Mobile Strip
Home / Blog / Employee Benefits: Types, Examples and Best Practices

Employee Benefits: Types, Examples and Best Practices

14 min read

employee benefits
In any organization or sector, employees are its lifeblood. Without employees, a business cannot accomplish its desired goals and objectives. The right staff member helps carry out the organization’s mission, influence customers, and propel business growth.

Clients do not come first. Employees come first. If you take care of your employees, they will take care of the clients.
Richard Branson

Companies and leaders who consider employees their no.1 asset always shine and thrive. They value their contribution with satisfying pay, rewards and recognition, perks and benefits, personal time off, etc. This is because employee benefits matter most of the time.

What are employee benefits?

Employee benefits are part of the aggregate compensation set, other than the employee’s salary. These are the additional rewards and compensations besides their pay, which are not necessarily cash. They may include insurance (such as group, health, family, accident, etc), benefits after retirement, sick leaves, vacation, or education funds.
According to Herzberg’s Two-factor theory of motivation and hygiene, employee benefit programs are essential and adequate conditions for smooth working; the hygiene aspect affects the work motivation of employees, which in turn affects their performance and productivity (Hong et al. 1995). Companies must offer financial and health/wellness benefits, community outreach, employee engagement, travel, training, and development opportunities.
Employee benefits aid the organization in attracting and retaining high-quality employees by increasing employee morale, job satisfaction, and motivation. The standard employee benefits comprise approximately forty percent of the total compensation package. And, they may be offered to employees on their basis overall performance, efficiency, economic growth or the sustainability of the organization.

Why Employee Benefits are Important?

The greatest motive behind offering employee benefits is to make employees who feel valued and appreciated at their workplace. Happy employees are more likely to stay longer with the company and be productive. They contribute to a healthy culture at the work as compared to a demotivated employee.
The impetus of the benefits to employees comprehends;

  • Aligning personal interests with organizational goals
  • Promoting integration in organizational functioning
  • Fostering employee well-being and satisfaction
  • Instilling will and determination for work improvement and innovation
  • Keeping members informed on the latest employee benefits developments
  • Motivating adoption of modern changes for enhanced employee efficiency
  • Channeling manpower for productive activities
  • Providing an open forum for discussion and problem solving
  • Establishing informal clubs or innovative clubs (like book clubs, wellness clubs, etc)
  • Cultivating a culture of continuous learning and development
  • Organizing extra-curricular activities for social awareness (CSR activities)
  • Enhancing quality of work life (QWL) Through Flexible Policies.

Types of employee benefits

employee benefits
In India, employee benefits are categorized into statutory and supplemental components, each serving distinct purposes. Statutory benefits, mandated by various labor laws, are compulsory for employers, while supplemental benefits are voluntarily provided to attract and retain skilled professionals.
So let’s understand these 2 crucial employee benefits in India.

1. Statutory Benefits:

Statutory benefits contribute to creating a positive and supportive work environment, aligning with the evolving expectations of employees worldwide. Examples include;

  • EPF (Employees’ Provident Fund):

A mandatory retirement benefit scheme applies to employees earning less than INR 15,000 per month. Both employers and employees contribute 12% of the basic salary to the fund.

  • Gratuity:

Governed by the Payment of Gratuity Act, 1972, applicable to diverse sectors. Calculated as 15 days of salary for each year of completed service, with a maximum cap of INR two lakh.

  • Medical Insurance:

Health benefits cover medical expenses as a group insurance policy or through reimbursement.

  • Bonus:

Bonuses are additional compensation beyond the regular salary that is often linked to performance or company profits.

  • Paid Time Off:

Paid time off is inclusive of holidays, sick leave, and personal days, varying in duration across companies. Establishing paid time-off banks, allowing sick days to roll over and paying out unused sick days discourages employees from taking sick days when they aren’t sick (McCaffery 1989)

  • Maternity Leave:

Maternity is the basic of all benefits for female employees to take time off during pregnancy and childbirth, with duration varying among companies.

