Employee Benefits 101: Types, Importance & How to Build a Winning Program

What if your company didn’t just pay you a salary but actually changed your life? That’s exactly what happened to many employees at Nvidia.

Through its stock purchase program, employees who simply opted in found themselves riding the wave of the company’s explosive growth. As Nvidia’s stock soared, many became millionaires—turning what seemed like just another benefit into a once-in-a-lifetime opportunity.

This proves that employee benefits aren’t just perks—they’re powerful tools that shape careers, build loyalty, and create workplaces where people genuinely want to stay. From financial incentives to wellness programs and professional development, the right benefits can turn a good job into a great one.

In this blog, we’ll break down the different types of employee benefits, why they matter, and how to design a program that makes a real impact.

Table of Contents

• What are employee benefits?
• Different types of employee benefits a company should offer
• How to manage your employee benefits effectively – Best practices
• Emerging trends in employee benefits
• Simplify your employee benefits management with Hiver
• Stronger teams, happier employees: The power of the right benefits

[cta_block]

What are employee benefits?

Employee benefits are the extra perks that come with a job—beyond just a paycheck. They cover everything from health insurance and retirement plans to paid time off, work-life balance perks, financial assistance, and professional development opportunities.

But benefits aren’t just about the essentials. Some companies go the extra mile, offering flexible schedules, mental health days, and even “pawternity leave” (yes, paid time off for new pet parents). These perks show employees that they’re valued not just for their work, but as individuals.

And here’s the thing—happy employees make happy customers. Richard Branson said it best: “Clients do not come first. Employees come first. If you take care of your employees, they will take care of the clients.”

When businesses invest in their employees’ well-being, it reflects in their performance, customer interactions, and overall company success.

Why are employee benefits important?

Want your employees to stick around and do their best work? It starts with benefits. Check this out:

• Care = loyalty: Employees who believe their boss cares about their well-being are 69% less likely to job hunt. *(Gallup’s State of the Global Workplace)*
• Better benefits, fewer goodbyes: Companies with killer compensation packages and benefits see 56% lower turnover. (LinkedIn Global Talent Trends)
• Boosting productivity: Happy employees work better. Organizations with high employee engagement levels see an 18% increase in productivity. (Gallup’s Survey)
• Attracting top talent: 63% of job seekers say benefits are one of the biggest factors when deciding where to work. (Glassdoor)

Take Airbnb, for example. They didn’t just offer remote work; they let employees work from different countries for up to 90 days a year. The result? Their career page traffic doubled to 10 million views in a year. That’s what happens when you put your employees first.

So, yes —benefits aren’t just a box to check. They’re how you build a team that’s motivated, loyal, and ready to create the kind of CX that customers rave about.

How much do employee benefits cost?

Benefits might feel like a big-ticket item, but they’re worth every penny. Here’s a quick breakdown:

1. A percentage of salary

According to the Bureau of Labor Statistics (BLS), employer costs for employee benefits in private industries averaged $12.77 per hour worked in December 2023. That’s about 30-40% of an employee’s total compensation. So, for a worker earning $50,000 annually, you’d be looking at an additional $15,000–$20,000 in benefits costs.

2. It depends on the types of benefits

Some benefits are expensive—like health insurance—but they’re also the ones employees value most. Other perks, like flexible work policies, cost next to nothing but can have a huge impact. Finding the right mix depends on your team and budget.

3. Don’t forget the tax implications

Here’s the cherry on top: many benefits come with tax advantages. For example, employer-provided health insurance is often tax-deductible, and retirement contributions can reduce taxable income. Plus, offering great benefits could help you avoid turnover costs.

We’ve crunched the numbers, explored the costs, and proven why benefits matter. Now comes the big question: what kind of benefits should you offer? Spoiler—it’s not a one-size-fits-all approach. The right benefits depend on your team, their needs, and what will make them feel valued.

Let’s break it down into the essentials.

Different types of employee benefits a company should offer

Not all benefits are created equal, but the right mix can make your company a place where employees actually want to stick around. Some benefits are mandatory (thank you, laws), while others are the cherry on top that increase your employee satisfaction. Whether it’s health benefits, paid time off, or career growth opportunities, offering the right perks can boost morale, loyalty, and overall happiness.

