What are voluntary benefits?
Voluntary benefits, also known as supplemental benefits, are additional insurance products that employees may choose to add to their benefits package. Typically benefits are offered through the employer but are paid in part or full by the employees through payroll deductions. They’re considered “voluntary” because it’s up to the employee whether to opt-in.
They exist to supplement core employee benefits packages, which often include medical insurance, life insurance, and retirement plans. Employees benefit as they can choose a benefits package that best fits their individual needs and circumstances.
The cost of voluntary benefits
As these supplementary benefits are so broad, it can be difficult to pin down a cost. It depends what is on offer. For example group term life insurance could be anything from 4 times a salary to much higher. According to NimbleFins the typical cost of small business health insurance varied from £23 to £100 a month depending on employee ages and the tier of cover.
Pros and cons of offering voluntary benefits
Both the employer and the employee benefit when businesses offer voluntary benefits. However, they are not without challenges.
Pros:
Can help fill gaps in traditional benefit and insurance plans
Depending on where you are in the world, statutory benefits such as contributions to pension and healthcare vary. Traditional benefit and insurance plans may not offer everything that an individual needs or values. For example some may need to sell paid time off, whereas others may want to buy it to spend more time with their family. Depending on local healthcare, or individual medical history, more comprehensive medical insurance may be needed. By offeringa variety of voluntary benefit options you can fill gaps in what is typically offered.
Flexibility of plans appeals to a diverse workforce
A diverse workforce has different needs. Families and parents may value medical insurance that covers all members, or an office worker may want season ticket support for their commute, that a remote worker does not need. You may also include support for physical wellbeing such as gym memberships, or mental health like access to therapy and counselling. Research from Tribepad found that what employees value varies by age – for example private healthcare is attractive for 74% of 24-34 year olds but only 43% 55+. Office based employees may require different things to remote workers. This flexibility to choose and curate a benefits package can improve employee satisfaction as they feel they are being supported in a way that suits them.
Retains and attracts employees
The 2022 Global Benefits Attitudes Survey found that benefits packages that meet the needs of employees and are tailored to them drive a 78% retention rate, compared to just 41% when employees feel that they do not meet their needs. And another survey found reveals that majority (84 per cent) of U.S. employers are increasing their benefits offerings to help with attraction and retention efforts.
What benefits are attractive differs based on job type, age, seniority, location and family structure. This is why voluntary benefit options are so compelling, as individuals know that they will get the support they need in a way that is unique to them. To make sure you attract and retain the best people, communicate the voluntary benefits offered through a clear employee value proposition.
Increases employee trust and loyalty
Because voluntary benefits are bespoke and tailored to individuals employees feel that they are being heard and advocated for. They additional financial protection and peace of mind, and employees can often get coverage through their employer at a lower rate than they would if they purchased it, which can increase their chance of staying with a company for longer. In addition, offering good employee paid benefits can boost morale as it is clear an employer has wellbeing and personal issues in their issues.
Improves company culture and reputation
LinkedIn’s fertility benefit has become known as being unique, and has helped them attract and retain talented employees. A strong voluntary benefits package improves company culture and reputation as it demonstrates that you care for your employees, beyond the day to day job.
Given that people are most likely to trust referrals from other colleagues, having a good voluntary benefits program that your employees value can mean that they spread the word and advocate for why you are a good place to work.
Cons:
Financial costs
Voluntary personal benefits do come at a cost for both employees and employers. According lecturer Joe Hadzima’s basic model for calculating the cost of salary plus benefits it usually adds up to round 1.25 to 1.4 times base salary range. So an employee earning $100k a year would cost the employer $125k–$140k annually. But despite these direct costs, given the cost of losing a good person and rehiring them, whether that is due to them having some kind of difficulty and having to leave the workforce, or because a competitor with a more suitable benefits package has attracted them, the long term financial pay off can offset itself and even save money in the long run.
Time investment
To build strong benefit programs takes time. Employers will have towork with a number of insurance providers to get the best deals and benefits administration will fall to HR teams who may already be overstretched. To ensure that you are creating a well rounded benefits package that is focused and targeted survey employees to find out what is important to them and what they would value the most.
Lack of awareness and adoption
Many employees look at their benefits when first joining a company – and then not again, until something happens and they are faced with medical expenses for example. However, throughout an employee lifecycle situations can change so it is important that employers regularly communicate what is available and the benefits it can bring to the individual.
Types of voluntary benefits
1. Health insurance and benefits
Health insurance benefits are a standard offering, especially in the US where national healthcare is limited. This private insurance provides access to treatment and facilities that may be out of reach financially unless someone has good savings. This may include hospital stays, medication and treatments, counselling and rehabilitation.
Disability insurance
Disability insurance provides income protection should an individual be unable to work due to the onset of a disability. Short term disability insurance usually lasts for two years, whereas long term can last for a lifetime. Long term disability policies typically replace around 60% of someone’s income if they can no longer work.
Critical illness insurance
Similar to disabiliy insurance, critical illness insurance pays lump sum should an individual be unable to work due to an illness. It usually covers spouses and dependents as well. The lump sum can be used to fund private health treatment, make adaptations to the home, take time off to care and have respite breaks.
