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Benefits 101: What Are the 4 Major Types of Employee Benefits?

Cover your bases by reading up on the major types of employee benefits you should offer to attract and retain talent

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Employee benefits are integral to the employee lifecycle. An enticing package has the power to attract the best talent in the field if they love what you’re offering. But get it wrong, and you’ll send your employees running into the arms of your competitors. President and Co-Founder of H3 HR Advisors, Steve Boese, explains: 

“As the workforce turns over, which it inevitably does, the suite of benefits offerings needs to adapt as well. You can’t just roll out the plans that worked in 1997 when there’s a new generation of people who are much more open and willing to adopt new approaches to how their benefits work.”

Employee priorities have shifted considerably since 2020 to focus on flexibility, work-life balance, and general well-being. A recent MetLife study highlights that 52% of workers now consider health and employee wellness programs a must-have benefit, up 26% from pre-pandemic. Similarly, 51% of employees require their employer to recognize their life outside of work, up from 38% in early 2020. 

Companies that offer the four major types of employee benefits will match this changing sentiment and remain relevant in the future of work. 

What are the 4 major types of employee benefits?

There’s a sea of employee benefits offerings out there, and it can feel overwhelming trying to pinpoint the perks your employees will engage most with. Cover the main bases with these common employee benefits: 

Let’s take a look at each of these examples of employee benefits in more detail. 

1. Health benefits

Top of the list is healthcare, as your employees want and expect their employer to support their physical and mental health. It’s up to you to provide a well-rounded package that meets their needs and protects them from financial ruin if they’re ever faced with unexpected medical bills. Your best bet is to offer a flexible spending account (FSA), healthcare reimbursement arrangement (HRA), or health savings account (HSA) tailored to their specific requirements. 

Your coverage may include a mix of the following: 

Medical care

Employees can expect their medical insurance to include basic medical appointments and prescription coverage. But we’ve also seen a significant increase in telemedicine care, with 93% of organizations offering this benefit, up from 62% in 2018. 

If they need a routine or life-saving operation, a robust medical plan will pay physician and surgeon fees and medical expenses for hospital stays. 

You should also protect your employees’ long-term health by investing in preventative healthcare, such as screenings and vaccinations. All these medical benefit options reduce the risk of serious illness down the line, as described by Kathie Patterson, Chief Human Resources Officer at Ally Financial

"If you’re truly thinking about the wellness of your employees, you want to keep them healthy. That means making sure they’re going for their mammograms, their colonoscopies, their annual checkup. As much as I think every single benefit serves and meets employees where they’re at, make sure your plans provide for preventative care and that you’re educating your employees on the importance of taking care of themselves — on the physical but also on the mental side.” 

Dental care 

Dental coverage is a valuable addition to your health plan to ensure your employees maintain oral hygiene. Employees should be able to access regular checkups, cleanings, and any expensive root canals, fillings, or crowns at discounted rates through their dental insurance. 

Vision insurance 

Vision care is essential for your staff’s safety, health, and productivity. Vision plans typically support eye exams each year and offer discounts on frames, lenses, or contacts to help with the fees associated with optical care. 

Mental health benefits 

SHRM indicates that 91% of companies now offer mental health benefits for employees, up from 84% in 2019 before the emotional toll of the pandemic. Employee assistance programs (EAPs) can provide much-needed support for employees in times of stress or crisis, so consider providing access to online resources and counseling services. 


The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law requiring employers to allow terminated employees to continue receiving their health benefits for up to 18 months or 36 months in special circumstances. Remember to factor these costs into your budget, especially if you’re planning for layoffs. 

2. Financial benefits

Inflation, rising energy bills, and mounting unemployment mean that finances are a significant employee concern. Providing them with access to financial education assistance and supplemental savings plans enables your people to plan ahead and build financial stability both now and in the future. 

Life insurance benefits

Life insurance plans, or accidental death and dismemberment insurance, provide financial protection for employees’ families if the worst were to happen. The insurance company would pay their beneficiaries a lump sum of money to cover funeral costs, any outstanding debts, or other financial burdens. The amount of coverage is usually a multiple of the employee’s annual salary, but it may be possible to purchase extra coverage. 

