The Advantages & Disadvantages of Employee Benefits

Employee benefits are forms of nonsalary compensation that companies may choose to offer their employees. This may include more standard benefits like medical insurance, 401(k)s, maternity leave and paid holidays or the types of fringe benefits that have become increasingly common in businesses since the rise of Silicon Valley, which can include things like onsite child care, catered lunches, massages and free gym memberships.

When deciding whether to offer these options to your employees, it is important to consider the advantages and disadvantages of benefits before making a final decision.

Advantages of Benefits

Recruiting and training new employees is expensive, so it is cost effective to retain employees, and offering a good benefits package is a good way to do exactly that. These perks can also make recruiting new and high-quality employees easier since people often want to work for a company that offers good benefits. In fact, sometimes employees prefer to work for a company with a lot of benefits that doesn't pay as much over a company that pays more but offers fewer benefits.

Benefits can make employees feel valued, more motivated and more dedicated to a company, meaning they will not only be less likely to leave for another employer, but they will also work harder. Additionally, certain fringe benefits like massages, onsite child care, catered lunches and yoga classes can reduce employee stress levels, which will help ensure your employees don't burn out so they can keep contributing to their full capacity.

Finally, health insurance, gym memberships and other benefits that improve the health of your employees will translate into fewer sick days and increased productivity.

Disadvantages of Benefits

Of course, while there are many advantages to offering benefits, there are also downsides. One big one is that while some employees are willing to accept smaller salaries in exchange for more benefits, other employees would rather have a larger paycheck that they can use for any purposes they see fit.

Offering benefits also requires additional administrative efforts and increased costs to ensure they are properly administered. Also, some benefits are strictly regulated by the government, meaning you will have to ensure your company complies with these rules, or you may risk paying high penalties. You may even need to hire an attorney to ensure you are following all the rules.

The Cost of Benefits

The cost of offering nonsalary compensation is both an advantage and disadvantage of employee benefits for an employer. Obviously, it costs companies more to provide these benefits to workers, but at the same time, sometimes these perks can be less expensive than giving everyone increased financial compensation.

For example, offering workers a weekly lunch may cost no more than $10 per worker, which is less expensive than offering even a $1 per hour wage raise, but it could be enough to make your staff feel more loyal to your company than another job that pays more money.

It is also worth noting that many benefits such as those involving health, dental, retirement and life insurance may present your company with tax deductions that can help offset the cost of the benefits themselves. On the downside, though, certain benefits may increase in price drastically from year to year, such as health insurance, and you may eventually be forced to choose between paying more and more or discontinuing these benefits, which will likely hurt employee morale and could increase employee turnover.

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About the Author

Jill Harness is a blogger with experience researching and writing on all types of subjects including business topics. She specializes in writing SEO content for private clients, particularly attorneys. You can find out more about Jill's experience and learn how to contact her through her website, www.jillharness.com.