When an organization design overall its compensation program, a critical areas of concern is what benefits to provide. Today’s workers expect more than just an hourly wage or a salary; they want additional considerations that will enrich their lives. These considerations in and employment setting are called employee benefits.

1. 1. Introduction
When an organization design overall its compensation program, a critical areas of concern is
what benefits to provide. Today’s workers expect more than just an hourly wage or a salary; they
want additional considerations that will enrich their lives. These considerations in and
employment setting are called employee benefits.
Benefits are generally membership-based, offered to employees regardless of their performance
levels. This done not seem logical business practice, but evidence indicates that inadequate
benefits and services for employees contributes to employee dissatisfaction and increased
absenteeism and turnover. Accordingly, the greatly negative effect of failing to provide adequate
benefits prompts organizations to spend tens of billions of dollars annually to ensure baluabel
benefits for each employee
Over the decades, the nature of benefits has changed drastically. Benfits and service offerd in the
early 1990’ clearly differed from those offered today in focusing on time off from work.
Today’s organizational benefits are more widespread, more creative, and clearly more abundant.
As indicated in the main body of this paper employee benefits nowadays are designed to ensure
value for each employee.
Employee benefits are all forms of consideration given by an entity in exchange for service
rendered by employees, including directors and management. Employee benefits can be many
types
Employee services are employee benefits, but they are a more specific form of employee benefit
that employers offer to help instill loyalty among their workers.
The purpose of employee benefits is to increase the economic security of employees and in doing
so, improve worker retention across the organization. As such, it is one component of reward
management.
Employee services can include anything an employer deems necessary to provide as a perk for
employees. No real limit exists as to what can be included as an employee service. Some
companies provide cafeterias and event catering services for employees. Others have coffee
shops. Employee services are more of a convenience than a true benefit.

2. 2. Employee Benefits and Services
The Employee benefits are defined as the elements of remuneration given in addition to the
various forms of cash pay. (Michael Armstrong) .
Employee benefits include holiday leave, weekly leave, sick leaves, on work safety, bonus pay,
rewards, provident and pension. We must understand that the employee benefits are varying with
some internal and external factors. The internal factors could be said the paying capacity of the
organization, the policy of the company regarding to the employees handling, the employees
demand and bargaining power. While the government/ legal enforcement, the labor market,
unions influence, global economy and others may be considered as of external factors.
Employee benefits also include share-based payment transactions by which employees receive
equity instruments (such as shares or share options) or cash or other assets of the entity in
amounts that are based on the price of the entity’s shares or other equity instruments of the
entity.
Employee benefits are all forms of consideration given by an entity in exchange for service
rendered by employees, including directors and management. Employee benefits can be many
types which include:
1. Short-term employee benefits
2. Post-employment benefits
3. long-term employee benefits,
4. Termination benefits
2.1 Short-term employee benefits, which are employee benefits (other than termination
benefits) that are wholly due within twelve months after the end of the period in which the
employees render the related service.
Short-term employee benefits include:
 Wages, salaries and social security contributions;
 Short-term compensated absences (such as paid annual leave and paid sick leave) when
the absences are expected to occur within twelve months after the end of the period in
which the employees render the related employee service;

3.  Profit-sharing and bonuses payable within twelve months after the end of the period in
which the employees render the related service; and
 Non-monetary benefits (such as medical care, housing, cars and free or subsidized goods
or services) for current employees.
2.2 Post-employment benefits, which are employee benefits (other than termination benefits)
that are payable after the completion of employment. It includes:
 Retirement benefits, such as pensions;
 Other post-employment benefits, such as post-employment life insurance and post-
employment medical care.
2.3 Long-term employee benefits, employee benefits other than postemployment benefits and
termination benefits that is not wholly due within twelve months after the end of the period in
which the employees render the related service. It includes:
 Long-term compensated absences such as long-service or sabbatical leave.
 Long-service benefits.
 Long-term disability benefits.
 Profit-sharing and bonuses payable twelve months or more after the end of the period in
which the employees render the related service.
 Deferred compensation paid twelve months or more after the end of the period in which it
is earned.
2.4 Termination benefits are benefits payable as a result of either an entity’s decision to
terminate an employee’s employment before the normal retirement date, or an employee’s
decision to accept voluntary redundancy in exchange for those benefits.
Employee benefits include benefits provided to either employees or their dependants and may be
settled by payments (or the provision of goods or services) made either directly to the employees,
to their spouses, children or other dependants or to others, such as insurance companies.
Furthermore, an employee may provide services to an entity on a full-time, part-time, permanent,
casual or temporary basis.
Employee benefits also include share-based payment transactions by which employees receive
equity instruments (such as shares or share options) or cash or other assets of the entity in
amounts that are based on the price of the entity’s shares or other equity instruments of the entity

