Employee benefits guide 2025

Creating a well-balanced employee benefits package is one of the most important but also most difficult tasks for HR directors or managers. It requires some serious tightrope-walking skills and ensuring that:

a) the package meets the employees’ wants and needs,
b) it allows the company to stay competitive within industry benchmarks and
c) it meets legal compliance.

And just like a tightrope-walker risks their life high up there on that rope, a poorly thought-out and designed benefits package can also have significant adverse effects on your company, from difficulty retaining current talent to trouble attracting new employees.

And, while we can’t teach you how to be a tight-rope walker, we can help you create a well-balanced employee benefits package for 2025 that satisfies your current employees and attracts new talent in this employee benefits guide 2025.

What are employee benefits?

Employee benefits are any compensation offered to employees besides their regular salary or wage. These can be financial or non-financial and included in the employee contract or outlined separately, usually as an employee benefits package.

Also called “fringe benefits,” these can be mandatory (statutory) or voluntary. 

Mandatory or statutory benefits are required by law that the employer provides them to employees. Typically, these include social security, paid annual leave, parental leave, pension contribution, health insurance, etc. 

These benefits vary from country to country, so here is a table summarizing mandatory employee benefits for the US, Canada, EU, UK, and Australia.

Region	Mandatory Employee Benefits
United States	Social Security, Medicare, Family and Medical Leave, Unemployment Insurance, Worker’s Compensation Insurance, and Affordable Care Act (ACA) Compliance.
Canada	Employment Insurance, Worker’s Compensation Insurance, Survivor Insurance, Pension Contributions, Provincial Healthcare Coverage.
European Union*	Paid Annual Leave, Sick Leave, Parental Leave, Health Insurance, Minimum Wagee Regulations.
United Kingdom	National Insurance Contributions, Statutory Sick Pay, Statutory Maternity Pay, Statutory Paternity Pay, Annual Leave Entitlement.
Australia	Superannuation, Paid Parental Leave, Worker’s Compensation, Annual Leave Entitlement, Sick Leave Entitlement.

* Dependents on the EU member state.

These benefits can vary in detail between different countries for the same region. For instance, workers in Germany receive their full salary (100%) during sick leave for the first 6 weeks, known as “Entgeltfortzahlung” (continued remuneration), while those in France receive 50% for the first 30 days of sick leave.

Apart from mandatory, businesses can also offer voluntary or supplemental benefits. These are not required by law and can include benefits such as wellness programs, stock options and equity plans, paid holidays, professional development, bonuses and incentives, volunteer time off (VTO), and others.

Voluntary employee benefits are an excellent way for the company to differentiate itself in the competitive job market and can be tailored to meet the employees’ specific needs, so even if they’re not required by law, you should make sure to include some of them.

Types of employee benefits

Employee benefits can be categorized in many different ways. However, we think grouping them into these five main types offers the best overview of what you need to include in your package:

Health and wellness benefits

Health and wellness benefits include benefits that support the physical and mental health and well-being of employees. These include:

• Health insurance: Medical, dental, and vision
• Wellness programs: Health screening, gym memberships, fitness classes, smoking and alcohol cessation programs
• Mental health support: Employee Assistance Programs (EAP), therapy sessions, counselling

Financial benefits

Financial benefits aim to provide financial security for employees during their company tenure, after retirement, and growth and development opportunities. These are:

• Life and disability insurance: Death or long-term disability coverage
• Retirement plans: 401(k), Pension plans
• Stock options/equities: Ownership opportunities in the startup
• Financial assistance: Financial counselling, student loan repayment, tuition reimbursement
• Bonuses and incentives: Performance-based bonuses, profit-sharing

Paid time off (PTO)

Paid time off (PTO) benefits guarantee that the employee will be paid (in whole or in part) during their time away from work due to sickness, maternity/paternal leave, holidays, vacations, and bereavement.

• Sick leave: PTO for employees’ medical needs and illness
• Maternity and paternity leave: Paid leave for new parents, adoption leave
• Paid holidays and vacation leave: Paid days off for public or company-specific holidays

Professional development

This group of benefits helps employees advance their careers, skill development, and education. For instance, these can include:

• Career development: Coaching, mentorship, and leadership programs access
• Training and education: Courses, certifications, and degrees funding
• Conferences and seminars: Sponsorship and funding for attending industry events like conferences and seminars

Perks and bonuses

These benefits include things like reduced prices for employees, performance bonuses, etc.