Let’s dive into the key categories of benefits every company should consider. 

1. Mandatory employee benefits

Let’s start with the essentials—the benefits you have to provide by law. These may not feel glamorous, but they’re the foundation of any solid benefits package.

– Social Security, Medicare, and FICA contributions

Every paycheck your employees receive comes with these deductions. Why? Because they’re funding their future. Social Security provides financial support during retirement, while Medicare ensures health care coverage later in life. 

Employers and employees share this responsibility through FICA (Federal Insurance Contributions Act) taxes:

• Social security tax: Employees contribute 6.2% of their wages, and employers match it for a total of 12.4%.
• Medicare tax: Employees pay 1.45%, and employers match it for a total of 2.9%.
• Additional Medicare tax: For employees earning over $200,000 annually, an extra 0.9% is deducted, but employers don’t match this.

These contributions ensure employees have a safety net for retirement and medical care when they need it most.

– Workers’ compensation insurance

Accidents happen, even in the safest workplaces. Workers’ compensation ensures employees have medical coverage and income replacement if they’re injured on the job. For employers, workers’ compensation insurance provides financial security—it covers medical expenses and lost wages for injured employees, reducing legal risks and ensuring a safer, more supportive workplace.

– Unemployment insurance

Nobody likes to think about layoffs, but unemployment insurance offers a safety net when jobs are lost. While the exact rules vary by state, it’s there to help employees stay afloat while they get back on their feet.

– Family and Medical Leave Act (FMLA) requirements

Life doesn’t stop at work. FMLA ensures eligible employees can take unpaid, job-protected leave to welcome a child, care for a sick family member, or deal with a personal health issue. 

2. Retirement and financial benefits plans

Money might not buy happiness, but financial stress can certainly steal it. 

A PwC survey found that 57% of employees say finances are the top cause of stress in their lives. Among those feeling the pinch, 56% spend three or more hours a week at work worrying about their personal finances. 

That’s time—and peace of mind—you can help them reclaim with the right financial benefits.

Here’s what to consider offering:

– Retirement savings plans: 401(k) and pension plans

Retirement may feel far off for many employees, but giving them tools to build financial security is huge. A solid 401(k) plan with employer contributions shows you’re invested in their future, not just their present. If you want to go that extra mile, pension plans are a great way to provide long-term support and stability.

– Stock options and profit sharing

Want employees to care about the company’s success as much as you do? Give them a piece of the pie. Stock options and profit-sharing programs align their interests with the company’s growth, turning jobs into something more personal.

– Financial literacy and emergency fund programs

Knowledge is power—especially when it comes to finances. Offering workshops on financial literacy or programs to help employees build emergency funds can make a world of difference. Think of it as a proactive approach to reducing their stress.

3. Work/life balance benefits

Picture this: Your Gen Z employee nervously walks up to you and says, “I need two days off to help my new puppy adjust. He’s got separation anxiety.” You pause, blink, and think. Is this a thing now? Spoiler: it is. 

Companies like 9Sail are already offering Pawternity Leave—two days off to help employees bond with their pets. And honestly, it’s kind of genius. 

Cisco is another great example of a company that takes work-life benefits many notches up. They offer Grandparent Time Off, providing three days of paid leave for every new grandchild. For Charles, a director at Cisco, this policy means he’s been able to meet four grandchildren without worrying about work—and he’s ready to use it again for number five. It’s a small but impactful way to say, “Your family matters.” 

These kinds of benefits aren’t just cute stories—they reflect a deeper trend. Work/life balance is no longer optional; it’s expected. Bloomberg reports that 49% of Millennial and Gen Z workers would consider quitting if remote work weren’t an option. Meanwhile, 53% of remote-capable jobs are now hybrid, according to Gallup.

If your workplace doesn’t respect the balance employees need, they’ll find one that does.

Now, look at Buffer, a company redefining work/life balance. They don’t just “offer” vacation time—they demand it. Employees are required to take at least three weeks off every year because burnt-out employees are bad for business (and everyone else’s sanity).

