Benefits, Employee

Employee benefits are the noncash compensation offered by employers to their employees as part of the total compensation package. The benefits offered by employers generally reflect a basic care and concern for the well-being of employees and the importance of that well-being to employee productivity. For the most part, employee benefits may be placed in one of three categories: health-related insurance, financial insurance, and quality-of-life benefits.

Health-related benefits, which include health, dental, vision, and disability insurance, are designed to provide for the health care needs of employees and, in many instances, may be extended to include their spouses and/or dependent children. The purpose of financial insurance, which includes retirement and pension plans, life insurance, and flexible spending accounts, is to help employees become more financially secure. Quality-oflife benefits, which have grown increasingly important to employees in recent years, help employees live less stressful lives by maintaining a healthy work-life balance. Quality-of-life benefits includes personal and parental leave time, on-site child care, day care subsidies, paid holidays, flexible work schedules, employee assistance programs (EAP), concierge services, and a plethora of additional elective benefits, such as insurance for their homes, pets, and long-term care.

Employee benefits may be further classified as voluntary or mandatory. Mandatory benefits are those that employers are required to provide by law and include social security, Medicare, and unemployment and disability insurance. Voluntary benefits are health care and retirement plans, as well as other elective benefits that employers provide above and beyond what is required by the government.

Employee benefits as an essential feature of the total compensation package grew out of the U.S. labor movement. The Norris-LaGuardia Act of 1932 and the Wagner Act of 1935 guaranteed employees the right to join unions and required employers to engage in good faith collective bargaining. In 1949, labor unions won the right to include employee benefits in the bargaining agreement.

The rapid growth throughout the 1950s and 1960s in the number of employers that offered benefits as part of the total compensation package reflected an expanded social consciousness in which employers felt increasingly obliged to invest in the total wellbeing of their employees. The growth in employee benefits was further facilitated by a strong economy and the tax incentives that the government made available to firms that provided benefits. Subsequently, by the 1970s, almost all employers offered some type of employee benefits to their regular full-time employees, primarily health insurance and retirement plans.

With so many individuals now dependent on employee benefits programs for their health care and retirement, legislation was enacted to safeguard their rights as participants in these programs. The Employee Retirement Income Security Act (ERISA) of 1974 established minimum standards for most voluntary pension and health care plans in private industry to provide protection for the employees participating in these plans. ERISA requires employers to provide employees with detailed information including the benefits plan features and funding, defines the fiduciary responsibilities of those who manage and control plan assets, requires plans to establish a grievance and appeals process for participants to get benefits from their plans, and gives participants the right to sue for benefits and breaches of fiduciary duty.

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