The Advantages of Discretionary Employee Benefits

Discretionary employee benefits include benefits the law does not require the employer to offer. Such benefits might include physical health, mental health and substance abuse, prescription drugs, dental and vision insurance for the employee and her family, life insurance, a pension plan, tuition assistance, and assistance with paying for child care. Employers typically pay for part of the cost of the benefit plan so employees receive coverage at a reduced rate. Discretionary benefits frequently include paid vacations and personal days, too, as well as maternity or paternity leave. They offer employers several advantages.

An employer may offer discretionary benefits to build positive relationships with employees. When employees appreciate their benefit package, they may think more favorably about their employer and take more pride in working for their company. This may cause them to stay with the company longer, rather than leaving because they feel their employer undervalues and undercompensates them. Employers should aim to offer their employees a set of benefits that will prove useful to them. For instance, if applicants tend to include young married people, they will probably appreciate family health and child-care coverage.

Similarly, employers who do not offer the same benefits as their competitors, or better ones, will probably have difficulty attracting and retaining the best employees. A particular set of benefits might be the norm in their field, so providing these benefits, or better ones, might help employers stay ahead of their competition. Advertising an attractive benefits package will probably lead more qualified candidates to apply with the company. The company’s reputation in the field may grow in the process.

Employers cannot predict which benefits their employees will need or want most. The true value of the benefit plan lies in the employees’ perception of its value. Thus, offering an array of discretionary options makes more sense than offering one fixed plan. Furthermore, employers should offer their employees choices of which benefits they want, and allow employees to personalize their plans. For example, employees might have the choice of opting for vision and dental care, and then would make choices about what their individual plan would involve, like the amount of the deductible.

Employees who are both physically and mentally healthier, as a result of preventative health-care benefits, may work more productively. Likewise, employees receiving tuition assistance to further their education in the field will probably become more knowledgeable and productive. Employers are increasingly offering wellness plans, too, which cover benefits typically considered “extras,” like help with quitting smoking, losing weight and managing stress. Such plans may lead to happier, more psychologically and emotionally balanced employees who can work together as a more productive team.