An employee benefits package can be a big deciding factor for individuals when they are looking for the next opportunity. If you are an employer, it’s important to know what benefits will matter most to your employees.
What Are Employee Benefits?
Employee benefits are the compensation provisions that employers provide in addition to basic pay. These can take many forms. These usually will include pension, medical, dental, vision and other similar plans. They can also include additional pay based on the profit in the company. They can also include items like car allowances, telephone packages, pet insurance. All of these can be called fringe benefits.
The Importance of Employee Benefits Packages for Employers
The importance of an employee benefit package is often underestimated. It encompasses the monetary and non-monetary advantages that an employer offers to their employees. It helps attract and retain employees as well as keep them healthy and productive.
Employee Benefits Packages
The cost of benefits packages for employees will depend on the company, the number of employees at the company, and the type of employees. These packages tend to take the form of either an insurance program or a health spending plan. These two systems are very different.
Employee benefit insurance plans are programs that are set up with health insurance companies. Sun Life is one such provider. Your local Chamber of Commerce can also be a provider. These programs will include a whole program of life insurance, health insurance, dental insurance, and other features. These programs all contain maximum amounts for each benefit. The employer than pays a monthly fee. The monthly fee is determined based on the number of employees, the types of benefits and the claim history of the company.
The other approach that is used is called the Health Spending Plan. This is different from the insurance programs in that the employer pays out based on the actual claims to the program. So, if an employee claims $1,000 of medical expenses, the employers are required to pay the insurance company the $1,000 plus a fee for service which is then paid out to the employee. These programs are more of a pay as you go approach.
Each of these approaches has its own merits and disadvantages.
Common Types of Compensation Packages
Compensation packages are part of an employee’s benefits package. They are meant to provide the employee with financial rewards for their work.
Profit-sharing is a common means that employees will receive additional pay based on the profits of the company. These systems tend to pay an amount that is independent of the employee’s performance. A performance bonus is another way to provide additional compensation. This system is based on the employee reaching certain targets set by their company. Christmas bonuses are also another example where employees receive money as a gift.
The ultimate goal of a compensation package is to provide the type of monetary reward that will pique the interest of a candidate for a given job. That means that companies have to think about what type of salary and benefits would best suit the needs of that candidate.
Other Soft Benefits to Consider
It is not uncommon in today’s competitive market for employers to offer a list of soft benefits. In fact, many new employees will enquire about them before making a decision to join your company. These soft rewards make it more enticing for your staff to stay even if you don’t always offer the highest salary.
Soft benefits include workplace flexibility, flextime, flex days, special summer hours, continuous education, paid overtime, TOIL (time off in lieu of overtime), performance rewards, paid cell phones, fuel allowances, or a company vehicle. Be aware of the fact that all of these benefits will come with their own tax consequence so you should consult your tax adviser before implementing these benefits.
The Bottom Line
In the past, small businesses have managed to get away with not having a clear compensation structure. In today’s highly competitive market, that is no longer an option. With more and more employees looking for the best benefits possible, a company should have a clear idea of what their employees will be receiving in terms of pay and benefits.
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