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Definition of Employee Benefits

Info: 4864 words (19 pages) Essay
Published: 6th Aug 2019

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Jurisdiction / Tag(s): Canadian Law

According from the Wikipedia, the free encyclopedia, it explained especially in British English employee benefits and benefits in kind (also called fringe benefits, perquisites, perqs or perks) are various non-wage compensations provided to employees in addition to their normal wages or salaries. Where an employee exchanges (cash) wages for some other form of benefit, this is generally referred to as a ‘salary sacrifice’ arrangement. In most countries, most kinds of employee benefits are taxable to at least some degree.

For the employee benefits in Canada might include additional health coverage that are not included in the provincial plan such as (medical, prescription, vision and dental plans); health and dependent care; retirement benefit plans (in addition to Canada Pension Plan (CPP); group-term life and long term care insurance plans; legal assistance plans; transportation benefits; and possibly other miscellaneous employee discounts wellness programs, discounted shopping, hotels and resorts, and so on.

On the other hand, the employee benefits in United State might include relocation assistance; medical, prescription, vision and dental plans; health and dependent care flexible spending accounts; retirement benefit plans (pension, 401(k), 403(b)); group-term life and long term care insurance plans; legal assistance plans; adoption assistance; child care benefits; transportation benefits; and possibly other miscellaneous employee discounts (e.g., movies and theme park tickets, wellness programs, discounted shopping, hotels and resorts, and so on). American corporations may also offer cafeteria plans to their employees. These plans would offer a menu and level of benefits for employees to choose from. In most instances, these plans are funded by both the employees and by the employer(s). The portion paid by the employees is deducted from their gross pay before federal and state taxes are applied. Some benefits would still be subject to the FICA tax, such as 401(k)[2] and 403(b) contributions; however, health premiums, some life premiums, and contributions to flexible spending accounts are exempt from FICA.

Furthermore, employee benefits in the United Kingdom are categorized by three terms: Flexible Benefits (Flex) and Flexible Benefits Packages, Voluntary Benefits and Core Benefits. Flexible Benefits, usually called a “Flex Scheme”, is where employees are allowed to choose how a proportion of their remuneration is paid. Currently around a quarter of UK employers operate such a scheme. This is normally delivered by allowing employees to sacrifice part of their pre-tax pay in exchange for a car, additional holiday, a shorter working week or other similar benefits, or give up benefits for additional cash remuneration. Voluntary Benefits is the name given to a collection of benefits that employees choose to opt-in for and pay for personally. Core Benefits is the term given to benefits which all staff enjoy, such as holiday, sick pay and sometimes flexible hours.

According to the article write by Alison Doyle, she said that for many of us, the most important factor in considering a job offer is salary. For others, job security is of primary importance. Also high on the list of considerations are benefits and perks. When considering perks, the desire to work in a comfortable, casual environment where employees can set their own work schedule, have an option to telecommute, and where there is a casual dress code, are all important.

According to the article from blog, the author explained all benefits provided or made available to employees by an employer. The narrowest definition of the term includes only employer-provided benefits for death, accident, sickness, retirement, or unemployment. Even with this approach, there is disagreement on whether the definition should include those benefits that are financed by employer contributions but provided under social insurance programs, such as workers’ compensation insurance, unemployment insurance, Social Security, and Medicare. On the other hand, the broadest definition of employee benefits includes all benefits and services, other than wages for time worked, that are provided to employees in whole or in part by their employers.

Categories of employer contributions

Employee benefits as including benefit plans for employees that arise from the following five categories of employer payments or costs, legally required social insurance payments. These include employer contributions to the following programs:

Social Security


Unemployment compensation insurance

Workers’ compensation insurance

Temporary disability insurance

Payments for private insurance and retirement plans, these include the cost of establishing such plans, as well as contributions in the form of insurance premiums or payments through alternative funding arrangements. Benefits are provided under these plans for personal loss exposures such as the following:

Old age

Dental expenses


Legal expenses

Disability income

Property damage

Medical expenses

Liability judgments

Payments for time not worked. These include the following

Vacations and holidays

Maternity leave

Sick leave

Sabbatical leaves

Jury duty

Extra cash payments to employees, these are cash payments other than wages and bonuses based on performance. Benefits in this category include the following:

Educational expense allowances

Savings plans

Moving expenses

Christmas bonuses

Current profit-sharing payments

Suggestion awards

Cost of services to employees. These include items such as the following

Subsidized cafeterias

For example, some company they provide subsidized cafeteria to every employees by giving employees RM 2 each person, so employees can enjoy the RM 2 to buy any food on the cafeteria. If the employees work overtime, the company will pay more than RM 2 for the employees.

