The Difference Between Employee Benefits and Employee Perks
From keeping their employees safe in the workplace to providing all the needed equipment, business owners are very well aware of their roles and responsibilities. They must also know they have other responsibilities too as an owner of the business. Employees have extra requirements that employers should consider. However, these requirements are not mandatory to offer, but employers should definitely present them. Perks and benefits both come in this category. Benefits and perks have their own significance in the workplace. It is more important than ever for employers to provide competitive compensation as it has become a priority. It will help them not only attract new candidates but to retain current employees.
Perks and benefits – these are the shiniest tools for hiring top talents and retaining them. Companies even offer benefits and perks to candidates to attract them. One of the perks that employers can offer to candidates is using modern hiring techniques. Conduct their interviews using video interview software, and improve their experience. According to a recent survey, 78% of employees are likely to choose a company that offers extra perks and benefits. But have you ever thought about the difference between these terms? These terms may sound similar but have a meaningful difference. This distinction can really impact a company’s recruitment, compensation, and retention strategies. Let’s take a look at the significant difference between these terms.
What are the employee benefits?
You can describe the benefits as the non-wage compensation, which supplements the salary of the employee. In simple words, benefits cover all the expenses that employees pay with their salaries, such as commute costs, health insurance, etc. Benefits are more about basic needs and are even more reliable than perks. Moreover, they are fixed and can’t be changed. Companies decide which benefit they should offer to employees depending upon the current trends.
- Benefits fall into two categories such as legally required benefits and voluntary benefits.
- These are kind of mandatory and will appear on employees’ contracts. However, it doesn’t ensure that the employee is entitled to avail all benefits.
- Benefits can be re-designed according to the role or tenure.
- Employee benefits are not tied to their performance.
- Providing benefits is a company’s way of telling its employees that they care for employees’ financial security and wellbeing.
Employee benefits are necessary to keep them happy and motivated. According to a report by SHRM, getting the new employees in place of the old ones can cost 6 to 9 months of their annual salary. So it is better to provide employees with these benefits. These can foster a happy and motivating environment, improving the retention rate. A report by the U.S. Chamber of Commerce states that 56% of candidates said that the quality of the benefits package truly impacts their choice of the organization.
Examples of employee benefits
After reading what exactly the benefits are, explore some examples of them.
- Stock options – This benefit comes under the supplementary pay category. It is offered to encourage the ownership of employees in the workplace. Employees can buy a company’s share at a discounted price.
- Health insurance – Health insurance falls into the category of compensation. Providing health benefits is beneficial for companies also, as it helps to improve their brand reputation. Moreover, healthy employees perform in a better way. Employees can also include their family members in the plan, depending upon the company’s offer.
- Paid Time Off (PTO) – PTO falls under the paid leave category. It is basically a leave policy, where a company offers a pool of leaves. There will be no loss of pay for taking these sanctioned leaves. These leaves may include maternity leaves, sick leave, and vacations. Providing generous PTO gives a huge boost to business productivity. Some studies show a direct link between greater employee morale and PTO.
- 401(k) plan – 401(k) plans are offered to help employees secure their futures. It is an employer-sponsored retirement plan. According to this plan, eligible employees in the organization make tax-deferred contributions from their wages. In simple words, it is a retirement savings and investing plan. Additionally, it improves the retention rate.
What are the employee perks?
Perks are the offerings by organizations that go above and beyond their salaries and benefits package. These are the extra rewards on top of the salary. Perk is a factor that allows employees to perform better in the workplace. Organizations offer these benefits to look better than their competitors. In simple language, benefits are defined as “need-to-have” while perks are “nice-to-have” bonuses. Both benefits and perks are a goodwill gesture of the company.
- Perks will not appear on employees’ contracts.
- These usually highlight the company values and culture.
- Perks cover expenses that workers might not pay on their own.
- Perks are not decided depending upon the performance or tenure.
Companies that offer perks can see a significant boost in the hiring process. 53% of employees who are availing these perks state that these perks improve their quality of life. Moreover, employees feel valued, and they tend to stay for a longer time in a company. Companies with happy and engaged employees also perform better.
Examples of employee perks
Some examples of employee perks are-
- Gym membership – Gym membership permits employees to have a fully funded membership to a gym. Some companies also offer discounted memberships. It is a flexible or voluntary benefit offered by the company.
- Free snacks or coffee – Providing free coffee and snacks is one of the best strategies to keep employees happy and engaged. This results in decreased turnover and increased collaboration. Some companies also offer free lunch meals to their employees. You can even provide a coupon code to workers so they can order at a discounted rate.
- Flexible working options – After the coronavirus pandemic, flexible working options have become one of the most beneficial perks a company can offer. 41% of employees said that flexible working options or remote work are the top benefits among all that they look for in a company. Moreover, promoting flexible working options helps in lowering absenteeism.
- Tuition assistance – It is basically an employee upskilling policy. Companies allow employees to train themselves by taking technical courses without any fee. The organization will reimburse the fee based on certain criteria. Additionally, providing tuition assistance is a win-win situation for both organizations and employees.
Look at the overall difference
To summarize, benefits are a way to enhance employees’ salaries, whereas perks are an added incentive. Benefits are substantial and help employees compensate for certain things instead of paying actual money. At the same time, perks are offered to create an enjoyable environment in the workplace. Both benefits and perks are useful for your business. Some companies provide only benefits, whereas some offer perks. You must design a package that includes both.
Why are perks and benefits important for business productivity?
Employers should know that providing perks and benefits is more than a hiring strategy. It is an approach to creating an engaged and motivated workforce. Offering benefits and perks can make your employees happy. And as you know, happy employees are likely to be more productive in the workplace.
As mentioned above, both are essential for a successful business. Suppose you have offered every benefit to employees, like health insurance, dental coverage, etc., but what if the workplace environment is dull and depressing. The level of productivity is not going to increase without perks. The same goes for the benefits. What is the point of an extra perk if an employee is suffering from health issues? So, offer a little extra to them, and enhance business growth.
By providing the needed perks and benefits, companies can improve their workplace culture, which has become a priority among candidates. Without benefits and perks, people can likely leave the organization and look for other options. Therefore, plan your organizational offerings carefully, and make sure they look appealing. With this, you can decrease the turnover rate tremendously.
Wrapping it up
As now you know the difference between benefits and perks, design your package accordingly. Both these terms are distinct, but together they promote a healthy and enjoyable work environment. So, focus on connecting your employees with stellar benefits and perks, and retain them. These benefits will increase productivity and decrease the turnover rate.