4. Health and wellness benefits

Picture this: Sarah, a Starbucks barista, has been juggling everything—work, family, bills, and the constant buzz of a coffee shop. But last week, she booked her first free therapy session through Starbucks’ Lyra Health care programme. After an hour with a therapist who actually gets it, Sarah walked out feeling like she could breathe again. For the first time in weeks, she didn’t just survive her shift—she thrived.

That’s the power of health benefits. They’re not just perks; they’re lifelines. They turn stress-filled, overwhelmed employees into focused, energized team players who are ready to bring their A-game.

Why health and wellness benefits matter

1. Mental clarity fuels success: Offering therapy sessions or mental health days helps employees like Sarah tackle life’s challenges. It’s no wonder companies that invest in mental health see happier, more productive teams.
2. Boosted productivity: When employees feel good, they work better because 65% of employees say wellness programs improve their productivity 
3. Loyalty built on care: Benefits like mental health support, gym memberships, or even on-site yoga classes build trust and show employees you’re in their corner.

Now, let’s take it a step further. Picture offering gym credit like Apple, encouraging employees to recharge with a spin class or a jog. Or creating a monthly wellness stipend to cover everything from meditation apps to fitness gear. 

The truth is, when you care about your employees’ well-being, they’ll care about your business. And that’s a win everyone can get behind.

5. Professional development benefits

Meet John. He’s a talented, mid-level manager at a tech startup—but lately, he’s felt stuck. His ideas are good, and his work is solid, but he craves more. Then, his company rolls out a tuition reimbursement program for employees looking to upskill.

John dives in headfirst, enrolling in a leadership certification course. Six months later, he’s bringing innovative strategies to team meetings, mentoring junior colleagues, and stepping up as a future leader. For the company, it’s a no-brainer—they’ve invested in John, and now he’s investing back into their success.

This is exactly what well-thought-out professional benefits can do for your team and business.

Why professional development benefits matter

1. Keep your top talent: Ambitious employees like John are less likely to jump ship when they see growth opportunities.
2. Build better leaders: Paid training and mentorship programs create a pipeline of confident, capable leaders ready to take on challenges.
3. Attract the best: People don’t just want jobs; they want careers. Development programs draw candidates who value growth.
4. Boost morale and skills: Learning opportunities make employees feel valued while giving them the tools to excel in their roles.

What could you offer?

• Tuition reimbursement: Companies like Amazon pre-pay up to 95% of tuition for employees pursuing high-demand skills through their Career Choice program.

• Access to learning platforms: Provide free subscriptions to LinkedIn Learning, Coursera, or other professional development tools.
• Internal growth programs: Host leadership workshops, mentorship opportunities, or skill-building projects that align with company goals.

How to manage your employee benefits effectively – Best practices

Managing employee benefits doesn’t have to be complicated, but it does require a proactive approach. A well-designed benefits program can boost morale, improve retention, and make employees feel valued. Here’s how to make the most of your program:

1. Keep it relevant

Employee needs change, and your benefits should, too. Regularly reviewing and updating your offerings ensures they stay useful and competitive.

✔ Survey employees annually to understand what benefits matter most to them.

✔ Benchmark against industry trends to stay competitive with evolving benefits.

2. Make it easy to understand

Even the best benefits won’t be used if employees don’t understand them. Clear communication is key.

✔ Create a simple benefits guide that breaks down offerings in plain language.

✔ Host quarterly Q&A sessions to help employees maximize their benefits.

3. Use technology to your advantage

Modern tools can simplify benefits administration for both employees and HR teams.

✔ Implement an HR software platform for self-service enrollment and tracking.

✔ Automate reminders for benefits deadlines like open enrollment and FSA contributions.

Pro tip: If you’re looking to streamline your HR processes, check out this guide to choosing the right HR help desk software.

A great benefits package only works if employees use it. Keep it fresh, easy to access, and powered by the right technology to make a real impact.

4. Measure what matters

Do your benefits actually make a difference, or are they just nice-to-have perks? Tracking key metrics ensures your offerings aren’t just attractive on paper—but valuable in practice.

✔ Employee satisfaction scores – Run regular surveys to gauge how employees feel about their benefits.