Adoption assistance

Recreation programs

Wellness programs

Clothing allowances

For example, the company will provide the employee uniform,.

Day care centers

Financial counselling

Transportation benefits

For example, the company will provide the transportation to the employees to who has transportation problem or live too far from company.

Retirement Counseling

International Employee Benefits

According to the article from International Benefits Network, the term “employee benefits” refers to non-wage compensation provided to employees in addition to wages or salary. This can include a wide range of benefits including social security benefits, retirement and death benefits, medical care, sickness benefits, long-term care, child care, tuition fees, housing allowances, company cars, profit-sharing, share-options, termination indemnities, relocation assistance, shopping discounts.

Benefits may be financed by employer and/or employee contributions. Some employers offer cafeteria plans which give employees the option of choosing from a menu of benefits. The benefits provided in each country will depending on local taxation, social security and labour law.

In the narrow sense, the term is normally limited to benefits which include an element of insurance or funding. These are normally as follows:

Retirement benefits;

Survivors’ and children’s benefits;

Medical care;

Sickness and disability benefits.

“International employee benefits” is concerned with the provision and financing of employee benefits for employers who have employees in more than one country. This can include:

Audits of international employee benefits;

Advice on international employee benefits strategy;

Information on local practice;

Financing of international employee benefit programmes, including the use of multinational pooling, self-insurance and captive insurance companies;

Employee benefits for expatriates.

Type of the Employee Benefits

Base on the article from 2005 Minnesota Employee Benefits Survey, Minnesota Department of Employment and Economic Development, it explained the type of employee benefits as the following:

Medical Insurance

Medical insurance covers the costs of physician and surgeon fees, hospital rooms, and prescription drugs. Dental and optical care might be offered as part of an overall benefits package, sometimes offered as separate pieces, and sometimes not covered at all. Coverage can sometimes include the employee’s family (dependents).

Employers usually pay all or part of the premium for employee medical insurance. Often employees pay a percentage of the monthly premium. Even if the employer does not pay the entire monthly premium, the cost is often lower than available to an individual.

Minnesota facts:

Fifty-three percent of firms offer medical insurance to full-time employees, while only 12 percent offer it to part-time employees. Dental insurance is less common, especially for part-time workers.

By industry, manufacturing, financial, and education and health services are the most likely to offer benefits. The leisure and hospitality sector is the least likely to offer benefits. Larger firms are more likely to offer benefits than small firms.

Disability Insurance

Disability insurance replaces all or part of the income that is lost when a worker is unable to perform their job because of illness or injury. This benefit is not commonly offered. There are two main types of disability insurance:

Short-term disability insurance begins right away or within a few weeks of an accident, illness or some other disability. For example, someone hurt in a car accident would be offered a few paid weeks to recover.

Long-term disability insurance provides benefits to an employee when a long-term or permanent illness, injury, or disability renders the individual unable to perform her/his job duties. For example, an employee with spinal injuries could be entitled to long-term disability benefits until retirement age.

Minnesota facts:

Only 19.2 percent of firms offer short-term disability insurance, and only 18.1 percent offer long-term disability insurance to full-time workers

Life Insurance

Life insurance protects your family in case you die. Insurance benefits are paid all at once to the designated beneficiaries of the policy, usually a spouse or children.

You can get life insurance through an employer if they sponsor a group plan. Company-sponsored life insurance plans are standard for almost all full-time workers in medium and large firms across the country. You can also buy it privately in the marketplace, but this is usually more expensive.

Minnesota facts:

The number of people employed usually determines whether a company will offer life insurance or not. Only 15.5 percent of firms with fewer than 10 employees offer this benefit, while firms with more than 250 employees offer it almost universally.

Retirement Benefits

Retirement benefits are funds set aside to provide people with an income or pension when they end their careers.

