Select Page

What are employee benefits and why are they important?

benefits of employee

Unemployment is a difficult situation to be in. This is what pushes many people to take ‘whatever they can get’ — after all, dire times require prompt solutions. An unfortunate side-effect of this is that some employers take advantage of the lack of knowledge on benefits, and people end up with jobs that don’t afford them the basics that they’re entitled to. 

Times are certainly changing as more employees inform themselves about the benefits they’re entitled to and prevent employers from taking advantage of them. So, what are employee benefits and why are they important? Let’s talk about it.

What are employee benefits?

According to Ben, an all-in-one platform for any company to personalise benefits and rewards, employee benefits can be defined as “a form of non-salary related compensation” given to employees in addition to traditional salary, forming part of total rewards. “Employee benefits are used to attract talent, reward your existing team, and as a way to support employee physical and mental health and wellbeing.”

As we mentioned before, more and more employees are informed on what employee benefits are and how they work, making employee benefits, perks and compensation packages a vital part of ensuring an organisation’s success. How? 

For one thing, employee benefits are a great way to attract the best talent in the market. In the same way, the benefits a company offers could also help retain the top talent under it. It boosts morale and keeps employees happy, while also ensuring their well-being — and preventing a tidal wave of litigation. 

In fact, according to PeopleKeep’s 2022 Benefits Survey Report, 83% of participants stated that an employer’s benefits package was an essential factor in whether or not they accept a job. Basically, if a company isn’t offering great benefits, it will struggle to hold on to and onboard great employees.

Benefits come in all shapes and sizes, such as maternity leave, paternity leave, health insurance, profit sharing, etc. But this doesn’t mean that all employee benefits are entirely up to employers to hand out, however, they feel like it. 

There are certain benefits that are required by law — which can also change depending on the country or even across areas within a country — such as social security contributions made by employers on behalf of their employees. Others, of course, are additional/fringe benefits, or ‘perks’.

But how did these benefits come about? 

The exact moment employee benefits came to life is hard to trace back, but an interesting piece on the very first benefit recorded for workers states it happened during colonial times back in 1797. Then-Secretary of the Treasury Albert Gallatin formulated America’s first profit-sharing plan. This incentive plan meant companies would distribute part of the profits amongst their employees on top of their salaries.

It wasn’t until 1877 that the first employee health plan came to be. Following this, other benefits like paid vacations, stock options, parental leave, and more made their way into organisations, all throughout the 20th Century. 

We see new benefits arising, adapting to the current climate and needs of the people, such as Diversity, Equity and Inclusion (DEI) programs and remote work and internship options.

Just as new benefits keep entering the arena, some have been on the decline. This includes ones like flexible spending accounts, domestic partner benefits, and housing benefits. 

Why are benefits important? 

To dive further into the importance of employee benefits, we spoke to Ben’s VP of Growth Lukas Roth, who provided an industrial insight into how benefits are decided on and how they impact companies.

Lukas Roth

Ben VP Growth Lukas Roth

Ben’s approach focuses heavily on flexibility while integrating automation so that the platform does most of the heavy lifting in the process. 

Speaking on the primary pain point Ben addresses, Lukas said, “The main question was how do we make sure that the benefits we pay for are suitable, that people actually make use of them? If you’re paying health insurance for an employee, for example, they actually become a pretty significant cost burden on a company.”

“What we initially came out with was this card product — the allowance product — which is still part of the proposition. The idea here is very much to let people actually choose where to spend their budget. Because at the end of the day, they choose to spend on what fits their needs. This way, both the employee and employer get value from it.”

When asked about how companies decide on which benefits to offer, Lukas explained how Ben always recommends their clients ask their employees first. “First and foremost, ask your employees what they want and what they value. Then try and structure that program around the needs of your employees. We are seeing a shift with the new generation — the younger members of the workforce — where there is a greater emphasis and much higher expectations on employers taking care of their staff.”

This includes looking after their health and well-being. If an employer doesn’t deliver on these vital areas, they’re likely to witness a downward shift in employee retention and difficulties in maintaining company loyalty. This is a clear sign that employee benefits are only becoming more relevant with time.

“This is a major factor in attracting talent. If you have a very poor benefits offering — if you’re just offering coffee and cookies — and another company offers more comprehensive benefits, even with a lesser salary, it just sends a very different signal to the employee. They may think, ‘hey, this company has a great culture. They seem to care’.”

Ben works with many tech businesses, and what Lukas observed was how vital employee benefits are for these businesses — particularly in terms of retaining talent. “Tech companies are often forward-thinking businesses that are in a highly competitive talent market. Tech businesses are always competing over the finite resource of strong tech talent. So, they understand the need for it. They needed to differentiate their employer brand and compete in the market. They also have the budgets for it.”

On the other hand, when you shift towards blue-collar work, where the salaries tend to be at the lower end, it’s less so as their budgets tend to be much smaller — drastically lowering the number of benefits the sector can afford to offer.

For Ben, this posed a different challenge. “There are times when we have to educate them on why they need to offer benefits in such a way. That’s the difficult part for us. We know that companies spend a lot of time and money on admin.” 

Despite all the talk about benefits in recent years, there is still a general unawareness regarding them amongst the public. This affects those who are just entering the job market the most.

boost morale

For this situation, Lukas offers some advice on assessing whether or not what they’re getting is fair, comparable and of value to the individual. “Fundamentally, you need to know what you value. I think that also determines the countries you want to work in. In North America, a very competitive market, for example. If you’re young in your career and very ambitious, it’s a great jumping board to work with and learn the ropes. If holidays and time off are some things that you value, then it’s probably not the market where you want to be in.”

Taking healthcare as an example, he elaborated: “Not every country has free universal healthcare, so healthcare could be very expensive. If you’re just entering the job market, you may not have the funds to pay for private healthcare. In such a scenario, companies offering healthcare as a benefit would be valued much higher.

There are also statutory benefits to consider. “I would also advise to, depending on the markets you’re in, be aware of things like statutory holidays, which could differ across countries.”

Another benefit to be aware of that some companies offer their employees is equity compensation, which is a non-cash compensation, such as restricted stock, offered to employees. “Equity is a benefit of sorts. So, if you struggle with negotiating your salary and you’re really committed to being at this company, growing with the company because you believe in their vision and you can see yourself there for four or five years, negotiate on your equity instead.”

He added, “Early-stage startups will probably in, in most cases, tend to be a lot more generous on the equity side in the early days, and there’s obviously bigger upside potential for you there as well. If you’re sticking around anyway, you know, assuming the business succeeds, then you might even have a much higher reward down the line than trying to get a few more grand on your base salary.”

Final thoughts

It’s vital that you are aware of what you are entitled to as an employee of a company.  Informing yourself of what you’re assured is a good measure for preventing your employer from taking advantage of you. 

Pay attention to what benefits are being offered by companies you’re applying to. Is there health insurance coverage available to you? Are there retirement plans? How much paid time off do you get? What about parental leave?

Ask yourself what you consider more valuable as you explore the benefit options at hand. It will also help you to compare with other companies in the same industry and see if they’re matching what others are offering.

Finally, if you get selected to join a company, ask questions about your benefits and sort out any grey areas before agreeing to anything. 



Kahless is a writer with a special interest in sociology. He spends much of his free time travelling, reading, writing, and stopping his cats from ripping apart everything he owns. It’s advised to bring along a strong cup of coffee (3 espresso shots minimum) when approaching him.

Keep reading