• Performance bonuses: Extra compensation for performance
• Employee discounts: Reduced prices for employees for company products and services
• Commuter benefits: Subsidies for transportation and parking
• Home office stipends: Remote work setup support

What should you consider when implementing employee benefits programs?

Now that you know what types of benefits there are, here’s what you should consider when designing an employee benefits package that guarantees employee retention and job satisfaction and attracts new talent:

1. Company goals

Employee benefits must align with the company’s strategic goals. For example, if the goal is to retain talent, then the program should include training and career development opportunities, as well as retirement plans. On the other hand, if the goal is expansion and attracting top talent, the focus should be on health plans, stock options, and the like.

2. Budget and resources

Only some benefits will be relevant for your company, and they will cost money and resources. HR should carefully assess which benefits can give you the best return on investment and deliver maximum value.

3. Employee preferences and needs

There’s not much point in offering benefits that employees are not looking for, is there? The HR should understand the different needs of the workforce the company has and the talent it wants to attract and tailor the program accordingly. For instance, if their work includes injury hazards, then health coverage, sick leave coverage, and life and disability insurance are a must, whereas for an office or at-home worker, not so.

For instance, HeartCount clients can use custom surveys to understand and find out which benefits are the most important for their employees. 

4. Economic factors

Another factor that can shape your employee’s benefits program is the economic factors. HR should keep its finger on the pulse for any sign of economic recession and adjust the program accordingly. For instance, in such times, the company’s focus can be on more cost-saving benefits like flexible work arrangements, mental health support, or employee recognition programs.

5. Compliance

Compliance means offering employee benefits that are mandated by the law in their country. If your program doesn’t have these, your company risks fines, legal disputes, and reputational damage. For example, California Labor Law prescribes a penalty for failing to secure the payment for workers’ compensation of a minimum of $10,000, which can include imprisonment.

6. Industry standards

Finally, your employee benefits program must be competitive to those offered on the market and by your competitors. If a close competitor offers better benefits than you, they will likely snatch the top talent before you, so you need to closely monitor the industry standards and benchmarks. 

How much do employee benefits cost?

Calculating the costs of employee benefits is tricky. The three main factors to consider here are:

1. Location
2. Company size
3. Range of benefits

Location

Location influences employee benefits costs in three ways:

The first one is the local laws and regulations. Countries will mandate specific benefits. For instance, mandatory healthcare contributions are more significant in Europe than in the US.

The second factor here is the regional costs of living. Housing or transportation-related benefits will typically be more common and higher in areas with high living costs.

For instance, the average employer cost per employee in the US in June 2024 was $43.94/h. Of that, $30.90/h was wages (70.3%), and $13.04/h (29.7%) were benefits.

Looking at the regions, the highest cost for employers was in the Northeast region, where the total employee cost was $53.14/h ($36.95/h for wages, $16.49 for benefits), while the lowest was in the South, $39.02/h for the total employee cost ($28.03/h for wages and salaries and $10.99 for the benefits).

This difference isn’t surprising and coincides well with the difference in the cost of living, where the cost of living index is the highest in states like New York and Massachusetts (125.1 and 148.4) and lowest in the South, with Alabama having an index score of 87.9.

As for the EU, finding precise data on employee benefits costs is tricky due to different employee benefits programs, structures, or reporting standards across member states.

The average share of non-wage costs in total labour costs in the EU in 2023 was 24.7% (this includes employee benefits, social security contributions, employer-paid taxes, etc.). 

This is the same as in 2022, and the largest share was in Sweden at 32.20% (the only 30+ country), Italy – at 27.90%, and Austria – at 26.70%, while the lowest was in Romania – 5%, Lithuania – 5.40% and Malta – 6.30%.

Finally, you also need to consider the dynamics of the labour market. In competitive markets, companies can offer more generous benefits such as extended PTO, flexible work arrangements, stock options, etc.