4. Busy corporate offices, for example, might provide dry cleaning pickup services for employees.
Employers in remote locations might offer shuttle services to and from work. The type of
services depends upon each employer. Small business owners can use employee services such as
on-site childcare to make their positions more attractive to potential employees.
Employee benefits differ from employee services in that benefits tend to be necessities for many
people. Basic insurance needs are covered by many employee benefit plans. Insurance options
provided by employers can include
 health insurance,
 life insurance,
 accidental death
 disability insurance,
 dental insurance and
 Unemployment insurance also. Other types of benefits usually include a retirement plan
qualified tax-deferred plan.
Although employee services might be considered a benefit, they are usually optional and not
necessarily what job seekers first look for when conducting a job hunt.
Employee benefits packages can be cost prohibitive but can benefit the business owner as a tax
deduction. Business owners might be limited in the benefits they can provide and might have to
compete with other business owners to provide the most comprehensive benefits packages.
Employee services have the potential to make a less comprehensive benefits package appear to
be more generous because of the additional perks they provide.
Employee services can also prove to be expensive for employers. In businesses where employee
services are an established part of the benefits offered, it might be difficult for employers to cut
the services even when they become too expensive

5. 3. Objectives of Employee Benefits Management
Employee benefit systems in organizations must be linked and aligned to organizational
objectives and strategies. Benefits also require balancing the interests and costs of the
employer with the expectations of employees. The employee benefit system of an
organization basically ensures that the system is in compliance with all legal
requirements, cost effective, maintains equity for internal, external, and individual
employees and enhances the performance of the organization. In the process, the system also
must balance the cost of offering these benefits with that of ensuring organizational
competitiveness and maintenance of all employees on board to the successful implementation of
goal and objectives. In order to attract, retain, and reward employees, employers provide several
types of benefits. Some of the major objectives of implementing employee benefit and
compensation systems are listed here below.
a. Acquire qualified personnel: The employee benefits and services need to be
high enough to attract qualified and competent applicants. Pay levels must
respond to supply and demand of workers in the labor market since
employees compete for wages.
b. Retain employees: Employees may quit when the benefits levels are not
competitive, resulting in higher turnover. Thus benefits and services considered
should enable the business to retain its work force.
c. Ensure equity: Employee benefits management strives for internal and external
equity. Internal equity requires that pay be related to the relative worth of jobs, so
that similar jobs get similar pay. External equity means paying workers what their
counterparts in other firms in the labor market are being paid. External equity
could also help the business compete for acquisition of the best employees in the
market.
d. Further administration efficiency : Wage and salary programs should be
designed to be managed efficiently, making optional use of the human
resources information system, although this objective should be a secondary
consideration compared with other objectives.

6. 4. Designing employee benefits and services
4.1 The 5 W’s and how question in designing employee benefits and services
While designing employee benefit and service strategic consideration should be given to the
following questions:-
 What is expected from benefits?
 What is an appropriate mix of benefits?
 How much total compensation, including benefits, should be provided?
 What part should benefits comprise of the total compensation of individuals?
 What expense levels are acceptable for each benefit offered?
 Why is each type of benefit offered?
 Which employees should be given or offered which benefits?
 What is being received in return for each benefit?
 How does having a comprehensive benefits package aid in minimizing turnover or
maximizing recruiting and retention of employees?
 How flexible should the package of benefits be?
4.2 Step to design employee benefit and service
An organization needs to maintain the proper balance between making profit or meeting
organizational goals and objectives, and addressing employees’ needs for benefits. Business
owners must exercise vigilance to ensure the cost of the employee benefits does not affect a
organization’s revenue stream. Hence the following steps should be considered while designing
employee benefits and services.
Step 1
Choose the employee benefits you wish to provide. A number of different employee benefits
exist, ranging from retirement plans to health benefits to setting up college funds for employees,
etc... The most popular employee benefit, however, is offering paid leave for employees. In order
to make sure you are getting the best benefits for the employee and are paying the least amount
of money, compare different plans and programs to find the plan best suited for your company.

