The top five types of employee benefits

Employee benefits are important for enhancing job satisfaction and engagement within an organization. From health insurance to retirement plans, employers can offer several common types of benefits to their employees. However, not all employee benefits are created equal.

Based on results from PeopleKeep's 2024 Employee Benefits Survey, we've compiled a list of the top five types of benefits that are most important to employees.

In this article, we'll cover which employee benefit offerings give the best return on investment. By offering these benefits, employers can create a more attractive and competitive benefits package that will help them stand out in the labor market.

Takeaways from this blog post:

• Health benefits are a top priority for employees, with 92% rating them as important. Offering an HRA as a health benefit can be a cost-effective alternative to traditional group health insurance.
• Dental insurance, paid time off, retirement benefits, and vision insurance are among the top five most important employee benefits.
• By offering these desired benefits, employers can attract and retain top talent, increase employee satisfaction and loyalty, and create a productive work environment.

1. Health benefits

If you want happy employees, offer them health benefits. One of the most sought-after benefits for employees is healthcare coverage. Survey results show that 92% of employees rated health benefits as important. It's also one of the most common employee benefits, with 74% of employers offering them.

Providing access to quality healthcare can help employees feel valued and cared for by their employer. A quality health benefit can also entice more talented employees to join your team.

So, what types of health benefits can employers offer?

Traditional group health insurance

This type of insurance is a popular choice for many employers due to its familiarity. Employers buy group health insurance policies for employees and their dependents. Employees can then choose to opt in or opt out of coverage.

Some of the most common types of health insurance include:

• Health maintenance organization (HMO)
• Preferred provider organization (PPO)
• Point of service (POS)
• Exclusive provider organization (EPO)

Employers looking at group policies may face steep minimum participation rates or high premiums they can't afford. According to KFF¹, the average annual cost of employer-sponsored health insurance premiums per employee was $23,968 for family coverage and $8,435 for single coverage in 2023.

Health reimbursement arrangement (HRA)

A health reimbursement arrangement (HRA) is a cost-effective alternative to traditional group health insurance. It's an IRS-approved, employer-funded health benefit that allows employers to reimburse employees for more than 200 qualifying healthcare expenses, including individual health insurance premiums. This way employers can simply reimburse employees for their health insurance coverage rather than buying it for them.

Here are some examples of HRA-eligible expenses:

• Doctor's visits
• Annual physicals
• Prescription drugs
• Over-the-counter medicine
• Chiropractic care
• Mental health counseling

With an HRA, employers set their own allowance amount. Then, employees pay for their medical care using their own money. Once they incur an expense, they can submit it for reimbursement. When the expense is approved, you can reimburse them up to their allowance amount. Employer contributions are tax-free, and reimbursements are tax-free for employees.

Here are the types of HRAs you can offer:

• The qualified small employer HRA (QSEHRA): The QSEHRA is for small businesses with fewer than 50 full-time equivalent employees (FTEs). You must offer a QSEHRA to all W-2 full-time employees, but you can choose whether or not to offer it to part-time employees as well. There are annual contribution limits with a QSEHRA. Employees must have a health plan with minimum essential coverage (MEC) to participate.
• The individual coverage HRA (ICHRA): The ICHRA is for businesses of all sizes. It's similar to the QSEHRA but offers greater flexibility. With no contribution limits, employers can offer as much or as little of an allowance as they would like. They can also offer differ allowances and benefit eligibility with 11 employee classes, such as full-time or part-time workers. Plus, an ICHRA satisfies the Affordable Care Act's (ACA) employer mandate without the need for a group health insurance plan. Employees must have a qualifying individual health insurance plan that meets MEC to participate.
• The group coverage HRA (GCHRA): If you don’t want to offer a QSEHRA or ICHRA instead of a group plan, you can use an HRA to supplement it. The GCHRA, also known as an integrated HRA, works alongside a group health plan. For example, if you offer a high deductible health plan (HDHP), a GCHRA can cover out-of-pocket medical expenses the HDHP doesn’t fully pay for. Employers can also customize GCHRA allowances and eligibility with seven employee classes.

