In What Ways Are Employee Benefits Actually Better Than Wages? Exploring the Advantages

Companies have a vested interest in securing and retaining top talent, and providing benefits is one way to sweeten the employment pot. Many workers report that they would choose an extensive benefits package over a higher salary. The advantages of employee benefits over wages have been corroborated by the changing landscape of the post-COVID work environment. With that in mind, the team at Union Risk Services is here to answer the question, “In what ways are employee benefits actually better than wages?”

Contact us today to speak to an employee benefit broker!

Most Desirable Benefits for Employees

Despite what some might think, employees don’t always want a higher salary. In a 2023 survey, about 20% of workers said they would be willing to take a lower salary in exchange for more benefits. Below is a quick list of some of the most common employee benefits that job seekers are looking for:

• Health insurance
• PTO
• Career development opportunities
• Childcare benefits
• Remote work options
• Tuition reimbursement
• Fitness and lifestyle incentives
• Retirement benefits

Out of these common desires, workers want fully covered healthcare the most. Over 50% of participants in the above survey said higher healthcare coverage was their single most desired employee benefit, with a 401(k) match as a close second (37%). One is also more likely to see benefits outweighing wages for employees in younger age brackets.

In What Ways Are Employee Benefits Actually Better Than Wages?

So, the real question then becomes, “Why choose employee benefits over higher wages?” Comparing benefits and wages, you might think employees would want more money to pay for those benefits themselves and whatever else they want. However, the truth about employee benefits versus salary is a bit more complex. Below are the major reasons an employee might see benefits as a better form of compensation than traditional wages.

Peace of Mind

Above all, additional employee benefits provide peace of mind. Regardless of health, workers will eventually get sick and need to go to a doctor, so healthcare helps them feel more at ease and better equipped to handle an injury or illness. Employees who can take PTO report higher satisfaction and better productivity. You may be surprised to learn that when employees have higher PTO allotments, they end up using fewer of them.

Options like retirement benefits and 401(k) matching provide further peace of mind as they help employees save for retirement. In other words, benefits provide stability and regularity that a higher salary alone cannot provide. The safety net of benefits gives workers more job satisfaction and helps keep them productive and happy.

Save Money (for Employees and Employers)

Generally, benefits cost less to administer through an employer than they do individually. For instance, buying into a group health insurance plan through your employer is often cheaper than buying private healthcare insurance because employers get nice discounts when buying benefits packages.

On the employer’s side, benefits packages are like investments. Benefits increase employee morale and productivity, leading to long-term business gains. Investing in employee health and satisfaction is integral to maintaining business growth and well-being.

Tax Advantages

Employer-sponsored benefit packages also provide several tax advantages over private benefit plans. On the employer side, any money spent on benefits packages is tax-deductible, meaning the business can lower its effective tax burdens by offering benefits, allowing higher salaries and more job satisfaction.

From the perspective of the employee, employer benefits are largely tax-exempt. For example, employer payments for health insurance do not count as taxable income, and 401(k) accounts are tax-deferred and grow tax-free. As a result, it is much more efficient to take tax-exempt employer benefits instead of paying for individual private benefits with post-tax dollars. Thus, employers can save money and lower their taxes by using employer benefits.

Employee Flexibility

All other things being equal, higher salaries are nice for employees, but they may not directly address their most important concerns. Benefits like childcare allowances or fitness incentives give financial flexibility to employees. They can take advantage of the benefits for immediate concerns while using their income for other things.

From a work perspective, things like hybrid work schedules or enhanced PTO give employees more autonomy and flexibility in the workplace, which increases employee satisfaction and lowers the chance of employee burnout.

Retain Talent

It costs a lot more money to recruit talent than to retain existing talent, and good employee retention creates institutional knowledge that helps increase productivity and onboarding of new employees. Therefore, employee retention should be a priority for any business. Benefits packages incentivize employees to stick around instead of jumping ship to another company.

One report compiled by Paycor found that organizations that offer benefits see a 138% reduction in employee turnover compared to businesses that do not offer benefits. Given that turnover is one of the biggest challenges employers face, a generous benefits package can vastly improve retention rates, which is a win-win for everyone involved.

Attract New Talent

In addition to retaining the talent you have already cultivated, attractive benefits packages help attract top-tier talent. Employees nowadays know their value and have expectations from employers when looking for a job. They want benefits that help cover their health expenses and provide career development opportunities.

For example, about three out of four employees say companies that offer professional development benefits are more attractive than companies that do not. In light of these trending insights, it’s clear that if you want the competitive edge in attracting the best talent to your company, offering a wide range of flexible benefits is a given in today’s job marketplace.

Benefits Broker for Businesses

Employers must be aware of the penalties for not providing workers’ comp. Now that you know the answer to the question: “In what ways are employee benefits actually better than wages?” take the next step. Contact Union Risk Services online or call today at (718) 370-3131 to learn more about our risk management and business benefits solutions!