Table of contents
  1. Types of Employee Benefits
  2. Why Are Benefits Important?
  3. How to Design a Benefits Package
  4. Communicating your Benefits to your Employees
  5. Conclusion

Employee benefits are forms of compensation that an organization offers its employees in addition to their base salary. They can include incentives like health insurance, paid time off, health and wellness initiatives, childcare, bonuses, and restaurant vouchers. 

As an employer, you may be required by law to offer some benefits, such as certain types of insurance or paid time off. Otherwise, you’re free to design a benefits package that suits your employees and organization.

Types of Employee Benefits

There are many kinds of employee benefits that employers across the globe offer. Here, we’ll divide them into a few broad categories. 

At-work benefits

Paid leave is a major at-work benefit to cover. This is any time off an employee can take while still receiving their salary. You can offer paid time off (PTO) for various purposes, including vacation, parental obligations, illness, or study or travel. 

It’s essential to include paid leave in your benefits package—some forms of paid leave are required by law, and it’s also one of the most important benefits to employees. Vacation and parental leave are some of employees’ top priorities when considering benefits packages. This directly impacts your employees’ health and well-being, giving them time to rest so they can return to work energized. 

As long as you mind any rules governing paid leave in your country, you can design your paid leave program to best suit your organization and employees. This could take the form of any of the following. 

  • Accrued PTO, where employees accrue a certain amount of leave based on the hours or days they have worked. 
  • Allotted PTO, where employees are allocated a fixed amount of leave to use within 12 months. 
  • Unlimited PTO, where employees can take as much leave as they want.

Flexible working hours are another important employee benefit. In a recent survey, 38% of employees said that flexibility is one of the most important benefits an employer can offer.

Other at-work benefits could include: 

  • Remote work
  • An employee assistance program that offers employees access to confidential counseling services
  • Free lunches or healthy office snacks
  • Continuing education, such as professional development programs or financial assistance towards qualifications related to an employee’s role

Insurance and financial security

In a recent survey, paid insurance premiums were the second-highest “must-have” benefit for employees, but financial benefits aren’t limited to insurance, either. Benefits in the insurance and financial security category can include the following.

  • Health insurance. According to employers, health insurance is one of the most important benefits to offer employees. It’s especially important in the US, where health insurance via an employer is one of the only ways to access affordable healthcare. 
  • Dental and vision insurance
  • Life insurance
  • Disability insurance
  • Health savings accounts, where employees can save money tax-free for additional medical expenses
  • Pet insurance
  • Pensions and retirement benefits such as 401(k) plans in the US

Other monetary incentives

Monetary benefits are often tied to performance, incentivizing productivity and loyalty to an organization. Examples include:

  • Bonuses
  • Sales commissions
  • Stock options

Lifestyle benefits

These are types of benefits that add to company culture or give employees perks that aren’t directly related to monetary compensation. This could include: 

  • Childcare 
  • Employee wellness programs, such as gym memberships or lunchtime activities
  • Meal vouchers
  • Work-related items, such as cell phone plans or company cars

Why Are Benefits Important?

While salary is an important factor in choosing a job, benefits also matter—according to Glassdoor, 79% of employees would accept new or extra benefits over a pay raise. Offering a benefits package that’s valuable to your employees can benefit your business in the following ways.

  • It helps you stay competitive when recruiting. Even if you’re unable to match the market salary for a role, you could still attract top talent with a quality benefits package that makes you stand out from the competition. 
  • It improves employee wellbeing. Investing in your employees’ health and wellbeing pays dividends for both your employees and your organization. For example, ensuring employees take vacation leave lowers their stress levels and makes them more productive and creative on their return to work. 
  • It improves job satisfaction. Good benefits are key to employee satisfaction. In one SHRM survey, 92% of respondent employees identified benefits as important to their job satisfaction. Satisfied employees are more productive and are also more likely to remain with an organization, reducing your turnover and lowering long-term recruiting costs. 

How to Design a Benefits Package

Now that you have an understanding of its importance, you may be ready to design or redefine your employee benefits package. The following steps will help you get started.

Define the objectives of your benefits package.

It’s important to identify what you want to achieve with your benefits package by defining its objectives. You can do this separately or as part of your compensation strategy. 