Company size

Company size also influences employee benefits costs in a few ways. First of all, larger companies are often subject to extra regulatory requirements.

For example, the US Affordable Care Act (ACA) does not require small employers to offer health insurance. However, they can participate in the Small Business Health Options Program (SHOP), which provides group plans.

On the other hand, large US employees must comply with the ACA’s Employer Shared Responsibilities Provisions and offer health insurance that meets at least 95% of the minimum essential coverage (MEC) of full-time employees and also covers at minimum 60% of the employee’s healthcare costs.

The second size-related factor to consider is that large companies usually have more extensive benefits than smaller ones and can negotiate better rates for some benefits like health insurance or retirement plans due to the greater number of employees.

Range of benefits

You don’t have to offer the same benefits as everyone else. You could only provide the basic, mandatory benefits and cut costs. Of course, your competitors will likely offer some voluntary benefits on top of those and attract more talent that way.

If you go the opposite route and offer every benefit you can think of, your costs will increase dramatically. So, it’s a balancing act. Offering enough employee benefits without going overboard.

You also need to consider your industry and tailor your benefits package to it.

Looking at the four largest US industries, healthcare, IT, retail, and manufacturing, the most common benefits for each are:

1. Healthcare

• Health insurance
• PTO
• Professional development
• Wellness programs
• Disability insurance

2. IT

• Health insurance
• Remote work options
• Professional development
• Stock options
• Wellness programs

3. Retail

• Employee discounts
• Flexible scheduling
• Health benefits
• PTO
• Commuter benefits

4. Manufacturing

• Health insurance
• Retirement plans
• Safety programs
• Shift differentials
• Tuition assistance

How does a strong employee benefits package help your company?

So, what’s the point of offering a solid employee benefits package? How will it affect your bottom line?

A robust employee benefits package provides several advantages, such as:

• Attracting top talent

A comprehensive benefits package can give your company a competitive edge to attract top talent compared to the competition and attract a wider talent pool.

• Greater employee retention

Offering employee benefits that meet the employees’ needs and preferences means they are less likely to quit. This means turnover costs such as recruitment, onboarding, and training will be lower, and employee loyalty and satisfaction will be higher.

• Improves employee morale

Finally, by offering them more benefits, you show the employees that you value them, making them more motivated and engaged and creating a better workplace culture.

Here are some examples from different companies and how it helped them retain current talent and attract new ones.

Google

Google offers the following benefits and perks to its employees: 

1. Health and wellness

• Medical, dental, and vision insurance for employees and dependents
• Mental health assistance programs for employees
• Wellness centers
• Access to mental health apps
• Medical support programs

2. Financial well-being

• Regular bonus and equity refresh opportunities
• Student loan reimbursement
• Generous 401(k) retirement plans
• 1-on-1 financial coaching

3. Flexibility and time off

• PTO is for vacation, sick leave, parental leave, disability, holidays, jury duty, etc.
• Hybrid work models available
• Four “work from anywhere” weeks every year
• Part-time and job-sharing options

4. Family support and care

• Fertility and growing family support
• Parental leave
• Caregiver leave
• Elder care and support

5. Personal development and community

• Educational reimbursement
• Volunteer time off

Offering these employee benefits, such as on-site healthcare or wellness programs, allows Google to appeal particularly to candidates for whom work-life balance is essential and who focus on personal development and growth with benefits like learning resources and tuition reimbursement.

Additionally, Google offers generous parental leave and on-site care, which allows employees to balance personal and professional responsibilities better.

Amazon

Amazon provides the following benefits to its employees:

1. Health

• Medical plan options
• Support for fertility treatment, physical therapy, cancer, diabetes, and family-building
• Free mental health support through the Employee Assitance Programme (EAP)
• Dental and vision plans

2. Financial

• Life and accidental death and dismemberment insurance
• Short and long-term disability insurance
• Pension

3. Maternity and paternity leave
4. Time off
5. Employee discounts with these benefits: Amazon can attract more talent through diversity and inclusivity programs and skill development through the Career Choice Program.

Also, by offering comprehensive financial security and family support benefits like equality and up to 20 weeks of parental leave, the company can retain more talent.

How to implement an employee benefits program?

