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Definition: Employee benefits are payments employers make to employees that are beyond the scope of wages. Typically, employers pay employees and hourly wage or a salaried wage. These wages can be based on the amount of time the employees worked or even the employees’ performance. Wages are only one part of an employee’s total compensation package.

What Does Employee Benefit Mean?

Many employers pay a portion or all of the medical, dental, optical, life, and disability insurance premiums for their employees. Since medical insurance rates have risen in the past two decades, medical insurance is one of the most sought after employee benefits.

Example

Another common employee benefit is a retirement plan or  pension plan . Employers often contribute a small percent of employee wages to a retirement plan of the employee’s choice. Typically, employers match employee contributions up to 3 percent. Retirement plans like 401(k)s and IRAs are basically savings accounts that allow employees to save money tax free until they retire. Pension plans are slightly different than retirement plans in that a pension plan is a fund that makes regular payments to the employee indefinitely after they retire. Most employers have stopped offering private pension plans because of the increasing cost. Pension programs are more commonly found in government organizations like school systems.

So why are employers willing to pay all this extra money to employees? Most individuals can’t afford to buy group insurance plans on their own. The same is true about retirement. Businesses offer employee benefits to attract talented and dedicated employees to their company. Google, for instance, offers fully functional cafeterias where employees can eat three meals a day for free.


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