Employee Perks And Benefits, What’s The Difference?
Compensation goes beyond salaries and wages. Total compensation also covers employee benefits, perks, and rewards—all of which play their part in recruitment, retention, wellness, and productivity.
Use this guide to help you understand what perks, benefits, and rewards are, the key differences, and why they’re useful.
Employee Benefits Vs. Perks
The key difference between employee benefits and perks lies in their purpose and scope.
Employee benefits are non-wage compensations provided to employees in addition to their regular salary.
Benefits are typically essential and legally required in many countries, for example health insurance, retirement plans, and paid time off. They are intended to ensure the well-being and financial security of employees.
Perks are optional, extra incentives offered by organizations to enhance the employee experience.
Perks are not essential or legally required and often vary widely between organizations, reflecting their mission and culture.
Examples include gym memberships, flexible working hours, free snacks, travel vouchers, or company retreats. They are aimed at making the workplace more enjoyable or attractive.
Summary
In summary, benefits are typically necessary and focused on employee welfare, while perks are optional extras designed to enhance job satisfaction.
While employee benefits planning is more fundamental and focused on long-term support, perks are typically seen as additional, nice-to-have offerings.
A good way to think about it is that workers need benefits but want perks.
Let’s go a bit deeper.
What Are Employee Benefits?
Employee benefits are non-wage compensations provided to employees in addition to their regular salary or wages. They are designed to support the health, financial security, and overall well-being of employees, often playing a key role in attracting and retaining talent.
Some benefits, like Social Security and Medicare in the USA, are mandated by law, while others are offered at the employer’s discretion.
Examples of employee benefits
As part of their employee benefits strategy, organizations will normally blend a mix of mandatory, industry-standard, with less common fringe benefits.
Common employee benefits
- Health insurance: Medical, dental, and vision coverage for employees and sometimes their families.
- Retirement plans: 401(k) plans or pension schemes, often with employer matching contributions.
- Paid time off (PTO): Vacation days, sick leave, and personal days.
- Life insurance: Coverage for employees in case of death.
- Disability insurance: Both short-term and long-term disability coverage in case of illness or injury.
- Parental leave: Maternity, paternity, and adoption leave.
- Flexible work schedules: Options like remote work or flexible hours.
- Employee assistance programs (EAPs): Confidential counseling and mental health services.
- Worker’s compensation: Insurance covering work-related injuries or illness.
- Bonuses: Performance-based or end-of-year bonuses.
Less common employee benefits
- Student loan repayment assistance: Contributions toward paying off employees’ student loans.
- Fertility and family planning support: Coverage for fertility treatments, adoption assistance, or surrogacy.
- On-site childcare: Employer-provided or subsidized childcare services at the workplace.
- Sabbaticals: Extended time off after a certain number of years with the company.
- Legal services: Access to legal advice or coverage for certain legal expenses.
- Housing assistance: Employer-provided or subsidized housing, especially for employees relocating.
Why are employee benefits important?
Employee benefits are important for employees and employers because they can contribute significantly to overall job satisfaction, well-being, and organizational success.
They are crucial for employees because they help provide financial security, support health and well-being, and improve overall job satisfaction.
Benefits like health insurance, retirement plans, and PTO help employees manage personal responsibilities and reduce financial stress, leading to better work-life balance and loyalty to the company.
For employers, offering a strong benefits package is a key tool for attracting and retaining top talent in a competitive market and helps keep employees healthy and productive.
Ultimately, a solid benefits strategy strengthens the company’s reputation and leads to a more stable, loyal, and productive workforce.
What Are Employee Perks?
Employee perks are additional, non-essential incentives provided by employers to enhance the employee experience and make the workplace more enjoyable or attractive.
Unlike employee benefits, which are more fundamental and focused on long-term support, perks are typically aimed at boosting job satisfaction and improving the day-to-day work environment.
They are not legally required and vary greatly depending on the company’s culture and resources.
Examples of employee perks
Organizations can get a bit creative with their perks and they’re often a reflection of the organization’s mission, values, philosophy, and culture. Examples include:
- Flexible working (fully remote or hybrid work options)
- Home office stipend
- Free meals or snacks
- Wellness initiatives (gym memberships, yoga classes)
- On-site amenities (game rooms, gyms, nap pods)
- Financial counseling
- Paid volunteer time
- Unlimited PTO (no fixed cap on the number of days employees can take off).
- Pet insurance
- Pet-friendly offices
- Adoption assistance
- Company discounts
- Travel support for reproductive care
- Travel stipends
- Unlimited ice cream (yes, Ben & Jerry’s!).