Retirement plans fit into two general categories:

In defined benefit plans, sometimes called pension plans, the benefit amount is pre-determined on the basis of salary and years of service. In these plans the employer bears the risk of the investment.

In defined contribution plans (for instance a 401k plan), employer or employee contributions are specified. But the benefit amount is usually tied to investment returns, which are not guaranteed.

Minnesota facts:

The vast majority of full-time workers in Minnesota are offered access to retirement benefits: 64.4 percent are offered access to a defined contribution and 15.6 percent are offered a defined benefit program.

Defined benefit plans are offered most frequently in those sectors with the highest levels of unionization: public administration, construction, manufacturing, and trade, transportation and utilities.

Domestic Partner benefits

Some employers offer benefits to unmarried domestic partners, while others do not. Requirements to qualify vary from simply signing a form to showing proof of domestic partnership or financial interdependence. A common domestic-partner benefit is access to family health insurance, but that benefit is considered taxable income by the federal government.

Minnesota facts:

Check this list of Minnesota employers offering domestic partner benefits.

Paid Time Off

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.

In the majority of workplaces, employees earn vacation, sick leave, and paid holidays as separate benefits. About ten percent of Minnesota employers offer Consolidated PTO, which combines sick leave and vacation into one account for the employee to use as needed.

Minnesota facts:

The most popular benefit with employees is paid vacation. Sixty-two percent of firms offer this benefit to full-time workers. Paid holidays are also very common. Thirty-three percent of firms have paid sick leave for full-time employees.

Fringe Benefits

It defines as compensation to employees in addition to salary. Some examples of fringe benefits are paid holidays, retirement plans, life and health insurance plans, subsidized cafeterias, company cars, stock options, and expense accounts. In many cases, fringe benefits can add significantly to an employee’s total compensation, and are a key ingredient in attracting and retaining employees. For the most part, fringe benefits are not taxable to the employee, though they are generally tax-deductible for the employer.

A variety of non-cash payments are increasingly being used to attract and retain talented employees. These are referred to as “fringe benefits” and can include tuition assistance, flexible medical or child-care spending accounts (pre-tax accounts to pay qualified expenses), other child-care benefits, and non-production bonuses (bonuses not tied to performance).

Tuition reimbursement can be an especially important benefit if you plan to take classes in your personal time. They can be a great opportunity to advance in your career. Most firms offering tuition assistance, however, require that courses relate to job duties.

Minnesota facts:

Fringe benefits are most common for full-time employees in the manufacturing sector. Non-production bonuses are the most common type of fringe benefit offered to full-time workers in Minnesota. These include hiring bonuses, signing, year-end, attendance, and holiday bonuses. Tuition/educational assistance are offered by 19 percent of companies in Minnesota.

According to the article wrote by Alison from the Alison’s Job Searching Blog, there are some types of employee benefits that are mandated by law, including minimum wage, overtime, leave under the Family Medical Leave Act, unemployment, and workers compensation and disability. There are other types of employee benefits that employers are not required to offer, but choose to provide to their employees.

Type of Mandated Employee Benefits



Family and Medical Leave Act

Minimum Wage


Social Security Disability Insurance

Unemployment Benefits

Workers Compensation

COBRA – Consolidated Omnibus Budget Reconciliation Act

The definition of COBRA (Consolidated Omnibus Budget Reconciliation Act) gives employees and their families who lose their health benefits the option to continue group health benefits provided by their group health plan for limited periods of time (usually up to 18 months) under certain circumstances such as voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events.

Group health plans which cover 20 or more employees are required to provide COBRA benefits, however the individual who is entitle to coverage is responsible for paying the full health insurance premium – up to 102 percent of the cost to the plan.

Disability Insurance

California, Hawaii, New Jersey, New York and Rhode Island have state sponsored disability programs. These programs are typically short-term and the benefit amounts are low. In New York, for example, the weekly benefit amount is 50% of the employee’s average weekly wage, up to $170 for a maximum of 26 weeks.

Your employer may also provide additional disability coverage in these states as well as in the rest of the country. So, if you are unable to work, your first step should be to inquire as to what insurance your employer provides. If you have your own disability coverage, file a claim with that insurance company as well.

