Glossary definition

What are employee benefits?

Employee benefits are extra compensation or ‘perks’ given by an employer to a worker on top of their wages. The benefits may be a service or product that employees can use, a discount or facility.

A good benefits package can help attract and retain employees and enhance the employer’s reputation.

Employee benefits can be small perks, such as free coffee in the office, an annual Christmas party or a subsidised canteen, or they may have substantial value.

If they’re of direct individual benefit to the employee, they’re usually taxable. For instance, if an employee has a company car that they use for both business and personal journeys, they’ll pay tax on the value of the personal element.

Other traditional benefits include healthcare schemes, pension schemes, childcare vouchers, enhanced parental leave, insurance, share options, employee share schemes and interest free season ticket loans.

Some employers offer employee discounts on their own products and services or negotiate discounts with other providers.

Flexible benefits let employees pick and choose a range of benefits that they particularly value. These might also include wellbeing benefits (gym membership, dentistry, physio, massage or counselling) extra holiday, education and training.

If a company offers benefits in exchange for an element of wages, this is called salary packaging or salary exchange.