7. Step 2
Examine the finances of the business to determine how much money can be spent on employee
benefits. Take at least one year’s worth of data to see where the business stands and project the
future (when possible). Make sure any employee benefits can be absorbed by the business
without it impacting operating expenses.
Step 3
Set up a file for each employee, detailing any benefits being given to the employee including
monthly costs. In addition, have an overall master file prepared to chart monthly expenses for all
employee benefits. Make sure all documentation is maintained since the Internal Revenue
Service taxes any employee benefits provided by an employer. Moreover, it will help us control
undesired behavior by employees who tend to manipulate benefit packages for their undue
advantage.
Step 4
Set up any automatic withdrawals needed for employees matching any employee benefit
contributions, such as retirement funds. Most companies offer the necessary documentation for
obtaining authorization for having the employee-matching contribution taken out of the account.
If an employee does not want to do that, the deduction can be taken directly out of the paycheck.
Step 5
Monitor financial data on a regular basis. In order for a business to remain successful, the cost of
providing employee benefits cannot cut into the company profits. When profits fall due to
employee benefits, the company ceases to grow. If the financial picture changes, employee
benefits might need to be scaled back or even halted. The employee benefits can return to their
previous level when business returns. A good example of such scenario in the past three years is
the case of Manchester United Football Club that ceased to offer free meals for all staff involved
on match days and after training sessions.
5. Employee benefit trend and practice

8. Employee benefit and services may vary from country to country depending the industry the
capacity of the organization. For our better understanding examining three advanced countries
i.e. United State, United Kingdom and Canada is presented as follow.
5.1 Employee benefits in the United States include:-
 relocation assistance;
 medical, prescription,
 vision and dental plans;
 health and dependent care flexible spending accounts;
 retirement benefit plans;
 group-term life and long term care insurance plans;
 legal assistance plans;
 adoption assistance;
 child care benefits and transportation benefits;
 paid time off in the form of vacation and sick pay.
Benefits may also include formal or informal employee discount programs that grant workers
access to specialized offerings from local and regional vendors
e.g.,
 movies and theme park tickets,
 wellness programs,
 discounted shopping,
 hotels and resorts, and so on
Companies who offer these types of work-life perks seek to raise employee satisfaction,
corporate loyalty, and worker retention by providing valuable benefits that go beyond a base
salary figure.
The term "fringe benefits" was coined by the War Labor Board during World War II to describe
the various indirect benefits which industry had devised to attract and retain labor when direct
wage increases were prohibited.
Fringe benefits are also thought of as the costs of retaining employees other than base salary.

9. Some fringe benefits For example,
 accident and health plans,
 group-term life insurance coverage up to US$50,000) may be excluded from the
employee's gross income and, therefore, are not subject to federal income tax in
the United States.
Normally, employer-provided benefits are tax-deductible to the employer and non-taxable to the
employee. The exception to the general rule includes certain executive benefits (e.g. golden
handshake and golden parachute plans) or those that exceed federal or state tax-exemption
standards.
American corporations may also offer cafeteria plans to their employees. These plans 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 employees is
deducted from their gross pay before federal and state taxes are applied. Some benefits would
still be subject to the Federal Insurance Contributions Act tax (FICA), such as
 health premiums,
 some life premiums, and
 Contributions to flexible spending accounts are exempt from FICA.
In the United States paid time off, in the form of vacation days or sick days, is not required by
federal or state law. Despite that fact, many United States businesses offer some form of paid
leave. In the United States, 86% of workers at large businesses and 69% of employees at small
business receive paid vacation days.
Major Employee Benefits (percent of Employers Participating)

