The Impacts of Employee Benefits


Personnel motivation is one of the main issues for all companies that value their reputation and the trust of employees. The success of a company largely depends on the qualifications and full commitment of employees to their work. For the stable development of a company, an effective and well-organized system of employee benefits becomes a prerequisite. There are three key types of such benefits, including discretionary, health insurance and retirement plans, and mandated ones. This paper aims at discussing these benefits based on the recent scholarly literature and personal experience.

Examining Benefits

Discretionary Benefits

The compensation provided to employees by an employer that is not mandated by the law refers to discretionary benefits. They may involve such issues as insurance, maternity or sick leaves, and so on (Martocchio, 2016). The discretionary income of an employee is that part of the income that is spent by him or her for leisure time and traveling compared to the mandatory expenses for housing, transport, insurance, et cetera.

In many companies, discretionary privileges, including loans for the purchase of housing, free meals, or the right to buy the company’s products at preferential prices can be enjoyed only by certain categories of workers (Martocchio, 2016). For example, top managers or employees who have worked in the company for a long period of time may be given to them. Another option for the formation of the identified benefits is an independent choice by an employee from the list. For example, one would prefer to pay for tuition, while the other would like additional medical insurance.

For the employee engagement, it is necessary to ensure a sense of self-worth for each employee, so that he or she is interested in responsible work with enthusiasm for the benefit of the organization. For instance, Yahoo offers fitness centers with yoga, cardio-kickboxing, pilates, and golf. The offices are also equipped with special ergonomic chairs that provide back support, and there are automatic machines with healthy food and drinks on each floor (Shields et al., 2015).

Outside the office, Yahoo provides discounts on ski resorts and theme parks in California as well as holds an annual party called Octoberfest. In addition, the company arranges a baby shower for employees who are preparing to become parents. These discretionary benefits create the atmosphere of the engagement and show that the company’s leadership cares about employees by supporting their professional growth and personal development.

Many scholars report that employee benefits are usually the first issue in employment applicants pay attention to. Speaking of discretionary benefits from the social point of view, an employee receives some support from the employer, and, consequently, the company’s productivity increases, the atmosphere in the team improves, and staff turnover decreases (Fronstin & Roebuck, 2013). However, additional employee benefits are beneficial for companies since employers often retain valuable employees without a significant salary increase.

The psychological factor is also significant as it creates the cohesion of the team as well as the benevolent atmosphere in the company. The current trend is that for many employees, the expression of care on the part of employers is likely to be more important than financial incentives.

Health Insurance Programs and Retirement Plans

The presence of retirement plans and health insurance programs for employees compose a guarantee of reliability and stability. Depending on what an employer offers in this package, a potential employee can decide how comfortable he or she will be in one or another company. The United States has a developed insurance system, which is recognized as one of the best in the world, and it accounts for about a quarter of the global insurance market.

In accordance with the Affordable Care Act, the main law of the United States in the field of health insurance, the purchase of insurance is the responsibility of every US citizen (Shields et al., 2015). If for some reason, an employee does not have insurance, he or she may even be fined. There are several health insurance programs that may be provided to employees as benefits.

Medicare is an American health insurance program for people aged 65 years and older. Also, people under 65 can apply for this insurance: people with disabilities, suffering from permanent renal insufficiency, or amyotrophic lateral sclerosis (Charcot’s disease) (Shaw, Asomugha, Conway, & Rein, 2014). The program helps in paying for medical care, but it does not cover all medical expenses. Medicare is funded by part of the payroll tax paid by both employees and employers, while another part of the program is funded by monthly contributions deducted from social security benefits.

The insurance of medical services covers both the costs of doctors and other providers of medical services, outpatient treatment, and medical equipment of permanent use, as well as home care services (Shaw et al., 2014). In addition, preventive services for maintaining and promoting health are included in the mentioned program. For the poorest groups of the population, there is the Medicaid that was established in the 1960s as a program of medical care for the poor; however, over time, the number of beneficiaries includes more and more Americans with income 2-3 times higher than the poverty line.

Speaking of the insurance plans, one should also take into account two key types of organizations responsible for these benefits. Health Maintenance Organization (HMO), the most inexpensive insurance, implies that an employee should select a practitioner who will supervise him or her in the future (Shaw et al., 2014). It is this doctor who has the right to refer a person to more focused specialists such as a cardiologist or oncologist, if required.

In this case, medical care can be received only in certain organizations. Preferred Provider Organization (PPO), a more expensive type of insurance, offers the most favorable conditions for medical insurance. For example, a person can be served not only in the basic organizations but practically in any medical organizations. There is no need to interact with the therapist: a person can turn to the specialist in need at the chosen medical organization.