2. Supplemental Benefits

Supplemental benefits go beyond statutory requirements, offering additional perks to enhance overall employee well-being and attract top talent.
In today’s competitive job market, employers recognize the importance of offering robust supplemental benefits to stand out, appeal to potential hires, and ensure the satisfaction and retention of their current workforce.
Examples include:

  • ESOP (Employee Stock Ownership Plan):

ESOP provides employees with an opportunity to own a stake in the company.

  • Travel Benefits:

Travel benefits support employees with travel-related allowances/ expenses, making work-related trips more convenient.

  • Medical Benefits:

Extending medical coverage beyond statutory requirements, often including dental, yearly whole-body check-up or vision insurance.

  • Paternity Leave:

Paternity leave benefits which are usually 14-20 days, allows any male employees time off for the birth or adoption of a child.

  • Accidental Death Benefits:

Provides financial support to the family in case of an employee’s accidental death.

  • Others:

Miscellaneous supplemental benefits catering to the diverse needs of employees and their families.

Examples of Employee benefits

employee benefits types
Employee benefits are important to attract and retain employees. A Report, stated that 73% of employees agreed to stay back longer in the company if their employers offered wider benefits. And, in that aspect employee perks and benefits are usually categorized as follows:

Legally Required Payments:Contingent and Deferred Benefits:Payments for Time Not Worked:Other Benefits:
Old-age, survivors, disability, and health insurance (commonly known as Social Security) Workers’ compensation Unemployment compensationPension plans Group life insurance Group health insurance:
i. Medical expenses (hospitalization and surgical)
ii. Disability income (short and long-term) Guaranteed annual wage (GAW) Prepaid legal plans
Maternity leave
Child care leave
Sick leave
Dental benefits Tuition-aid benefits:
I. Suggestion awards
ii. Service awards
iii. Severance pay
Vacations Holidays Voting pay allowancesVacations Holidays
Voting pay allowances.
Travel allowances
Company cars and subsidies
Moving expenses
Uniform and tool expenses
Employee meal allowances
Discounts on employer’s goods and services
Child care facilities

Employee Benefits best practices

best practices of employee benefits
How human resource practices can support and foster an organization’s strategy to help gain a competitive advantage has been explored since the 1980s (e.g., Schuler and MacMillan 1984; Schuler and Jackson 1987).”
Benefits strategies can impact a company’s strategic advantage by positively influencing organizational outcomes through costs and affecting employee behaviors, including retention, attraction and motivation, in a uniquely effective way.
From an HR and an organizational point of view, employee benefit strategies can be broken down into a structured way. Incorporating some of these practices will broadly enhance employee benefits.
Here are a few practices that you can consider:

  1. Definitive benefit framework: Consider creating a total benefit framework for the organization. Since, it is essential to align your business goals with market goals and provide competitive offerings to attract and retain top talent. Also, regular benchmarking and analysis of the market trends, legal requirements, and compliance with employee needs can help you achieve this balance.
  2. Employee attitudes and behavior: Attracting and retaining employees with attitudes, values, knowledge, skills, and abilities through sorting effects is crucial. Understanding the nuanced needs of the team can help you design a benefits package that caters to their specific requirements.
  3. Employee retention strategy: Being mindful of employee needs is essential to retain top talent. A well-designed employee benefits package can help you achieve this goal. Providing benefits that meet the needs of an employee’s physical, emotional, and financial wellbeing is critical.
  4. Wellbeing assistance: Well, you all must know what an EAP is!! Employee Assistance Programs (EAPs) can effectively provide wellbeing assistance to your employees. EAPs offer confidential counseling services, financial planning, and legal advice to employees struggling with personal or work-related issues.
  5. Organizational Outcome: Employee benefits can significantly impact the cost, identity, and reputation of your organization. A well-designed employee benefits package can help you attract and retain top talent, reduce employee turnover, and improve employee satisfaction. This can help achieve organizational goals in the long run.