10. 5.2 Employee Benefits in the UK are categorized by three terms:
1. Flexible Benefits (Flex)
2. Flexible Benefits Packages,
3. Voluntary Benefits and Core Benefits.
Core Benefits is the term given to benefits which all staff enjoy, such as pension, life insurance,
income protection, and holiday.
Flexible benefits, often called a “flex scheme”, are where employees are allowed to choose how
a proportion of their remuneration is paid or they are given a benefits budget by their employer
to spend. Currently around a third of UK employers operate such a scheme.
How flexible benefits schemes are structured has remained fairly consistent over the years,
although the definition of flex has changed quite a lot since it first arrived in the UK in the
1980s. When flex first emerged, it was run as a formal scheme for a set contract period, through
which employees could opt in and out of a selection of employer-paid benefits, select employee-
paid benefits, or take the cash. In recent years increasing numbers of UK companies have used
the tax and national insurance savings gained through the implementation of salary sacrifice
benefits to fund the implementation of flexible benefits. In a salary sacrifice arrangement an
employee gives up the right to part of the cash remuneration due under their contract of
employment. Usually the sacrifice is made in return for the employer's agreement to provide

11. them with some form of non-cash benefit. The most popular types of salary sacrifice benefits
include childcare vouchers and pensions.
Flex packages :- A number of external consultancies exist that enable organizations to manage
Flex packages and they centre around the provision of an Intranet or Extra net website where
employees can view their current flexible benefit status and make changes to their package.
Adoption of flexible benefits has grown considerably, with 62% of employers in a 2012 survey
offering a flexible benefit package, and a further 21% planning to do so in the future.. This has
coincided with increased employee access to the internet and studies suggesting that employee
engagement can be boosted by their successful adoption.
Voluntary Benefits is the name given to a collection of benefits that employees choose to opt-in
for and pay for personally, although, as with flex plans, many employers make use of salary
sacrifice schemes where the employee reduces their salary in exchange for the employer paying
for the perk.
Employee benefits in Great Britain include various types of non-wage compensation provided
to employees in addition to their normal wages or salaries. Examples of these benefits include:
 housing (employer-provided or employer-paid),
 Group insurance (health, dental, life etc.),
 disability income protection,
 retirement benefits,
 daycare,
 tuition reimbursement,
 sick leave, vacation (paid and non-paid),
 Social security, profit sharing, funding of education, and other specialized benefits.
The term perks is often used colloquially to refer to those benefits of a more discretionary
nature. Often, perks are given to employees who are doing notably well and/or have seniority.
Common perks are:
 take-home vehicles,
 hotel stays,

12.  free refreshments,
 Leisure activities on work time (golf, etc.),
 stationery,
 Allowances for lunch, and—when multiple choices exist—first choice of such things as
job assignments and vacation scheduling. They may also be given first chance at job
promotions when vacancies exist.
5.3 Employee benefits in Canada might include additional health coverage that is not included
in the provincial plan such as:-
 medical, prescription,
 vision and dental plans;
 Group Disability, Employee Assistance Plans,
 Group Term Life & Accidental Death & Dismemberment,
 Health and dependent care;
 retirement benefit plans in addition to Canada Pension Plan ; 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.
6. Conclusion
Employee benefits and service is among the major human resource management functions.
Employee benefit is the major cost incurred by the business organization.
Employee benefits include benefits provided to either employees or their dependents and may be
settled by payments (or the provision of goods or services) made either directly to the employees,
to their spouses, children or other dependents or to others, such as insurance companies.
Furthermore, an employee may provide services to an entity on a full-time, part-time, permanent,
casual or temporary basis.
Poor employee benefit and service design and management may lead to undesired behaviors like
frequent absenteeism, high rate of employee turnover, job dissatisfaction, psychological
withdrawal, poor mental health, lack of sense of belongingness and loyalty, etc. Hence The

13. employee benefit system of an organization basically ensures that the system is in
compliance with all legal requirements, cost effective, maintains equity for internal,
external, and individual employees and enhances the performance of the organization.
Reference
1. MICHAEL ARMSTRONG (2009). Armstrong’s Handbook of Human Resource
Management Practice; 11th edition.
2. DAVID A. DECENZO and STEPHEN P. ROBBINS (2005) Fundamentals of Human
Resource Management; 8th edition.
3. www.chron.com (how to manage the employee benefits)
4. www.boundless.com (definition of employee benefits)