Why Employee Benefits are Important in 2023

Olivia Jones

If you’re considering offering employee benefits (or you already do) and you need some guidance, look no further—here, we discuss why a good benefits program is a crucial part of your overall compensation package.

We all know that salary is one of the most important factors candidates consider when deciding whether to accept a job. 67% of candidates said that money was their number-one motivator behind their job search. The importance of salary and a push for equity in hiring is behind the current move toward pay transparency in hiring. But a good compensation package goes along with another important yet underestimated decision-making factor in the job search– employee benefits.

Employee benefits, which are the programs and incentives employers offer to support employees’ health and well-being, also play a significant role in candidate decisions. While employee benefits packages may once have been an extra bonus for employees, they’re now the norm. In many cases, the benefits employers offer are services or programs that individuals can’t afford or even access on their own. Employer contributions to benefits, both as a benefits manager and as a financial contributor, are what makes benefits such an essential, compelling part of the offer package for any candidate.

Employee benefits may include programs such as:

  • Health insurance. In the United States, companies with more than 50 full-time employees are required to offer health insurance. Around half of Americans receive health insurance through an employer-managed health insurance plan. Because purchasing one’s own health insurance policy is so expensive, health insurance is one of the most common (and most important) employee benefits.
  • Short-term disability or life insurance. Many employers offer short-term disability or life insurance, both of which offer an employee or their next of kin compensation in the case of a major life event. Short-term disability insurance can help cover your living expenses while you take medical leave from work, and life insurance provides for your family if you pass away.
  • Retirement planning, matching, or managed funds. Some employers match employees’ retirement account contributions up to a certain amount each year. They may provide access to a certain type of retirement account, such as a Roth IRA, or offer a pension after a set number of years of service.
  • Paid leave, such as parental leave, sick leave, or vacation time. In the United States, there is no federal assistance for parental leave and no requirement that your employer provides you with paid time off for sick days or vacation days. This is one area that employers use to compete to attract job candidates, with ‘unlimited time off’ becoming an increasingly popular benefit in recent years.
  • Perks such as free snacks, company gear, paid-for travel, flexible working hours, and so on. 

Let’s explore why employers choose to offer these and other benefits to their employees. What makes employee benefits so important?

Why employee benefits are so important

Quality of life

Having access to employee benefits can vastly improve a person’s quality of life. Without them, an employee may struggle to pay for their health insurance or be unable to take time off to recover from being sick. While health insurance and paid time off are two of the more obligatory types of employee benefits, perks can also have a positive impact on an employee’s quality of life. 

Remote work, for example, has become a much-wished-for benefit as more and more employers implement a return to on-site work. Studies show that people who work remotely get more exercise and have better work-life balance. They’re also happier and 88% say working remotely has improved their job satisfaction.

Employers can provide benefits such as remote or flexible work, laundry service, free snacks, and wellness events at no or low cost. For all of the boost they provide to employees’ work/life balance, mental health, and well-being, and at a fraction of the cost of expensive benefits like health insurance, adding on benefits for your employees’ quality of life is a no-brainer.

Employee retention

After the Great Resignation and the Great Reassessment, many HR leaders are looking for effective ways to invest in employee retention. Employee benefits are an often-overlooked avenue for promoting employee retention. Just like high-quality benefits can encourage qualified candidates to sign on with your organization, the right employee benefits can make employees more likely to stay.

How exactly can you use employee benefits to improve employee retention? Start by considering how you can solve employees’ problems and unmet needs with benefits. If you provide health benefits, you might consider paying for a portion of employees’ health insurance premiums. Or evaluate whether you can offer employees the opportunity to work remotely some or all of the time. According to one survey, 97% of employees want to work remotely at least some of the time.

To make the most of employee retention from benefits, we suggest assessing benefits participation among your employees. Employees may not be aware of all of the benefits you currently offer. Benefits with better participation rates indicate areas where employees would likely appreciate extra services or assistance. You can also conduct a short anonymous survey to get employee input on what they’d most like to see.