2. Security
Life insurance
Life insurance provides income for an employee’s family should they die. It pays out a tax free lump sum to dependents. Most death in service benefits pay out two to four times an annual salary.
Accident insurance
If an employee experiences an accident whilst on a business payroll, they could receive insurance to cover bills and expenses whilst they are not working. This accident doesn’t have to happen at work.
Identity theft protection
Approximately one in five Americans were victim of identity theft or fraud in 2021. Most commonly this is credit card or banking fraud. The implications can be costly, and protection provides the costs associated with it. You may also consider cybersecurity training to help people protect themselves.
3. Financial benefits
Tuition reimbursements
To support your employees’ professional and career development you may encourage them to take courses and training. Paying back out of pocket expenses or a contribution towards fees can help them with the costs of both the actual training and taking time out to do it.
Financial assistance
As well as disastrous situations such as death or critical illness, other financial challenges may occur. Providing financial assistance in a time of need can help employees overcome any hurdles they may have when it comes to unexpected costs. Financial assistance can also include education and financial counselling to help individuals manage their money and deal with financial stress. One study from the UK found that 6 in 10 believed their employer should step in and support with the rising cost of living.
4. Personal benefits
Mental health resources and EAPs
Given that in All Worked Up we found that one in three employees have clinically significant symptoms of anxiety and/or depression, and half have not sought professional help, employers are in a position to step in and support them with mental wellbeing. Wysa for employers is scalable and affordable, clinically validated, and builds resilience. Wysa AI intelligently guides individuals down a curated care path based on what mental health resources they need to feel their best, from a package of tools and support.
Family assistance
Family assistance support can include maternity pay, paternity pay, support with fertility treatment, adoption support, assistance for caring, and compassionate leave. Employers who recognise diversity in family make up and the importance of work life balance are much more likely to attract and retain great people.
Pet insurance
A number of surveys have found that pet insurance is particularly attractive to millenials and Gen Z, who make up a growing proportion of the workplace. This covers vet bills for emergencies.
Dental insurance and vision insurance
Dental insurance and vision insurance are popular employee paid benefits as looking after teeth and sight can be costly. They often cover cosmetic dentistry that state funded dental plans may not, or laser eye surgery for example.
Tips on creating a voluntary benefits package for your employees
- Get approval from leadership on time and financial investment needed to implement a voluntary benefits plan – a comprehensive and valuable employee benefits plan needs to be strategic and have buy in from senior leaders.
- Identify your employee needs – ask every employee what is important to them and acknowledge diversity of situation, health and lifestyle. Remember that this will change as people get older or life events happen, so be sure to revisit it.
- Send out a survey about employee preferences on voluntary benefits – seek employee feedback so you can ensure that your benefits are working for them.
- Take into account state laws – The U.S. Bureau of Labor Statistics1 states that “legally required benefits provide workers and their families with retirement income and medical care, mitigate economic hardship resulting from the loss of work and disability, and cover liabilities resulting from workplace injuries and illnesses.” Howver state regulations can vary. For example, offering disability insurance is required in California, Hawaii, Rhode Island, New Jersey, New York, and Puerto Rico. It is necessary to understand state regulations that are supplementary to federal guidelines.
- Scout voluntary benefits providers and brokers – when seeking supplemental insurance and benefits providers be sure to ask them questions and seek out a bespoke plan that works for your organization. Do your research so that youcan ensure that you offer voluntary benefits that are both comprehensive and cost effective.
- Hava an adoption plan in place after roll out – voluntary benefits are only effective if they are adopted. Have a strong communications plan that clearly explains the benefits of enrollment, and why it is a cost effective option.
- Ensure to evaluate the plan periodically – as your workforce evolves, society changes, and priorities shift so should your voluntary benefits package. Make sure that you regularly review your offering so that it works for both your organization and your employees.
Commonly asked questions on voluntary benefits
Are voluntary benefits tax deductible?
Whether voluntary benefitsare tax deductible depends on thenature of the benefit and tax laws of your jurisdiction. Generally in the USA Health Savings Accounts (HSAs) or Flexible Spending Accounts (FSAs) may be tax-deductible. It’s best to consult a tax advisor for the specific detail.
How do voluntary benefits integrate with an overall benefits program?
Typically voluntary benefits are supplementary to a company’s core benefits package. They allow employers to offer a more comprehensive benefits package without bearing the full cost, as employees typically pay for these voluntary benefits, often at a group discount rate.
What is group vs voluntary benefits?
Group benefits are employer-sponsored benefits that are typically offered to all eligible employees such as retirement benefits, and are usually paid for in full or part by the employer. Voluntary benefits are those that employees choose to opt into, but pay for through payroll deductions. The employer facilitates availability and negotiates group rates.
How are voluntary benefits paid for?
Voluntary benefits are usually paid for by the employes who enroll with them, typically in a convenient and more manageable way through payroll deductions. Employers offer voluntary benefits to support their employees in a way that is more bespoke to them, and cost-effective for everyone.
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