Wrapping up

For a business to recruit, retain, and motivate people, human resource management (HRM) is essential. Two key components of HRM are employee benefits and salary. Many will accept a lower income if an organization offers a sizable employee benefits package. These benefits can range from monetary (parental leave, overtime pay, holiday pay, etc.) to lifestyle (flexible working hours, work-from benefits, etc.).
Although the discrepancy can be attributed to different employees having different preferences. Some might choose a laid-back working style, others only financial benefit and compensation, while soon-to-be fathers would seek time off.
No worries, KEKA HRMS is here for you.
KEKA helps streamline HR processes and reduce the workload of both HR and employees. It can help manage employee benefits, payroll, travel reimbursements, leaves, etc.
Not only does KEKA HRMS ease employee benefits by automating employee benefits management, but also help employees enroll in benefits programs, track their benefits, and manage their benefits information.


1. What are employee benefits?

Beyond their usual salary or wages, businesses may offer their employees non-wage remuneration through employee benefits. These benefits are intended to improve workers’ general well-being and attract and retain top talents while fostering a happy work environment.

2. Why are employee benefits important?

Employee benefits can help organizations achieve their strategic goals, leading to a sustainable competitive advantage. Besides;

  • Lure and Include top talents
  • Job satisfaction and morale
  • Well-being and work-life balance
  • Financial wellness
  • Overall Productivity and performance improvement
  • Employee Loyalty and Engagement
  • Legal Compliance and Employee Satisfaction
  • Adaptation to Changing Workforce Expectations
  • Corporate Image and Brand Reputation

3. What types of benefits are typically offered by employers?

In India, employee benefits fall into two categories: statutory and supplemental.

  • The government mandates statutory benefits and contains social security benefits through the Employees’ State Insurance (ESI) and the Employees’ Provident Fund (EPF), providing medical insurance and retirement funds, respectively. Gratuity is also mandatory, given as a lump sum after five years of continuous service.
  • Employers offer supplemental benefits to attract and retain talent, including additional health insurance, accident insurance, extra retirement funds, travel allowances, and internet packages. These go beyond legal requirements, enhancing the overall compensation package for employees.

4. How does health insurance work as an employee benefit?

The health insurance policy covers expenses incurred by the policyholder provided by the company. Employers offer health insurance as an employee benefit; they pay for part, and the employee pays the remaining amount.
The employee can then use the medical insurance to cover regular expenses like doctor visits, hospital stays, and prescription drugs. The coverage and benefits offered by the insurance plan depend on the policy and the insurance provider.

5. Are all employees eligible for the same benefits?

No, employee benefit eligibility can also vary based on factors such as employment status, job level, and company policies.

Table of Contents

    Meet the author

    Parismita Goswami

    Content Writer

    A writer, poet and cinephile by passion. Parismita is Content Writer at Keka. She shares her interest in having good conversations over tea, traveling, exploring and reading. When she is not experimenting with her culinary art, you can typically find her introspecting or taking a cozy corner.


    Thank you for Subscribing!

    Related articles

    Developing Employee Retention Strategies for 2024
    Nikitha Joyce 19 min read

    77% of employers focus on employee experience to improve retention. EX can make or break the organization's ability to retain talent. Explore how to retain talent via some common mistakes, case studies, analyses, and strategies.

    Leave Encashment: Calculation, Taxation and Rule
    Keka Editorial Team 26 min read

    Leave encashment is an often-ignored employment benefit, despite being a significant accrued component in the overall employee remuneration over the course of their professional life.

    Types of Compensation: A Guide For HRs
    Anwesha Panja 14 min read

    Competitive compensation packages are surely the right mix to ensure engaged and motivated employees. Explore expert insights on various compensation types to stay ahead in the evolving landscape!

    cookie image

    By clicking “Accept", you consent to our website's use of cookies to give you the most relevant experience by remembering your preferences and repeat visits. You may visit "cookie policy” to know more about cookies we use.