Types of Employee Benefits Schemes
Benefits are any perks offered to employees in addition to salary. The most common benefits are medical, disability, and life insurance; retirement benefits; paid time off; annual holidays; and other fringe benefits. Benefits can be quite valuable for example medical insurance can costly hence it’s important to consider benefits as part of your total compensation. The main types of employee benefits are:
1. Pension Schemes
These are generally regarded as the most important employee benefit. Retirement benefits are funds set aside to provide people with an income or pension when they end their careers. Some are statutory while others are voluntary.
Retirement plans fit into two general categories: defined benefit plans and defined contribution plans.
A defined benefit plan guarantees a certain payout at retirement, according to a fixed formula which usually depends on the member’s salary and the number of years’ membership in the plan.
A defined contribution plan will provide a payout at retirement that is dependent upon the amount of money contributed and the performance of the investment vehicles utilized.
Retirement benefits schemes are defined as any scheme or arrangement under which persons are entitled to benefits in the form of payments, determined by age, length of service, amount of earnings or otherwise and payable primarily upon retirement, or upon death, termination of service.
2. Personal Security
These are benefits which enhance the individual’s personal and family security with regard to illness, health, accident or life insurance.
Medical insurance covers the costs of physician and surgeon fees, hospital rooms, and prescription drugs. Coverage can sometimes include the employee’s family (dependents). Employers usually pay all or part of the premium for employee medical insurance.
Disability insurance covers all or part of the income that is lost when a worker is unable to perform their job because of illness or injury. They cover two main types of disability (disablement): temporary disablement (incapacity) and permanent incapacity that provides benefits to an employee when a long-term or permanent illness, injury, or disability leaves the individual unable to perform his or her job.
Life insurance protects employee’s family in case of death. Benefits are paid all at once to the beneficiaries of the policy usually a spouse or children.
Company-sponsored life insurance plans are standard for almost all full-time workers in medium and large firms across many countries.
3. Financial assistance
These may include provision of company loans, house purchase schemes, relocation assistance and discounts on company goods or services.
4. Personal needs
These are entitlements which recognize the interface between work and domestic needs or responsibilities, e.g. holidays and other forms of leave, child care, career breaks, retirement counseling, financial counseling and personal counseling in times of crisis, fitness and recreational facilities. Paid time off (also referred to as PTO) is earned by employees while they work. The three common types of paid time off are holidays, sick leave, and vacation leave.
5. Other benefits
These are benefits which improve the standard of living of employees such as subsidized meals, clothing allowances, and refund of telephone costs, mobile phones, cars and credit card facilities.