What's Included in an Employee Benefits Package? A Guide for Employers

An employee benefits package is everything an employer offers its team beyond a paycheck: health insurance, retirement plans, paid time off, insurance protection and other perks. Together with salary, it makes up an employee's total compensation package.

For most employers, a benefits package combines a few benefits required by law with a set of benefits you choose to offer to attract and keep good people. This guide walks through the types of employee benefits, what a good benefits package looks like, and how a small or mid-sized business can build one that fits its budget.

Why your benefits package matters

Pay gets candidates in the door, but benefits often decide whether they accept your offer and whether they stay. A strong employee benefits package helps you:

• Attract better candidates. Job seekers compare benefits packages side by side, especially health insurance and retirement.
• Improve employee retention. Employees with benefits they value are less likely to leave for a small raise elsewhere.
• Raise employee satisfaction and productivity. Benefits that reduce financial and health stress help employees feel secure and focused.
• Save on taxes. Many benefits, like employer-paid health insurance and retirement contributions, are tax-advantaged for both the employer and the employee.

For a deeper look at the retention side, see why employee benefits matter for retention.

The four main types of employee benefits

Most benefits fall into four groups: benefits required by law, core benefits employees expect, voluntary benefits, and unique benefits and perks.

1. Benefits required by law

Every U.S. employer with W-2 employees must provide a few benefits, regardless of size:

• Social Security and Medicare. The employer matches employees' payroll tax contributions.
• Unemployment insurance. Federal and state unemployment taxes fund benefits for workers who lose their jobs.
• Workers' compensation. Required in most states. Texas is the one state where it's optional for most private employers, but going without it carries real legal risk.
• Family and medical leave. The FMLA applies to employers with 50 or more employees.
• Health coverage for larger employers. Under the Affordable Care Act, employers with 50 or more full-time-equivalent employees must offer affordable health insurance or risk a penalty.

Our employer's guide to statutory employee benefits covers each of these in detail.

2. Core benefits employees expect

These benefits are optional for smaller employers, but they're what most job seekers look for first:

• Group health insurance. The single most valued benefit for most employees. A health insurance plan covers doctor visits, hospital stays and prescriptions.
• Dental and vision insurance. Low-cost add-ons that employees use often.
• Retirement plan. A 401(k), or a 403(b) for nonprofits, with or without an employer match. A match is one of the most effective ways to help employees save for retirement.
• Life insurance. Basic group life insurance is inexpensive and often employer-paid.
• Disability insurance. Short-term and long-term disability replace part of an employee's income if illness or injury keeps them from working.
• Paid time off. Vacation, sick days and paid holidays.

3. Voluntary benefits

Voluntary benefits are offered through your company, but employees pay for them through payroll deduction. Employees get group pricing and convenience, and the employer adds value at little or no cost:

• Accident and critical illness insurance
• Hospital indemnity insurance
• Additional life insurance for employees and their families
• Pet insurance
• Legal and identity-theft protection plans

4. Unique benefits and perks

Unique employee benefits help a smaller employer stand out against bigger competitors. Many cost little to offer:

• Flexible schedules and remote-work options
• Wellness programs and employee assistance programs (EAPs)
• Professional development and tuition help
• Paid parental leave
• Commuter or phone stipends

Creative benefits work best when they match what your team actually wants. Ask before you add.

What does a good employee benefits package look like?

A good benefits package covers employees' biggest risks, health, income and retirement, and then adds a few benefits your team values most. Here's what a comprehensive benefits package often looks like at different levels:

There's no single "best" benefits plan. The right package depends on your industry, your workforce and your budget.

How to build a benefits package that fits your budget

1. Start with what your employees value. A short survey often shows that health insurance and retirement matter far more than perks.
2. Set your budget per employee. Decide how much you'll contribute each month. Many small employers pay a share of employee-only health premiums and let employees pay to add dependents.
3. Choose your health insurance structure. Options include traditional small group plans, level-funded plans, and health reimbursement arrangements (HRAs). See our guide to level-funded health insurance.
4. Add a retirement plan. Even a simple 401(k) without a match gives employees an easy way to save.
5. Layer in voluntary benefits. They round out the package without raising your costs.
6. Compare carriers side by side. Prices, provider networks and service vary widely for the same coverage.
7. Communicate it clearly. A benefits package only helps retention if employees understand it. Walk your team through it at hiring and open enrollment.
8. Review it every year. Your team, your budget and the insurance market all change.

Frequently asked questions

What are the four types of employee benefits?

The four main types are benefits required by law (like Social Security and unemployment insurance), core benefits (health insurance, retirement and life insurance), voluntary benefits employees pay for, and unique perks like flexible schedules.

What is included in a typical benefits package?

A typical employee benefits package includes health insurance, dental and vision coverage, a retirement plan, life and disability insurance, and paid time off. Many employers also offer voluntary benefits and wellness programs.

Are employee benefits taxable?

Most core benefits are tax-advantaged. Employer contributions to health insurance and retirement plans generally aren't taxed as income to the employee. Some perks, like certain stipends or gift cards, may be taxable. Check with your tax advisor for your situation.

How can I improve my employee benefits package without raising costs?

Add voluntary benefits, an employee assistance program, or flexible scheduling. Re-shop your health insurance each year, since a different carrier or plan design can often deliver similar coverage for less.

Get help building your package

Benefits On Us helps small and mid-sized employers nationwide compare health insurance, retirement and other benefits from multiple carriers, and build a benefits package that fits their team and budget. Book a free 15-minute Discovery Call and we'll walk through your options. No cost, no pressure.