Why are employee perks important?
Employee perks are important because they can play a part in boosting job satisfaction, engagement, and retention by enhancing the overall work experience.
Perks like flexible hours, wellness programs, and unique offerings like home office stipends or family-building support make employees feel valued beyond their salary.
They also help companies attract and retain top talent in competitive markets by providing a differentiated and supportive work environment, fostering loyalty and productivity.
What Are Employee Rewards?
Employee rewards are incentives or recognitions given to employees as a way of acknowledging their efforts, achievements, and contributions to the organization.
They can be monetary, non-monetary, or experiential and are typically aimed at boosting morale and motivation and enhancing employee engagement. This is becoming a key part in what you might refer to as the art of compensation.
Examples of employee rewards
As mentioned, rewards can be monetary, non-monetary, or experiential:
Monetary rewards
- Bonuses: Performance-based bonuses, annual profit-sharing, or spot bonuses for exceptional work.
- Salary increases: A raise in base pay as a reward for excellent performance or tenure.
- Stock options: Equity or shares in the company, often granted to employees as long-term incentives.
- Commission: Sales-based incentives where employees earn a percentage of the sales they generate.
- Gift cards: Financial value provided in the form of a card to spend at various retailers.
Non-monetary rewards
- Recognition: Employee recognition programs such as "Employee of the Month" awards or public acknowledgment of achievements in company channels or socials (employee recognition platforms can help here).
- Extra time off: Additional vacation days, personal days, or half-days.
- Office perks: Reserved parking spaces, upgraded office equipment, or preferred seating.
- Certificates and trophies: Tangible awards like certificates, plaques, or trophies recognizing an employee’s contributions.
Experiential rewards
- Company trips: Fully or partially sponsored travel experiences like team retreats or destination conferences.
- Event tickets: Access to concerts, sports events, or theater performances.
- VIP experiences: Exclusive activities like private tours, behind-the-scenes access to events, or luxury hotel stays.
- Paid volunteer days: Time off to engage in community service or charity work, fully paid by the company.
- Skill-building experiences: Offering employees the chance to attend high-profile industry events, conferences, or workshops.
These rewards help enhance employee motivation by addressing financial, personal growth, and lifestyle preferences.
Why are employee rewards important?
Employee rewards are important because they help motivate employees, boost performance, and help retain top talent.
Nobody likes feeling undervalued, so recognizing employees' efforts through rewards increases job satisfaction, engagement, and loyalty, reducing turnover and fostering a high-performing work culture.
Rewards and recognition can also help reinforce desired behaviors such as creativity, adaptability, or teamwork.
Tying It All Together
As you can see, benefits, perks, and rewards all play an important role in employee recruitment, retention, wellness, and productivity.
When crafting your benefits, perks, and rewards packages, these key considerations can help ensure they are effective and aligned with your organizational goals:
- Organizational goals: If you’re finding it hard to attract talent or absenteeism is high, could employee benefits help with these issues?
- Employee needs and preferences: Understand what matters most to your workforce. Look at demographic data, conduct surveys, and analyze how current perks, benefits, and rewards are being utilized (benefits administration software or compensation management software can help here).
- Alignment with company culture: Your benefits and perks should reflect your organization's culture and values. If innovation and creativity are central to your mission, perks like flexible work hours or paid time for creative projects might resonate.
- Budget and sustainability: While it's important to offer competitive packages, they must also be financially sustainable. Consider balancing high-impact, low-cost perks (like flexible work schedules) with essential but potentially more expensive benefits (like health insurance).
- Compliance with local laws: When developing a global compensation strategy, it's important to ensure your benefits meet legal requirements, which can vary by region or country (an employer of record can help here).
- Equity and inclusivity: Make sure the packages you offer are inclusive and cater to a diverse workforce. For example, family-building support should consider various paths to parenthood, and wellness programs should be accessible to employees of all physical abilities.
- Flexibility and personalization: Offering flexible or customizable benefits can improve employee satisfaction. Some companies allow employees to choose from a variety of perks, tailoring their package to fit individual needs.
- Long-term compact: Consider the long-term effects of your offerings. For example, retirement benefits, professional development opportunities, or health programs can support employees’ long-term well-being and career growth, creating loyalty and reducing turnover.
Subscribe To The People Managing People Newsletter
For more on compensation strategies, subscribe to our weekly newsletter for HR and business leaders. You’ll receive all our latest content to help you progress in your career and make greater impact in your org.