These objectives should align with your business and HR strategy. Some examples could be “to provide the most competitive benefits package to attract the highest quality talent” or “to provide a benefits package that prioritizes the physical and mental well-being of our employees.” 

 2. Confirm your budget.

Your budget sets the outer limits of the benefits you can offer. Look at your compensation budget, minus salaries, to confirm how much you have left to spend on benefits. 

If you already offer a benefits package, assess whether you may be able to save any costs with a redesign. There is a range of benefits providers, so it’s worth doing some research to find the best value for money when it comes to the benefits you provide. 

Identify any statutory benefits.

Employers are obligated to offer some benefits by law. These vary between countries and states. For example, employers in the US have to provide Social Security contributions and unemployment insurance. In Australia, paid parental leave is mandatory for employees who meet the eligibility criteria. 

Before turning to what your employees want, you should first check your legal obligations as an employer. Any statutory benefits must become the foundation of your benefits package. 

Identify employees’ needs and wants. 

A basic benefits package typically includes health and dental insurance and paid time off. These are some of the most common benefits offered by employers to cater to employees’ needs. But there’s likely a lot more on your employees’ benefits wishlist, and it pays to find out what they are. 

You can do this by conducting a survey of your employees to identify the most sought-after benefits. Don’t assume what your employees want—a survey may reveal surprising priorities.

There are also plenty of online surveys of employee benefits preferences that you can filter by industry, location, and employee characteristics to help you better understand what your employees want. Also, take a look at what your competitors are offering for similar roles. 

When taking employees’ feedback into account, remember that your benefits package should cater to all employees, not just some.

Regularly review your benefits package.

Once you’ve designed a benefits package for your employees, you should continue to review and adapt it. Check if it is meeting the objectives you first identified and make any necessary changes. 

Communicating your Benefits to your Employees

Communication is key to ensuring employee uptake of your benefits package and to its overall success. If employees don’t know about the benefits your offer, or how to access them, they won’t use them. 

When to communicate with employees about benefits

Conversations around benefits should be ongoing at various times throughout the year. But there are some key moments to discuss benefits with your employees. 

During the onboarding process

This is your first opportunity to explain your benefits package to an employee after they join your organization. It’s an ideal time to set out the benefits they can access and answer any questions they have. 

You can do this by incorporating an explanation of benefits into your onboarding training, for example, by providing a link to your intranet benefits page or offering an information session for employees to ask questions. 

Important information to cover at this stage includes any waiting periods before coverage can begin, how employee contributions are managed and reported in paychecks, how employees can make changes to their benefits, and whether there are any consequences for waiving coverage when employees are initially eligible. 

After a qualifying life event

An employee may be eligible to make changes to certain benefits when a significant life event occurs, such as marriage, the birth of a child, or a divorce. Changes to their employment status or work hours may also be qualifying life events. Employees typically have 30 days to change their benefit elections after a qualifying life event, making it the perfect time to remind them of their options. 

During open enrollment 

In the US, open enrollment is a limited period during which employees can add or change their benefits plan. In the lead-up to open enrollment, update employees on any changes to their existing benefits plan or new benefits being offered. You could do this by recording an informational video or offering a benefits seminar. 

Tips for communicating with employees about benefits

Here are some tips for informing employees about the benefits available to them. 

  • Communicate their value. Employees not only need to understand what benefits you offer, but they also need to understand the value of these benefits. When they understand the potential impact these benefits could have on their life, they’re more likely to participate in your benefits program. 
  • Use a variety of communication methods. Details of your benefits package should be accessible—for example, on your intranet—and interactive—for example, via seminars and presentations. It’s also important to create an ongoing discussion around benefits, such as quarterly emails reminding employees of your benefits package. Using a range of methods to communicate your benefits helps ensure you reach all of your employees. 
  • Incorporate storytelling in your communication. Sharing stories can inform and educate employees about benefits while also motivating buy-in. It can be used to show employees how others have used the benefits on offer and the value they took from them in real-life situations. For example, incorporating testimonial-style videos from current employees in your onboarding process can be a powerful way to explain your benefits package to new employees. 


Employee benefits encompass all compensation you might offer employees on top of their salary, such as health insurance, paid vacation and family leave, and flexible work arrangements.

A well-designed employee benefits package with a combination of at-work, insurance, financial security, and lifestyle benefits can help your company attract top talent while improving employee well-being, overall job satisfaction, and your bottom line.