Employee Benefits - Types of Benefits

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Below are common types of benefits that may be offered by employers:

Medical benefits

Medical benefits cover the costs of surgeon and physician fees, hospital rooms, and pharmaceuticals. Dental and optical care is not included, but might be offered as part of an overall benefits package. Coverage can be extended to the employee's family (dependents). Part-time workers are rarely offered family coverage.

Minnesota facts:

About 53 percent of firms offer medical insurance to full-time employees, while only 12.4 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 medical benefits and most other benefits as well. The leisure and hospitality sector is the least likely to offer medical or other types of benefits.
The share of firms that offer medical and dental benefits varies depending on firm size with larger firms more likely to offer them than small firms.

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: defined benefit and defined contribution. In defined benefit plans, sometimes called pension plans, the benefit amount is pre-determined typically on the basis of salary and years of service. In these plans the employer bears the risk of the investment. In defined contribution plans (e.g., 401k) 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 that tend to have the highest levels of unionization: public administration, construction, manufacturing, and trade, transportation and utilities.

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Disability benefits

Disability benefits assist with income replacement when workers are unable to perform their jobs because of illness or injury. This benefit is not commonly offered. The two main types of disability insurance are short-term and long-term:

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.

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Life insurance

Life insurance provides financial support to a beneficiary after an employee's death. Insurance benefits are paid all at once to the designated beneficiaries of the policy - usually relatives such as a spouse or children. This benefit will be very important to your loved ones if the unexpected occurs.

Life insurance can be either privately purchased in the marketplace (usually for a large sum) or received through an employer at a much lower cost if your employer sponsors a group plan. Company-sponsored life insurance plans are standard for almost all full-time workers in medium and large firms across the country.

Minnesota facts:

The number of people employed 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.

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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 cases paid leave is allocated by separate classifications such as vacation, sick leave, and paid holidays. In a few cases 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 with 62 percent of firms offering this benefit to full-time workers. Paid holidays are also very common (see table below).
Thirty-three percent of firms have paid sick leave for full-time employees.

Percent of firms offering paid vacation	Percent of firms offering paid sick leave	Percent of firms offering paid holidays	Percent of firms offering combined PTO
62.1%	33.8%	58.6%	9.9%

Source: 2005 Minnesota Employee Benefits Survey Minnesota Department of Employment and Economic Development

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Fringe benefits

Fringe benefits include a wide variety of non-cash payments, such as 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). Direct cash payments or stock options were not included in the survey.

With the looming prospect of skill shortages in some occupations, fringe benefits are increasingly being used to attract and retain talented employees.

Tuition reimbursement is an especially important benefit if you plan to pursue a degree in your evening or weekend hours. It can represent a unique opportunity to advance in your career. Most firms offering it, however, require that courses relate to job duties.

Minnesota facts:

Non-production bonuses, which include hiring bonuses, signing, year-end, attendance, and holiday bonuses, are the most common type of fringe benefit offered to full-time workers in Minnesota. Tuition/educational assistance is offered by 19 percent of companies in Minnesota (see Figure 1).
Full-time employers in the manufacturing sector have among the highest offer rates in almost all categories of fringe benefits.

Figure 1

FringeBenefits

Source: 2005 Minnesota Employee Benefits Survey Minnesota Department of Employment and Economic Development

Page last updated in July 2008.