenses using pre-tax dollars. This is an account that must be used within a year, or the employee will lose all access to the funds. Flexible benefits include not paying taxes on the money you put into your spending account, essentially putting your tax money toward your health procedures and dependent care.
HRAs are offered by insurance companies and Alternative Providers.
Cafeteria plans allow employees to choose between different types of benefits. This can help cut services and costs that are not needed, and provides more flexibility to the employee.
Cafeteria plans are offered by PEO, some HR, and insurance companies.
Paid Time Off/Holidays
This perk covers wages or salary paid during time off or on holidays. Under this plan, the employee gets compensated even if they aren’t in the office or working at all. Many companies also offer parental leave, which may count as paid time off or be considered as a separate entity. Maximum limits on how much paid time off you can get will depend on your company and employer.
Paid time off/holidays are offered by PEO, HR, and Payroll.
Commuter benefits cover the cost of transportation using pretax income. They can provide coverage for transit, carpooling and vanpooling, parking expenses, bike maintenance and repairs, and more.
Commuter benefits are offered by PEO, some HR, and some Alternative Providers.
Additional employee benefits: Fringe and work-life balance
While perks like health insurance, retirement plans, and parental leave are essential to any employee’s life, a company may go above and beyond to make their workplace employee-friendly. Fringe benefits, or the overall term for any employee benefit, provide this little bit of extra care for employees. They can include anything from medical insurance to education tuition assistance, employee discounts, and achievement awards. Fringe benefits are often tax-free and come at a low cost to employers, or they are considered a company investment to help employees reach their full potential.
Similarly, work-life benefit options add value to the company’s bottom line by giving employees more flexible schedules. Companies can choose to let workers manage their own schedule, provide child care or pet care in the office, or even offer short-term loans to employees moving to a new place. While these work-life balance initiatives are often not as defined as some of the above plans, they can make a big difference in your career – and life.
Most employee benefits, be it health insurance, commuter perks, retirement plans, or something in-between, offer priceless advantages and cut down your cost of living considerably. In fact, under the right circumstance, their total rewards can be more valuable than a raise or promotion.