So now, with the understanding of employee benefits and why you need them, it’s time to get to the drawing board and execute them.

Here are the steps to do so:

1. Set goals

First things first, why do you want to set up an employee benefits program? The package that you offer to employees will look very different if, for example, your goal is to retain talent and reduce employee turnover versus wanting to attract top talent from elsewhere.

Here are a few possible goals:

• Decrease turnover
• Attract top talent
• Increase productivity
• Improve employee engagement
• Boost morale
• Focus on work-life balance

2. Understand employee needs and preferences

The importance of benefits for employees has risen in recent years, both when it comes to deciding to work with a new employer (attraction) and staying with their current one (retention).

For example, in 2024, 51% of full-time employees in North America and 41% in EMEA “agree” or “strongly agree with the statement: “My benefits package was an important reason I decided to work for my current employer” while back in 2018 only 35% and 28% said the same.

Of course, not all employees want the same. Everyone wants something different and has different needs. It’s up to you to find out what that is. 

How? By gathering data and insight into what employees value the most. Conduct surveys, focus groups, and interviews. For example, this 2024 survey revealed that healthcare benefits are “very important” or “extremely important” for 88% of surveyed employees. This was followed by flexible work (70%), family care (67%), and professional career development (65%).

3. Plan your budget and resources

Budgeting your employee benefits package requires careful consideration. A good rule of thumb that many employers are going with is that you should spend about 50% of the employee’s hourly pay on benefits. For example, if an employee earns $40/h, you should budget $20/h on benefits.

When planning for the benefits budget, always take care of the mandatory benefits first. For example, the US’s average cost of legally required employee benefits is $3.08/h per employee. With the average total compensation per hour of $46.21 and $31.80/h going on wages and salaries, that leaves $14.41 – $3.08 = $11.33/h for non-mandatory or voluntary benefits.

4. Communicate the benefits with employees

Some benefits, like “free snacks,” are easy to understand; others, like PTO calculations or 401(k), not so much.

Your employees need to know and understand what benefits they have and how they can use them effectively. This is the core of workplace transparency – employees who know and are informed of their rights.

Especially make sure to communicate benefits during onboarding so that new hires can clearly understand what you’re offering besides the salary. Additionally, you can set up an employee portal for employees and keep them up-to-date on the benefits or send email updates reminding them of their benefits. All of this makes building a successful HR communication strategy crucial.

Understanding their benefits plays a big part in employee happiness and loyalty. In fact, 76% of employees who understand their benefits are happy, and 50% said a better understanding of their benefits would make them more loyal to their employer.

5. Choose providers

Of course, benefits don’t appear out of thin air. You need to partner with insurance providers, for instance. This means evaluating insurance coverage options, including health, vision, dental, life, and disability insurance, and ensuring they meet the needs of your employees. 

Start by creating a shortlist of reputable providers that offer flexible plans that suit different employee needs (family, individual) and a range of options that you can customize.

Next, assess their accessibility, costs (including premiums), claims processing and customer service, and regulatory compliance. Once you have all that, send them a request for a proposal (RFP) based on your requirements.

6. Listen to feedback and adjust when necessary

Finally, don’t set your employee benefits program on auto and forget about it. Assess its effectiveness by collecting regular employee feedback and looking at performance metrics such as enrollment rate in specific benefits programs, the percentage of employees who use a particular benefit, or employee happiness with a benefit.

Then, based on this feedback and metrics, adjust your benefits package to meet your employees’ needs better and align them with your strategic goals. Think of this as an ongoing process where you must constantly shift and play around.

7. Consider employee benefits platforms

This is an optional step since you can certainly manage all of this by yourself. However, a robust employee benefits platform can make managing employee benefits packages much more straightforward for HR.

With this, you get:

1. Automated benefits enrollment
2. Compliance management
3. Cost management & reportstiing
4. Communication tools
5. Compliance management
6. Employee self-service
7. And more.

Always start with how your employees feel

Employee benefits are essential for giving your employees what they need besides the salary. This requires a good understanding of employee sentiment, making assessing their engagement, happiness, satisfaction, and loyalty vital.

Take a product tour and see how HeartCount can help.