The retirement plans that represent the pension system in the United States incorporate multiple components. The pension consists of the past paid by the state as well as the funded part. The latter, in turn, includes the part the company-employer pays (the so-called 401K), and also from the savings of the pensioner, which may be accumulated in the account or invested in securities (Martocchio, 2016). It should be stressed that both of the mentioned items are not tax deductible.

Additional benefits get the military persons, who have a separate fund that pays for retirement plans. The majority of pensioners are provided with an insurance pension, and their income significantly exceeds the established minimum living wage. In addition to the mandatory state pension system, there are over 700 thousand private pension plans in the country. Among full-time workers, about 80 percent participate in voluntary savings plans at their place of work (Shields et al., 2015).

Personally, I can note that the number and variety of retirement plans are growing. For example, my aunt retired recently, and she received a good pension with the additional payment from the private fund in which she entered 15 years ago. As for my uncle, his company was less interested in motivating employees with insurance benefits and appropriate retirement plans; therefore, they paid the minimum.

Legally Required Benefits

There are state-guaranteed benefits that are mandatory for all organizations. This is the payment of annual leave, temporary disability, benefits for young employees, and those having disability. The employee benefits are the extra that a company can offer in addition to the basic compensation with the aim of supporting people and stimulating them to work better (Ko & Hur, 2014). In every company, such compensation looks differently, yet there are some common features.

In my company, management and leadership act in accordance with the Labor Law, paying for sick and maternity leaves, deducting funds to pension and insurance, and also providing medical insurance plans. At the same time, following the federal law, my employer compensates for the use of personal property for business purposes. In other words, if an employee uses a personal car or smartphone for his or her work activity, he or she is entitled to reimbursement of expenses.

The scholarly literature and the media provide the opportunity to mention some of the most successful implementations of legally required benefits to employees. For instance, in Boeing, new employees do not feel lonely, because the company brings them together through a program called REACH that allows participating in various social projects (Shields et al., 2015). For Boeing employees, there are 12 paid holidays per year as well as holidays between Christmas and New Year.

Another prominent company, Microsoft, provides paid leave to new fathers and mothers. It also has a mentoring program, and employees receive medical insurance that includes the services of doctors for people with autism. Microsoft is the first major company to offer such benefit that shows its attention to health and social concerns of employees.

In addition to the medical one, the system of social insurance is also developed in the US. The insured events are as follows: unemployment, disability, loss of the breadwinner, and old age. If health insurance is non-state, then contributions are paid to the budgets: the number of benefits in case of insured events will be calculated depending on how much one has worked, what was his or her income, et cetera (Ko & Hur, 2014).

The law on the nationwide social security pension payment system was signed by President Franklin Roosevelt in 1935. According to this document, all persons whose age exceeds the officially established threshold are paid a cash benefit, the amount of which depends on the average level of wages. Among other benefits can be discounts on manufactured products, payment for sports or housing, and so on.


In conclusion, it should be emphasized that employee benefits in the US are divided into three large categories such as mandated by laws, discretionary benefits, and insurance and retirement plans. It was revealed that the benefits required by laws assist employees in paying for their living and basic needs, while discretionary benefits help in organizing traveling and leisure time along with ensuring motivation to work more productive.


Fronstin, P., & Roebuck, M. C. (2013). Health care spending after adopting a full-replacement, high-deductible health plan with a health savings account: A five-year study. Issue Brief, 388, 1-16.

Ko, J., & Hur, S. (2014). The impacts of employee benefits, procedural justice, and managerial trustworthiness on work attitudes: Integrated understanding based on social exchange theory. Public Administration Review, 74(2), 176-187.

Martocchio, J. J. (2016). Strategic compensation: A human resource management approach (9th ed.). New York, NY: Pearson.

Shaw, F. E., Asomugha, C. N., Conway, P. H., & Rein, A. S. (2014). The patient protection and Affordable Care Act: Opportunities for prevention and public health. The Lancet, 384(9937), 75-82.

Shields, J., Brown, M., Kaine, S., Dolle-Samuel, C., North-Samardzic, A., McLean, P.,… Plimmer, G. (2016). Managing employee performance & reward: Concepts, practices, strategies (2nd ed.). New York, NY: Cambridge University Press.

Cite this paper

Select style


BusinessEssay. (2022, December 16). The Impacts of Employee Benefits. Retrieved from


BusinessEssay. (2022, December 16). The Impacts of Employee Benefits.

Work Cited

"The Impacts of Employee Benefits." BusinessEssay, 16 Dec. 2022,


BusinessEssay. (2022) 'The Impacts of Employee Benefits'. 16 December.


BusinessEssay. 2022. "The Impacts of Employee Benefits." December 16, 2022.

1. BusinessEssay. "The Impacts of Employee Benefits." December 16, 2022.


BusinessEssay. "The Impacts of Employee Benefits." December 16, 2022.