Definition of Employee Benefits

Definition of Employee Benefits

What are employee benefits?

Employee benefits are perks provided to employees in addition to their regular wages or salary. Frequently referred to as “benefits,” employee benefits can be tangible or intangible. Oftentimes, they are provided at the employer’s discretion. However, there are some that are mandatory.


Tangible benefits can be assigned a monetary value, meaning you can quantify and measure their financial worth. They are given directly to employees to incentivize performance.

They include:

  • 401(k) contribution match
  • Cash bonuses
  • Free merchandise
  • Gift cards
  • Gym membership
  • Health insurance
  • Life insurance
  • Paid time off
  • Pay raises
  • Profit sharing plans


These are benefits that do not have a quantifiable or measurable value. Intangibles appeal to an employee’s emotional and psychological needs, thereby increasing employee fulfillment and job satisfaction.

They include:

  • A healthy work environment
  • Autonomy
  • Career advancement
  • Flexible work options
  • Praise or thanks
  • Recognition awards
  • Training and development
  • Work-life balance


These are resources that an employer chooses to offer its employees.

Voluntary benefits include:

  • Commuting/travel reimbursements or allowances
  • Dental insurance
  • Disability insurance
  • Education assistance
  • Flexible spending accounts
  • Life insurance
  • Medical insurance
  • Mental health benefits
  • Paid time off
  • Retirement plans
  • Student loan repayment assistance
  • Vision insurance
  • Wellness programs


The federal, state, or local government requires the employer to provide these benefits. Which ones the employer must offer depends on various factors, including:

  • Business location
  • Employees’ geographic work location
  • Employer industry
  • Number of employees

Mandatories may include:

  • Bereavement leave
  • Continuing health insurance
  • Family and medical leave
  • Paid sick leave
  • Parental leave
  • State-sponsored retirement plans
  • Time-off to vote
  • Workers’ compensation

Why employee benefits are important to small businesses

Employee benefits play a vital role in a candidate’s decision to accept a job. Similarly, they significantly influence whether an employee will stay with their employer or leave. In fact, some employees prefer benefits over extra pay. For many, they are just as crucial as salary.

Employee benefits can help your small business:

  • Attract qualified candidates
  • Become an employer of choice
  • Enhance your public image
  • Improve productivity
  • Increase employee engagement
  • Reduce turnover
  • Remain competitive in your industry
  • Strengthen employee satisfaction

The history of employee benefits

According to 1 report, employee benefits trace back to the BCE era, when Caesar Augustus offered retiring legionnaires a strong pension to ward off potential rebellions.

Additional findings include in:

  • 1739, the Bank of England rolled out a pioneering pension plan.
  • 1875, American Express Company provided its employees the first US corporate pension plan.
  • 1912, the Montgomery Ward Company (in Chicago) offered its employees an employer-sponsored life insurance plan.
  • 1919, the International Labor Organization called for job protections for pregnant and nursing mothers, including paid maternity leave plus free prenatal and natal care.
  • 1920, the US federal government developed a pension plan for its employees.
  • 1932, the National Labor Relations Act (NLRA) was enacted. It later included health benefits as a mandatory collective bargaining issue.
  • The 1930s through the 1940s, US surgeon Sidney Garfield and industrialist Henry Kaiser established the Permanente Health Plan — the leading HMO today.
  • The 1980s to the present, many US benefits legislations have been enacted, including the Employee Retirement Income Security Act (ERISA), the Consolidated Omnibus Budget Reconciliation Act (COBRA), the Family and Medical Leave Act (FMLA), and the Affordable Care Act (ACA).

Other terms similar to employee benefits that can assist you

  • Employee benefits satisfaction: The level of satisfaction an employee feels regarding the resources they receive from their employer.
  • Workplace perks: Extras offered to employees beyond pay and required resources. They may include free snacks, flexible hours, onsite daycare, and employee discounts.
  • Compensation package: An employee’s pay and benefits inclusions, such as hourly wages or salary, health insurance, 401(k), paid time off, etc.
  • Employee benefits software: Employers use a software system to administer their employee benefits program.
  • Benefits compliance: The process of adhering to applicable employee benefits laws established by the federal, state, or local government.
  • Cafeteria plan: A documented plan that allows employees to pay for certain resources (e.g., traditional 401(k) and health insurance) with pretax dollars via payroll deduction.
  • Health insurance plans: An insurance contract in which the insurer pays some or all of the policyholder’s healthcare costs, so long as the policyholder pays a premium.
  • Benefits brokers and providers: Professionals and vendors that provide solutions to employers and organizations.
  • Employee benefits benchmarking: The process of analyzing how your programs stack up against other employers in your industry (or in similar ones).

Summary of definition

Employee benefits are monetary or non-monetary compensation provided to employees to improve job performance and employee satisfaction. They can be voluntary and are provided at the employer’s discretion. Or they can be mandatory, meaning a governmental body requires the employer to offer them.

By providing these resources, small businesses can:

  • Attract talented people
  • Boost engagement and productivity
  • Decrease employee turnover
  • Edge out the competition during recruitment and after hiring
  • Elevate the business’ reputation

Similar Glossary definitions you must know

Ancillary benefits

Add-ons that enhance an employee’s job-based health insurance plan. They may include:

  • Critical illness insurance
  • Dental insurance
  • Life insurance
  • Long-term insurance
  • Vision insurance

Benefits administration technology

An automated system that HR professionals can use to reduce paperwork and streamline the administration process, including open enrollment.


A state-licensed individual who helps employers research, design, and market their packages. Brokers can assist with:

  • Compliance
  • Cost control
  • Custom plan design
  • Employee education
  • Plan implementation

Plan sponsor

From an employment perspective, a plan sponsor is an employer who establishes and offers an employee benefit plan (such as a group health plan or a retirement plan) to its employees.

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