Employee Benefits: A Key Part of Job Compensation

During this “Great Resignation” era when many workers are changing jobs or considering a job change, it is more important than ever to consider various types of employee benefits and their economic value.  

Also known as “fringe” (short for fringe benefits) or “perks.” employee benefits generally equal 25% to 50% of a worker’s gross pay. Thus, they are a key part of workers’ total compensation package.

Purposes of employee benefits include:

¨    recruit and retain talented employees (e.g., total benefits package)

¨    enhance workers’ financial security and health (e.g., health insurance)

¨    improve employee morale (e.g., paid vacation)

¨    increase productivity (e.g., profit sharing) and human capital (e.g., educational benefits and training)

¨    improve an employer’s reputation as a good place to work for and do business with (e.g., flexible work hours)

 

Below is a description of ten common employee benefits and benefit-like policies in the current labor market:

Paid Vacation- This is one of the most common employee benefits.  Workers receive their usual pay but are allowed a certain amount of time (e.g., one to four weeks) off from work.  Often, the number of paid vacation days is based on years of service and increases with seniority. Vacation pay is part of a worker’s income and is fully taxable on federal and state income tax returns.

Paid Sick Leave- With this benefit, workers are paid but allowed to stay home when they, or sometimes a family member, are sick.  Leave may be uniform for all employees (e.g., 10 days per year) or based on years of service. Some employers allow workers to accumulate sick leave. Others take a “use it or lose it” approach where sick leave cannot be carried forward to future years. Like vacation time. sick day pay is fully taxable.

Paid Personal Days- This is a third type of  fully taxable paid leave. Some employers provide a certain number of annual  personal days for family emergencies or time-consuming activities (e.g., moving, jury duty or other court-related business, doctor’s visits, attending a wedding or funeral, house closing, travel snafus, and a child’s or pet’s illness). Workers may also use personal days when they run out of vacation or sick leave and need extra time off.

Holidays- Many employers provide a fixed number of paid holidays. These days are generally for national celebrations (e.g., New Year’s Day, Memorial Day, July Fourth, Labor Day, Thanksgiving, and Christmas). Some employers also purposely shut down their operations for week or two (e.g., colleges and universities around the holidays and some factory production lines) and pay their workers during this time.

Family Leave- The Family and Medical Leave Act requires employers with 50 or more workers to provide up to 12 weeks of unpaid leave.  To qualify, employees must have worked at least one year. Family leave allows time off to care for a newborn, a new adopted or foster child, or a seriously ill family member. It also provides unpaid leave when employees, themselves, are too sick to work.

Unpaid Leave- Workers may be able to negotiate time off without pay for reasons unrelated to family and medical leave.  Unpaid leave requests are often handled on a case-by-case basis. An example might be an employee who wants to take an extended road trip with friends or another who needs an unknown amount of time off to care for a sick or dying relative.

Educational Benefits- Many employers encourage their workers to learn new skills and pay tuition for college courses or specialized training. Some, not only cover tuition, but even allow workers “release time” to attend classes during business hours. Workers typically have to submit documentation of a passing grade or attendance. Paid sabbaticals are also available through some employers where workers get time off for extended study, community service, or creative projects.

Telecommuting- In the wake of the pandemic, liberal telecommuting policies are now being viewed as a key employee benefit. Workers who save two hours of driving and a half a tank of gas per day will save hundreds of hours of unproductive time and hundreds of dollars. Increasingly, employers are shifting to hybrid models where employees work at home for two or three days and in an office for two or three days. Some even allow workers’ pets at the office!

Flexible Hours- According to a recent study, 95% of workers want flexible work hours; even more so than they want remote work locations. More employers are increasing workplace flexibility in an effort to recruit and retain workers.

Company-Specific Perks- Another type of employee benefit are those related to an employer’s product or service line. Think discounts at retail stores and car dealers, free travel for airline employees, free or reduced tuition for college and university employees, stock or stock options for corporate employees, and free or reduced-cost company swag.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.