Employee Benefits: What’s in it for the Employer?

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Updated: 07 February 2024
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Insuranceopedia Staff
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Key Takeaways

  • Employee benefits improve employee retention and reduce costs.

What is the most important asset in your company? Your cutting edge tech product? Your well-positioned brand? Your production equipment? Or maybe your intellectual property?

If you answered any of those, chances are you’re wrong. For just about every business, the most valuable asset is their employees.

The Value of Your Workforce

We often hear about the legendary hiring processes at companies like Google or Goldman Sachs. That’s because they’ve recognize the importance of having a quality workforce and have processes in place to make sure they hire innovative workers.

When one of your best employees surprises you with a resignation letter, you will immediately be faced with some challenges. Highly skilled workers are in high demand, so how will you replace the employee you worked so hard to find and train? And the increased workload while you find a new employee to take their place will sink morale and productivity.

Recruitment, training, and onboarding are all expensive activities. According to the Society for Human Resource Management, it can cost between six to nine months’ salary to replace an employee. That means it can cost between $30,000 and $45,000 to recruit a new hire when you lose an employee who earned $60,000 a year – on top of paying the new employee’s salary, of course. For higher earning employees, executives, and those in highly trained roles, the costs can be as high as 213% of the employee’s salary, according to the Edubirdie.

With all the effort involved in selecting the best candidates, and the costs associated with losing them, it’s no wonder ensuring employee retention and a low turnover is a high priority many employers.

Employee Retention: The Old School

The traditional way of thinking about employee retention is to assume that the firm that pays its employees the most is the one that will attract and retain the most talented workers.

Everyone wants to be paid well for their job. That’s not going to change. But it’s usually not enough. Today’s workers, especially the younger set, want a company culture that aligns with their beliefs and allows them to perform meaningful work. To them, compensation means more than just a paycheck.

Employee Benefits: Retention and Cost Savings

If you pay your employees too low a salary, your top people will soon leave to seek greener pastures. But other than paying them well, what can you do to retain your best workers?

This is where a solid employees benefit plan can really set you apart and keep your prized employees in the fold. With the high cost of health and life insurance, benefits can be a huge draw for employees (see An Overview of Commercial Group Life and Health Plans to learn more about these benefits).

According to a survey done by Sanofi-Aventis in 2011, employees think very highly of their health benefits. So much so that when they were offered a choice between $20,000 in cash and keeping their benefits, respondents preferred to keep their benefits!

One of the things that makes benefits so appealing is that, in some jurisdictions, they are non-taxable. That allows your employees to get more value out of every dollar you spend on them, without facing the tax liabilities that come with increased salaries.

As an employer, there are more ways you benefit from providing benefits to your workers. Giving your employees a pay raise can come with increased payroll taxes on your end, as well as increased contributions to a number of government programs, such as pension plans, employment insurance plans, and workers’ compensation plans (see An Intro to Workers’ Compensation to learn more).

By dedicating that extra money to a benefits plan instead, you can avoid some of those additional burdens. Your contributions to a group benefit plan is considered a tax-deductible business expense. It’s a clear win-win situation: your employees have a better compensation package and you pay less for it overall (for more info, see A Guide to Group Health Insurance for Small Business Owners).


There’s a lot of talk about why employees should seek employers who will provide them with the right sorts of benefits. But it’s important to remember that employers stand to gain from offering them as well. If you’re not offering benefits to your employees, it’s time to seriously consider what kind of benefits package you could be providing them.

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