Benefits are payments or entitlements that are provided by an employer and offered to its employees. Benefits are also referred to as company benefits, employee benefits, and fringe benefits. In most cases, benefits are promised to an employee as part of an employment agreement. Benefits can also be extended via the government. In this situation, people are provided payments or entitlements based on being a citizen of that country.
Some types of benefits include health insurance, life insurance, paid vacation and sick leave, maternity and paternity leave, 401(k) contributions, pensions, profit-sharing, bonuses, and stock options. Companies also provide nonfinancial benefits like employee wellness programs, weight loss programs, and exercise facilities. In many cases, the employer will provide access to the benefit and make payments on behalf of the employee. For example, many companies will provide employees with health insurance. This usually includes providing access to the healthcare and paying a portion of the premiums on behalf of the employee.
The purpose of providing these entitlements or benefits is to attract and retain employees. Typically, companies will offer benefits along with a salary as part of an employment contract. Some companies are able to secure and maintain more qualified employees because of the benefits that they offer. In many cases, the organization will increase the value of the original benefits package over time. For example, in some companies, employees are not eligible to participate in 401k profit-sharing programs until they have completed two years of employment with the company. After an employee is eligible for the program, they are only partially vested in the beginning and become fully vested over time.
Generally, the employer bears all or the majority of the cost for the company benefits. For benefits like paid vacation time and sick leave, the employer bears all of the cost. However, many benefits, like healthcare, require a shared cost that is split between the employer and the employee. For healthcare, the employer typically pays the major portion of the premiums, while the employee pays a smaller portion. Providing benefits to employees can be quite costly. As the cost of healthcare continues to rise in most countries, providing employees with paid vacation time, stock options, healthcare, and other benefits has become quite expensive. Therefore, most companies try to limit these expenses. If not managed properly, the costs associated with company benefits can become a financial burden for the organization.
Company benefits are not always offered to all employees. The cost associated with providing benefits is a major factor influencing why benefits are not extended to all employees. Generally, company benefits are extended to employees who are considered full-time and/or salaried. Although some organizations provide benefits to part-time or hourly employees, these benefits are usually limited and not comparable to the benefits provided to full-time employees. In most cases, part-time or hourly workers are provided very few, if any, benefits at all.
Providing employees with company benefits has become customary in many countries around the world. Cultural influences and laws have a direct impact on what benefits a company can and will provide its employees. As a result, the benefits that are offered to an employee can vary significantly from one company to another. Most companies end up offering a unique package of benefits that is based on its country’s customs and laws, the size and type of organization, and its financial situation. Some other factors that can directly impact which benefits a company offers an employee can include things related to the employee, like educational background, skill level, job title, and length of time the employee has worked for the company.
Where a company is located has a major effect on the benefits that it offers its employees. That’s because a company’s location can influence which benefits it can legally provide, the company’s culture, and employee expectations. This influence can be significant and tends to vary greatly by country. Countries have laws and cultural norms with different beliefs regarding basic rights and what citizens are entitled to have provided by the government. Some countries have cultures and governments where the government provides very few benefits to its citizens, while some countries have governments that provide a lot of benefits to its citizens. This has a direct impact on the benefits that a company provides to its employees.
Many countries believe that their citizens are entitled to basic healthcare. Therefore, these countries will have national healthcare that provides all or a portion of the healthcare to its citizens. If a company is located in a country that provides healthcare to its citizens, then there is less burden on the company to provide healthcare benefits to its employees. In countries like Great Britain, Canada, and Botswana, the government provides all or some portion of the healthcare for its citizens. As a result, the companies that are located in these countries have less of a burden when it comes to providing basic benefits like healthcare to its employees.
If the company is located in a country where the government does not provide some of these basic benefits to its citizens, then there is typically a greater burden on the company to provide these types of benefits to its employees. In the United States, there is no national healthcare. Therefore, the majority of the people have to work to get access to healthcare. In a country like this, the companies that provide employment tend to provide healthcare as part of the benefits package for employees and bear a greater cost burden.
Some countries provide other benefits to their citizens like social security, pension plans, and disability insurance, which can also impact the benefits that a company offers to its employees. Similarly, a country’s laws can have a significant impact on what benefits a company is required to offer its employees. In many countries, there are laws that require the companies to offer benefits like paid time off, paid sick leave, maternity leave, etc. For example, when compared to many other countries, Germany has employment and labor laws that are very favorable to employees, so companies that are located in Germany are required to offer fairly generous benefits because of the employment and labor laws in that country. These laws require the employers in Germany to provide a lot of benefits to the employee; employees are required to receive benefits like generous paid vacation and sick leave. These types of laws place a greater burden on the companies that are located in Germany versus companies that are located in other parts of the world.
As stated previously, benefits are entitlements or payments that are granted to an employee via an employment contract with an employer. The types of benefits that are offered by a company are influenced by many factors, including the laws, culture, and government benefits offered in the country where it is located. Although providing employee benefits is customary, it can be quite costly and create a burden for the company. For this reason, benefits are generally not offered to all employees. However, companies will extend benefits to retain and maintain qualified employees.
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- Collins, “Employer-Based Health Insurance Past, Present, and Future,” Healthcare Financial Management (2007);
- Danis et al., “Low-Income Employees’ Choices Regarding Employment Benefits Aimed at Improving the Socioeconomic Determinants of Health,” American Journal of Public Health (2007);
- Gisonny and S. Douglas, “Nationwide Savings Plan Automatic Enrollment Getting Associates Prepared for Retirement,” Benefits Quarterly (2008);
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- “The New Equilibrium: Work/Life Balance,” Benefits Quarterly (2008);
- Christopher G. Reddick and Jerrell D. Coggburn, Handbook of Employee Benefits and Administration (CRC publishing, 2008).
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