Supporting equity

Employee benefits are in high demand in no small part because many of the benefits that employers provide are simply out of reach for most people otherwise. We’ve already discussed how many Americans rely on their employers for access to health insurance. But even with access to health insurance from an employer, health insurance can still be an impossible expense for some people. The average cost of healthcare premiums for an American family was over $22,000 in 2022. And if an employee were to pay out-of-pocket for an individual health insurance plan, it would likely cost them much more to get a similar quality plan that an employer can offer, since insurance companies provide employers with bulk discounts. People who can’t afford these benefits have to do without, risking extreme medical debt from unpredictable health problems, or relying on government-funded programs like Medicaid.

Health insurance, retirement benefits (like company matching), paid time off, tuition reimbursement, and other benefits are often out of reach or not available at all to individuals. Should all people have access to these services regardless of their employer? Absolutely. But since our system isn’t set up that way, it’s employers’ responsibility to provide employee benefits to support the health and well-being of their employees.

Reliable and productive workforce

In some ways, an investment in employee benefits is an investment in the stability of your workforce. We’ve already discussed how the United States doesn’t require that employers provide paid sick leave or parental leave. This is despite the fact that all of us get sick on occasion, and many of us will also welcome children into our families at some point. It’s up to employers to care for their employees’ longevity with the company by providing these benefits. With paid sick leave, employees don’t feel the same pressure to work while sick, which makes their presence more reliable and their time more productive. Employees who are cared for are also less likely to leave for another job, so there’s less churn and unpredictability among your employees.


Employee benefits are often necessary due to legal regulation and compliance. Exact laws depend on your organization and where you do business, so check with your attorney for any and benefits advice. 

Generally speaking, benefits employers provide for compliance reasons may include:

  • Taxes, like employer contributions to Social Security and unemployment.
  • Health insurance, due to regulations in the Affordable Care Act requiring most employers with more than 50 employees to offer health insurance.
  • Worker’s compensation insurance.
  • Paid time off, if an organization is based in a state or locality that requires they provide it.

Competitive hiring

With unemployment rates consistently low over the last year, employers need to take advantage of benefits in order to hire top talent. Benefits such as health coverage and sick leave are established norms; other benefits like remote and flexible work, parental leave, and wellness programs are quickly becoming employee expectations, too.

Job seekers understand the financial and quality-of-life advantages that a comprehensive employee benefits package provides, and benefits are a major factor that they look for when browsing job postings online, for example. One study found that when a job posting contained specific references to employee benefits, there was a 20% improvement in candidate responses compared to a job posting without benefits listed.

How to choose the right employee benefits

  • Evaluate your organization’s budget and priorities. In many cases, cost is a limiting factor for the types of benefits employers can offer. It’s always a good idea to start by assessing your existing resources. Don’t forget that many benefits and perks are relatively low-cost, and can still provide a significant quality-of-life boost for your employees.
  • Pay attention to trends in employee benefits. Watch the changing annual trends on employee benefits. Don’t get sucked in by fads or too caught up in what other companies offer—remember when startups had beer and cold brew on tap in their offices? Instead, watch the major trends and respond thoughtfully. The major trend in employee benefits for 2023 is remote and flexible work, but other popular fringe benefits include gym memberships, student loan assistance, and childcare.
  • Consult an expert on legal requirements in your area. Many states and even cities have their own laws about the types of benefits employers must provide. For this reason, you should consult with your organization’s own tax and legal representatives for specific benefits recommendations.
  • Check with your HR team to see what benefits employees use most. Auditing your organization’s benefits participation can provide clarity and direction when choosing which benefits to keep, expand, or eliminate. Often, poor employee participation in benefits is may indicate a lack of awareness rather than disinterest.
  • Survey your employees to find out what they want. Though providing employee benefits does offer advantages to the organization itself, it’s important not to lose sight of what your employees want and need. This should always be the guiding factor when deciding which benefits to invest in. You can conduct an employee survey to see which benefits they want most.

Employee benefits are important because they support an employee’s well-being in all aspects of their life, from work to health to family. Employers who provide the benefits that employees want may find it easier to retain current employees and hire new ones. In 2023, we expect to see a continued expansion of remote, flexible, and hybrid work options, as well as more employers providing paid parental leave for employees. 

If you and your team are overwhelmed at the prospect of expanding your benefits management duties, then explore a demo of Gusto’s offering. Our employee benefits management is easy to use for both managers and employees, and it can bring simplicity and efficiency to your benefits administration process.

Olivia Jones Olivia Jones is a freelance writer and former HR professional. She writes about HR and education for tech companies around the world.
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