2. Dental insurance

While many people worry about the rising cost of healthcare, dental care is close behind. Dental insurance ranked as the second most important benefit for employees, following health benefits. Results show that 91% of employees rated dental benefits as important, yet only 53% of employers offer them. Offering primary and supplemental dental benefits to employees can make your organization more competitive in the labor market. Affordable dental care also makes it easier for your employees to maintain good oral health, which helps prevent costly issues down the line.

If you choose to offer an HRA to your employees, you can reimburse them for their dental care needs. With a QSEHRA or an ICHRA, you can also reimburse them for their dental insurance premiums. However, this isn't an option with a GCHRA.

3. Paid time off

Paid time off (PTO) is the third most popular benefit. Employees appreciate having time off to rest and recharge. Survey results show that 90% of employees rated PTO as important.

Offering vacation days, sick time, and holidays can help employees achieve a healthy work-life balance and reduce burnout. Taking time away from the office is essential for employees to return to work with renewed energy. Therefore, providing an ample amount of PTO is a surefire way to boost employee morale and employee engagement at your organization.

4. Retirement benefits

Employees also want financial security for the future, especially since 56% of American workers feel like they're behind in their retirement savings, according to a Bankrate survey².

Our survey results show that 89% of employees believe that retirement benefits are important. Retirement savings plans, such as a 401(k) or pension plan, provide employees with a safety net and a retirement solution that allows them to enjoy their lives after ending their careers. Most importantly, retirement benefits allow your employees to live sustained and comfortable lives.

Though programs such as Social Security exist as a part of an employee's retirement, most employees greatly value additional retirement programs that help them begin to save for their time after retiring from a job. Many employees often forget to begin saving for retirement, but when their employer offers retirement plans and savings options, it pushes them to begin this important step.

When you give your staff financial stability for the future, it can increase job loyalty and improve employee retention.

5. Vision insurance

Vision insurance ranks as the fifth most attractive benefit, with 81% of employees ranking it as important. This type of employee benefit covers things like annual eye tests, eyeglass lenses, frames, and contact lenses. This is another employee benefit that can give you a competitive edge since only 48% of employers we surveyed currently offer vision insurance benefits.

With an HRA, you can reimburse your employees for their vision care expenses, including expenses that vision insurance doesn’t typically cover, like LASIK eye surgery. If you offer a QSHERA or an ICHRA, you can also reimburse them for their vision insurance premiums.

Additional benefits to consider

Mental health and/or wellness benefits, life insurance, and paid family leave are in the middle of the pack in terms of importance to employees. While they don't rank as high as other benefits in level of importance, they're still desired by many current and potential employees. Offering these types of benefits can also improve your recruitment and retention efforts.

Additionally, employers should consider offering flexible work arrangements if they want to entice job seekers. Results show that 57% of employees said having access to remote work or a hybrid work environment is important.

Why should you offer employee benefits?

These days, employees want compensation beyond their regular salary. Our survey found that 81% of employees said an employer’s benefits package is an important factor in whether or not they accept a job. So, if your job offer doesn't come with additional perks, talented employees may look for better opportunities elsewhere.

PeopleKeep can help you offer the personalized benefits your employees want. Our HRA administration software makes it easy to set up and manage your HRA in just minutes each month. Our experts generate your legal plan documents, verify employee expenses per IRS guidelines, and automatically send required notices so you don’t have to. This gives you back valuable time to invest in other areas of your business.

Conclusion

By offering these types of employee benefits, employers can create a comprehensive employee benefits package that stands out from competition. When employers invest in the benefits employees want most, they can attract and retain top talent, increase employee satisfaction and loyalty, and create a productive work environment.

This blog article was originally published on February 14, 2020. It was last updated on May 21, 2024.

1. https://www.kff.org/report-section/ehbs-2023-summary-of-findings/
2. https://www.bankrate.com/retirement/retirement-savings-survey/