Employee benefits, also called fringe benefits or perks, are forms of non-wage compensation provided to employees in addition to their normal wages or salaries. Here’s the full breakdown of what you need to know about employee benefits programs.
- Employee benefits programs promote economic security for employees. They provide health, retirement, and other benefits to help raise living standards and also help companies stay competitive in the marketplace. They protect employees and their families from economic hardship caused by disability, illness, unemployment, loss of life, and other events. Some benefits also serve as perks to help make an employee's job easier and more enjoyable.
Benefits also make employers more attractive in the hiring market. Many times, a job applicant will be torn between two job offers but be swayed by one because it offers more generous benefits. Employers, in turn, find that by offering benefits, they can attract and keep talented employees.
Employee benefits may be paid for entirely by the company or by a combination of employer contributions and employee contributions. Employee contributions are typically deducted from paychecks. For public sector benefits, employer contributions are paid for through tax dollars since, by definition, the state or federal government is the employer.
Mandated benefits are required by law. Most of them are state or federal programs that employers participate in. Optional benefits are those that employers choose to offer their employees. The actual types of benefits are nearly limitless. Many employee benefits are taxable, while others are non-taxable, partially taxable, or tax deferred. Some benefits are provided immediately upon employment, while others require a probation period of weeks, months, or years.
Benefits are a big part of many people's financial planning. Without benefits offered in the workplace, many people won't be prepared for retirement or health costs or many other life situations that arise. Stay financially fit, friends.