The Importance of Employee Benefits
If you had an open position at your company, what would your job ad look like? Would it communicate that you as an employer recognize the importance of employee benefits? If your answer is no, you might want to rethink the importance of benefits in attracting and retaining the best talent for your company.
The relationship between benefits and employee retention
Offering a high salary in a job advertisement instead of benefits might attract applicants to your posting, but what can help retain employees? What would stop them from leaving your company for a competitor offering higher wages? Offering a competitive salary combined with benefits and perks can be a winning combination, fostering improved work habits and reducing employee turnover. Benefits tend to drive employee engagement while providing a sense of security, encouraging workers to stay on the job, even during tough times.
Different views across generations
Different age groups or generations in the workplace currently include:
- Generation Z (born about 1995 and later)
- Millennials (born 1981-mid-1990s)
- Generation X (born 1965-1980)
- Baby boomers (born 1946-1964)
- Traditionalists (born 1925-1945)
Given this diversity in employee population, HR professionals need a thorough understanding of what each of these segments generally perceive as valuable, necessary, and optional when evaluating an employee benefits package.
When employees have the ability to pick and customize benefits according to their needs, it may encourage participation in benefits plans. This can provide employers and employees with a better return on their benefits investment.
Certain employee benefits may be legally mandated, based on your workforce and business. These may include:
- Social Security, Medicare, and Federal Insurance Contributions Act (FICA) tax. FICA is a federal payroll (employment) tax used to fund Social Security and Medicare, and both employees and employers are required to contribute to these funds.
- Employers are required to withhold Social Security tax at 6.2 percent of gross compensation, up to the Social Security wage base ($127,400 for 2018). Employers must also match 6.2 percent for Social Security, up to the wage base and 1.45 percent for Medicare.
- Employers must withhold Medicare tax at 1.45 percent of gross compensation, and an additional 0.9 percent of compensation in excess of a threshold amount based on the employee's filing status if an employee's compensation exceeds $200,000 (there is no wage base for Medicare).
In addition, your company may be legally required to offer benefits like unemployment insurance and workers' compensation insurance. Some businesses may be required to offer health insurance benefits, family and medical leave benefits, or paid sick leave depending on the federal, state, and local laws and regulations applicable to the business.
You may be legally required to offer some benefits, depending on federal, state, and local laws and regulations applicable to your business.
You may also consider benefits like 401(k) retirement savings plans, life and disability insurance (note that some states mandate employers to provide short-term disability leave), education assistance, wellness programs, and child care assistance. These are offered voluntarily by the employer, and can contribute to a worker’s job satisfaction, help strengthen their financial position, and strike a workable work/life balance. Basic health coverage and paid time off are examples of benefits that can allow employees to take care of themselves and spend time with their families, says Jennifer Benz, Paychex HR consultant.
"In addition, many employees today are taking care of children and aging parents," she says. "Adding benefits such as a flexible spending account, with options for dependent care expenses, and offering flex time or telecommuting can also provide a sense of work/life balance."
Benz adds that having a solid retirement plan may also give employees a chance to be financially prepared for the future — and can be relatively easy for businesses to manage.
"There are many retirement plan options available for employers, where they can decide how much they would like to contribute to their employees' retirement fund, and create a vesting schedule, which would also aid in employee retention," she says.
Many employee benefits can contribute to a worker’s job satisfaction, help strengthen their financial position, and strike a workable work/life balance.
Mixing traditional and non-traditional benefits
The 2018 Paychex Pulse of HR Survey revealed that 33 percent of HR professionals surveyed ranked offering competitive benefits among the top five biggest HR challenges, followed by retaining talent (31 percent). Another survey of 1,000 full-time employees indicated that employees rank regular bonuses, health care, dental insurance, 401(k) plans, casual dress days, and free snacks as top job incentives.
A mix of traditional and non-traditional benefits offerings can help keep your business competitive in your industry. Additionally, offering low-cost employee benefits can be a solution that employees value without adding significant administrative burdens on HR.
"Employers can offer low-cost or non-traditional options such as a floating holiday, an employee-of-the-month parking space, company-paid lunch breaks, casual Fridays, etc.," Benz says. "Creating a culture within your company that makes employees feel valued is also a great tool when considering or creating a benefit package."
Businesses looking to stay competitive in today’s tight labor market should understand why employee benefits are important. Ready to evaluate your current offerings, or explore options that you haven't previously considered? Explore some popular benefits that can be simple to implement and manage.