Short or long-term disability insurance 

There are two types of disability insurance: long and short-term disability, depending on how long the employee is out of work. The plan pays a percentage of the employee’s salary while they cannot work due to an illness or injury.

Retirement plans 

Setting aside money for later in life is essential for any employee when planning a comfortable retirement. In SHRM’s Employee Benefits Survey of 2022, some 82% of respondents selected that retirement benefits were either very or extremely important to them. 

There are various types of retirement plans, including employer-sponsored options: 

  • 401K: This defined contribution plan enables employees to save and invest a portion of their paycheck before taxes. Business owners often match employee contributions up to a certain percentage, and some plans offer tax advantages. 
  • 403(b): Similar to a 401K, this type of retirement plan is available to employees of non-profit organizations, public schools, government sectors, and other tax-exempt organizations. The employee and employer contributions are tax-deferred until withdrawal. 
  • IRA (individual retirement accounts): Tax-advantaged investment accounts enable employees to save for their retirement.

Unemployment insurance 

Unemployment compensation insurance provides temporary financial support to workers who have lost their job through no fault of their own. State regulations may apply to this type of cover, and recipients must prove they’re actively seeking employment as an eligibility requirement. 

Financial well-being support 

Whether planning ahead or struggling with a specific cost of living situation, financial well-being coaching will support your people. Providing access to tools, resources, and practical advice can alleviate the stress of handling money and suggest avenues for improvement and growth. Emily Sivey, People and Talent Lead at financial coaching platform Bippit asserts: 

“Effective and measurable financial coaching helps people feel less stressed, more secure, and more settled in their jobs.” 

Equity and stock purchase plans 

Equity and stock purchase plans incentivize and retain employees by offering them an ownership stake in the company or enabling them to purchase employee stock options at a discounted rate. Especially common in startups, this type of reward can be a powerful motivator for current and prospective employees. 

Peer rewards and recognition programs

Show your appreciation for your people’s hard work by rewarding them with recognition from their peers. A rewards program based on praise or specific achievements works by employees nominating or voting for other staff members who have performed exceptionally. The recipients will exchange their recognition for tangible rewards, such as gift cards or extra days off. 

3. Lifestyle benefits

Flex your muscles by going beyond mandatory benefits or traditional offerings to create a compensation package that caters to your people’s specific needs and interests. A list of employee benefits your organization will appreciate includes: 

Paid time off 

Although there’s no federal government requirement for companies to provide paid vacation days or time off, it is a great way to show you value your employees. Common PTO benefits include vacation time, personal days, sick leave, and time off to vote, attend jury duty, or recover from a miscarriage or bereavement. 

Childcare benefits 

Juggling work with family responsibilities is an ongoing struggle, and flexible work schedules are only one way to support employees with children. 31% of organizations permit workers to bring children to work in an emergency, while 59% provide a dependent care FSA to enable employees to set aside expenses for caregiving. Dependent care benefits such as these are instrumental in delivering a competitive benefits package.

Family planning 

Employees who want to start or grow their family now or in the future will appreciate a family planning benefit. Common types include fertility treatments such as IVF, egg freezing, surrogacy, and adoption assistance. 

Elder care 

The care needs of aging relatives can be a source of anxiety for employees, especially those who also have children to look after. Absenteeism and reduced productivity due to stress are real concerns for employers. To support your team, consider offering a flexible schedule or services like respite care or dependent care assistance plans. 

Food benefits 

Subsidizing or providing free meals can be an effective way to improve morale and productivity. While in the traditional workplace food benefits typically encompass pizza deliveries or catered lunches, the remote working landscape allows for more creative options such as grocery deliveries and meal kits. 

Wellness benefits

As the importance of mental health in the workplace grows, companies now offer their employees wellness stipends that cover areas like counseling, mindfulness, and fitness classes. This ties in with your healthcare plans too. Steven Cardwell, VP of Benefits, Well-Being, and Retirement at Premise Health, explains how the wellness space has evolved over the past decade and the unlimited voluntary benefits you can offer to support your workforce. 