Social Security Disability

To qualify for benefits, you must first have worked in jobs covered by Social Security. Then you must have a medical condition that meets Social Security’s definition of disability. In general, monthly cash benefits are paid to people who are unable to work for a year or more because of a disability. The application process takes 60 – 90 days. Then there’s a sixth month waiting period before you can collect a check.


If you are injured or temporarily or permanently disabled file a claim immediately. In many cases, there are dates that claims have to be filed by to be valid – typically no later than 30 days after the injury or the illness began.

Contact your state Workers’ Compensation Board, your state Department of Labor or the Social Security Administration if you have any questions or need help filing a claim.

Consider purchasing disability insurance while you’re healthy. First, check with your employer to see what coverage they provide, then ask if you can purchase supplemental coverage. Calculate if the benefits you’ll get will be enough to maintain your lifestyle. If they’re not, consider purchasing personal disability insurance.

Family and Medical Leave Act (FMLA)

The Family and Medical Leave Act (FMLA) can be of assistance if you need to take time off from work because of family responsibilities. The first step is to ask your employer what Family and Medical Leave Act benefits are provided to employees. They may provide additional benefits, like paid maternity leave, for example, than are required by law or, if you are ill, you may be eligible for disability insurance.

FMLA Coverage

At the least, all covered employers (typically employers of over 50 workers) must provide eligible employees up to 12 weeks of unpaid FMLA leave during any 12 month period.  The Family and Medical Leave Act was enacted in 1993.  Since then, the FMLA has provided eligible workers with unpaid time off to meet family responsibilities, such as caring for a new baby or an adopted child, or for looking after a sick child, spouse, or parent.  In addition, your employer must give you your job back or give you another job with equivalent pay and benefits.

How it Works:

Under the Family and Medical Leave Act, covered employers must grant an eligible employee up to a total of 12 work weeks of unpaid leave during any 12-month period for one or more of the following reasons:

for the birth and care of the newborn child of the employee

for placement with the employee of a son or daughter for adoption or foster care

to care for an immediate family member (spouse, child, or parent) with a serious health condition

to take medical leave when the employee is unable to work because of a serious health condition.

Military FMLA

The following amendments are part of the National Defense Authorization Act (H.R. 4986) (2008)

to employees with spouses, children, or parents who are now serving on (or who have been called up for) active duty in the military for up to 12 weeks of unpaid leave for a qualified emergency arising from a family member’s active military duty.

if those loved ones become seriously ill or injured while on active duty, coverage may be extended up to 26 weeks of unpaid leave each year.

Who’s Eligible:

An FMLA eligible employee is an employee who has been employed by the employer for a least 12 months and worked at least 1,250 hours. The 12 months do not need to be consecutive. You are only an eligible employee if your employer employs 50 or more employees within 75 miles of the worksite.

Additional Information:

FMLA may be taken on an intermittent basis allowing the employee to work on a less than full-time schedule.

If you are covered by health insurance, your employer must maintain that coverage while you are on leave.

If your manager isn’t aware of the FMLA guidelines, check with the Human Resources department directly.

California recently implemented a Paid Family Leave (PFL) insurance program, which when taken in conjunction with FMLA and California Family Rights Act (CFRA) leave, provides up to six weeks paid leave.  The program is administered by the State Disability Insurance Program.  Other locations may have programs, so, check to determine what benefits you are eligible for.

Minimum Wage

The minimum wage was enacted in 1938 as part of the Fair Labor Standards Act. The first minimum wage was .25 an hour.

Federal Minimum Wage Rate

Effective July 24, 2009, the federal Minimum Wage rose to $7.25 an hour for covered non-exempt employees.

State Minimum Wage Rates

Some states pay a higher minimum wage than the federal minimum. For example, the minimum wage in California is $8.00 and the minimum wage in New York is $7.15. Use the Department of Labor’s State Minimum Wage Rates chart to get information on the minimum wage in your location and information on when employers must pay overtime.

If an employee is subject to both the state and federal minimum wage laws, the employee is entitled to the higher of the two minimum wages.

Subminimum Wage

There are some employees that can be paid at rates below the hourly minimum wage. Those employees are permitted to be paid at rate called a submininum wage.