✔ Utilization rates – Measure how many employees are actually using health plans, wellness programs, and other perks.

✔ Employee retention rates – If your turnover is high, your benefits might not be as effective as you think.

✔ Feedback loops – Ask employees what’s working and what’s missing, then adjust accordingly.

The goal isn’t just to offer benefits—it’s to offer the right benefits that truly support your team. Keep tracking, keep refining, and keep delivering what employees actually need.

Emerging trends in employee benefits

Employee expectations are evolving, and companies are stepping up with benefits that reflect these changes. Here’s what’s shaping the future of employee perks:

1. Mental health and well-being programs

Mental health is no longer an afterthought. Companies are expanding therapy options, offering meditation apps, and even creating mental health days. It’s a direct response to increasing employee burnout and a step toward happier, more productive employees.

2. Financial wellness initiatives

Student loan repayment programs, emergency savings plans, and financial literacy workshops are becoming standard. Employees who feel financially secure are more focused and engaged.

3. Personalized benefits

Gone are the days of one-size-fits-all perks. Companies now offer customizable benefits packages, allowing employees to choose what matters most—whether it’s childcare support, gym memberships, or additional PTO.

4. Sustainability-focused perks

As eco-consciousness grows, benefits like bike-to-work programs, public transport subsidies, and carbon offset plans are becoming popular. These perks appeal to employees who value sustainability and align with corporate responsibility goals.

5. Flexibility as a standard

Flexible schedules, remote work, and hybrid options are now expectations, not extras. Companies embracing flexibility have a competitive edge in attracting top talent.

6. Integrating DEI (Diversity, Equity, and Inclusion)

Companies are weaving DEI principles into their benefits strategies. This includes offering:

• Coverage for fertility treatments or adoption support for LGBTQ+ employees.
• Floating holidays to accommodate diverse cultural and religious practices.
• Accessibility-focused benefits for employees with disabilities, such as ergonomic office equipment or assistive technologies.

These trends are shaping the modern workplace, ensuring that benefits go beyond perks to genuinely improve employees’ lives. By staying ahead of these shifts, companies can attract, retain, and support the best talent in a changing world.

Want to brainstorm even more quirky perks for your employees? Check out this Reddit thread where people share some of the coolest company benefits they’ve seen—it might just spark some ideas.

Simplify your employee benefits management with Hiver

Managing employee benefits can get overwhelming—but it doesn’t have to be. With Hiver, your HR team can streamline employee communication, improve response times, and enhance the employee experience—all within your inbox. Here’s how Hiver can help:

1. Shared inboxes for seamless communication

Handle employee inquiries about benefits effortlessly. With Hiver’s shared inbox feature, your HR team can:

• Collaborate seamlessly with Email Notes
• Assign emails to designated team members
• Provide quick and accurate responses to employee questions, ensuring no query goes unanswered.

2. Workflow automation to reduce manual effort

Say goodbye to manual tasks. Hiver lets your team automate repetitive processes like:

• Setting up automated responses for common questions about company benefits
• Tracking and following up on pending requests without manual effort
• Categorizing incoming employee emails into tags like “Payroll & Compensation”, “Healthcare & Insurance,” “Policy & Compliance,” etc.

This not only saves time but also reduces the risk of human error.

3. Analytics for data-driven decision making

Data drives decisions. Use Hiver’s Analytics to:

• Monitor response times to employee benefits inquiries
• Identify recurring issues or gaps in benefits communication
• Optimize HR workflows based on engagement trends

4. Knowledge base for employees to help themselves

Empower employees to self-serve. With Hiver’s knowledge base feature, you can create a centralized repository of FAQs, policies, and guides. Employees can access answers to common questions anytime, reducing reliance on HR.

Ready to make managing benefits a breeze? Start your free trial with Hiver today!

Stronger teams, happier employees: The power of the right benefits

Great benefits are more than just boxes to check—they’re how you tell your employees, “You matter.” From providing financial aid to offering growth opportunities through tuition programs, the right perks transform workplaces into communities.

When you invest in your people, they’ll invest right back into your success. Now that’s a win-win!

*(Gallup’s State of the Global Workplace)*