Small Business Glossary and Definitions

What are Employee Benefits?

Employee benefits are non-cash or indirect compensation an employer offers an employee in exchange for work performance. An employer offers benefits as a means to attract qualified employees in a competitive marketplace.

Employers are required by law to provide certain employees benefits, including an equal share of Social Security taxes, Workers Compensation, Unemployment Insurance and, through the Family and Medical Leave Act, work leave for qualifying reasons. Some states also require that employers provide Disability Insurance.

Other non-cash or indirect compensation are at the employer’s discretion. An employer assesses its business needs, analyzes the competitive workforce environment, and makes strategic decisions on what benefits to offer employees at a cost it can afford. Most employers, for instance, will offer paid federal holidays, vacation, and sick time as part of a basic benefits package.

Benefits that help attract and retain employees include healthcare insurance programs, retirement plans such as pension funds or 401(k) plans, paid leave, tuition reimbursement for continuing education, daycare or eldercare, legal services, employee assistance programs for various counseling services, and flexible work arrangements.