Exceptions to Minimum Wage – Tips

An employer of an employer who receives tips is required to pay $2.13 an hour in wages if that amount plus the tips received equals at least the federal minimum wage, the employee retains all tips and the employee customarily and regularly receives more than $30 a month in tips. If an employee’s tips combined with the employer’s direct wages of at least $2.13 an hour do not equal the federal minimum hourly wage, the employer must make up the difference.

Exceptions to Minimum Wage – Young Workers

A minimum wage of $4.25 per hour applies to young workers under the age of 20 during their first 90 consecutive calendar days of employment with an employer, as long as their work does not displace other workers. After 90 consecutive days of employment or the employee reaches 20 years of age, whichever comes first, the employee must receive a minimum wage of $5.85 per hour.

Overtime Pay

Definition: Workers earning less than $455 per week, which is $23,660 per year, are guaranteed overtime protection. There are exemptions for highly compensated employees who customarily and regularly perform any one or more of the exempt duties or responsibilities of an executive, administrative, or professional employee.

Overtime Pay

According to the Department of Labour, employees covered by the Act must receive overtime pay for hours worked in excess of 40 in a workweek at a rate not less than time and one-half their regular rates of pay.

Social Security Disability Insurance

Definition: Social Security Disability Insurance (SSDI) enables workers who are employed in covered employment and who have a medical condition that meets Social Security’s definition of disability to collect benefits while they are unable to work. In general, monthly cash benefits are paid to people who are unable to work for a year or more because of a disability. The application process takes 60 – 90 days. Then there’s a sixth month waiting period before you can collect a check


George was permanently injured in an accident and unable to work, so, he applied for Social Security Disability Insurance benefits

Unemployment Benefits

The purpose of unemployment insurance is to provide workers, who are unemployed through no fault of their own, with monetary payments for a specific period of time or until the worker finds a new job.

Unemployment benefits are provided by state unemployment insurance programs within guidelines established by Federal law. Eligibility for unemployment insurance, benefit amounts and the length of time benefits are available are determined by state law. Unemployment benefits also define as the following:

Regular benefits are paid for a maximum of 26 weeks in most states.

Additional weeks of benefits are being available during times of high unemployment.

In many states, the compensation will be half your earnings, up to a maximum amount. For example, in New York State you’re entitled to collect up to a maximum of $405, which is half the state’s average weekly wage. While in Arizona, the highest benefit rate is $205.

Benefits are subject to Federal income taxes and must be reported on your Federal income tax return.

Unemployment Insurance

Definition: Unemployment insurance is compensation provided to workers who are unemployed through no fault of their own. Unemployment provides monetary payments for a specific period of time or until the worker finds a new job.

Unemployment benefits are provided by state unemployment insurance programs within guidelines established by Federal law. Eligibility for unemployment insurance, benefit amounts and the length of time benefits are available are determined by state law.

Disqualification from Unemployment

The following circumstances may disqualify you from collecting unemployment benefits, depending on state law:

Quit without good cause

Fired for misconduct

Resigned because of illness (check on disability benefits)

Left to get married


Involved in a labour dispute

Attending School

Workers’ Compensation

Employees who are injured or become ill on the job are covered by state workers’ compensation laws. In every state, employers are required to have workers’ compensation insurance though there are a few exemptions. Benefits include payment for lost wages and payment of medical bills. However, you will only be paid a portion (usually two-thirds) of your salary. The first step in filing a claim is to notify your employer. Your employer should be able to supply you with the forms needed to file a claim

Besides, according to the author, Gary Dessler from textbook named A Framework of Human Resource Management said that the benefits represent an important part of just about every employee’s pay. They are defined as indirect monetary and nonmonetary payment an employee receives for continuing to work for the company. Benefits include such things as time off with pays, health and life insurance, and chid-care facilities.

He said the type of employee benefits are:

Pay for Time Not Worked

Unemployment Insurance

Vacations and Holidays

Sick Leave

Family and Medical Leave Act of 1993 (FMLA)

Severance Pay

Insurance Benefits

Worker Compensation

Hospitalization, Medical, and Disability Insurance

The Pregnancy Discrimination Act

COBRA Requirements

Cost Control

Retirement Benefits

Social Security

Pension Plans

Cash Balance Pension Plans

Employee Retirement Income Security Act (ERISA)


Employee Services and Family-Friendly Benefits

Flexible Benefits

Benefits Web Sites

Employees’ Provident Fund (EPF) and Socso

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