“Wellness was a stagnant space in the field. It was something people knew we needed, but were not sure how to implement it or what we needed to do. Fast forward and the shift of well-being has become a much more comprehensive space than it ever was before. Wellness is no longer just being physically fit, eating right, having a smoking cessation or a diabetes program; now, it’s about meeting team members where they are. We concentrate on physical, nutritional, financial, behavioral, mental health, and particularly social determinants within our well-being program." 

Fitness stipends 

As part of your well-being initiatives, encourage your employees to stay active by providing a stipend to cover the cost of gym memberships, fitness classes, and sports leagues. The stipend may also include purchasing or renting sports equipment. 

Relocation assistance 

To help employees afford the cost of relocating to a new city, state, or country, employers may provide financial assistance by covering moving expenses, temporary housing, language lessons, or visa fees. 

4. Work-related benefits

Companies that have switched from an office workspace to a distributed setup, or something in between, must respond by staying relevant with perks related to the updated work landscape. Some options include: 

Flexible hours 

9 to 5 is no longer the standard for employee productivity. Allow your team to complete their workload at the most suitable and comfortable time. That might mean frontloading their week on Mondays and Tuesdays so they can take Fridays off. Or it might mean working until midnight but taking mid-morning off to go for a run, read, or cook.

Remote working 

Provide your employees with the tools they need to succeed in their home offices by offering a work from home stipend. A remote working program can cover costs for noise-canceling earphones, ergonomic furniture, a new computer monitor, or anything else to kit out their workspace. Employees who don’t excel working from home might prefer to spend their allowance on a coworking space. 

Phone and internet stipends

If your employees use their cell phone or home internet for work and personal use, offer a stipend to cover their monthly expenses. Unlike reimbursements, stipends are paid upfront and require little extra administration.

Professional development 

Allow your employees to pursue their professional development by offering educational assistance to cover the cost of tuition and any exams or certification paths. Whether attending a coding boot camp, a language course, or an industry conference, professional development benefits increase job satisfaction and add essential skills to your team. 

Commuter benefits 

Modern-day commuter journeys have moved beyond subway journeys and bike rides. Offer commuter allowances to cover the cost of Uber and Lyft, electric scooter rental, or public transportation. This way, your employees can travel to and from the office or a coworking space without worrying about the cost. 

Employee referral bonus 

Replicate your team’s success by rewarding your existing employees for recommending suitable job candidates. This could be a bonus reward or a flexible perk that the employee can use. 

How can companies select the perfect benefits mix?

Even within the four major types of employee benefits programs, there’s still considerable choice available. To decide exactly what you want and need, it’s essential to stay focused on why you’re offering benefits in the first place — namely, to support your workers and your company. Emily Sivey elaborates,  

“It’s very hard to get benefits right. You want to choose benefits that support your workforce and enable them to bring their best selves to work (whether that’s working from the sofa or the office, family in France, or beach in Barbados). But benefits are not just a benefit to your team; they’re a benefit to you, the employer, by having a more engaged and productive workforce.” 

Develop a comprehensive employee benefits package strategy to determine exactly what you and your workers require. This will involve: 

  • Defining your company benefits goals and tracking results 
  • Deciding who will receive the benefits (for example, full-time or part-time employees)
  • Determining your cost of benefits 
  • Researching competitor benefits 
  • Prioritizing your must-have benefits 
  • Considering what your employees want and need
  • Providing flexibility in your benefit packages 
  • Ensuring benefits compliance 

Cover all types of employee benefits and perks with Benepass

Whatever your strategy, Benepass offers an entire suite of attractive benefits packages to support your workforce. Whether you’re looking for pre-tax programs such as our flexible spending accounts, or creative perks within our lifestyle spending account, it’s easy to experiment with different types of employee benefit plans in line with the latest trends.  

Ready to become an employer of choice by treating your employees as individuals and giving them the power to select the benefits that matter most to them?

Request a demo or contact our sales team at sales@getbenepass.com.  

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Rebecca Noori

Rebecca Noori is a freelance HR Tech and SaaS writer who is obsessed with our world of work. She writes about everything from employee benefits and performance management to upskilling and productivity tips. When she's not writing, you'll find her grappling with phonics homework and football kits, looking after her three kids.

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