Employee benefits and (especially in British English) benefits in kind (also called fringe benefits, perquisites, or perks) include various types of non-wage compensation provided to employees in addition to their normal wages or salaries. Instances where an employee exchanges (cash) wages for some other form of benefit is generally referred to as a “salary packaging” or “salary exchange” arrangement. In most countries, most kinds of employee benefits are taxable to at least some degree. Examples of these benefits include: housing (employer-provided or employer-paid) furnished or not, with or without free utilities; group insurance (health, dental, life etc.); disability income protection; retirement benefits; daycare; tuition reimbursement; sick leave; vacation (paid and unpaid); social security; profit sharing; employer student loan contributions; conveyancing; domestic help (servants); and other specialized benefits.
The purpose of employee benefits is to increase the economic security of staff members, and in doing so, improve worker retention across the organization. As such, it is one component of reward management.
Colloquially, “perks” are those benefits of a more discretionary nature. Often, perks are given to employees who are doing notably well or have seniority. Common perks are take-home vehicles, hotel stays, free refreshments, leisure activities on work time (golf, etc.), stationery, allowances for lunch, and—when multiple choices exist—first choice of such things as job assignments and vacation scheduling. They may also be given first chance at job promotions when vacancies exist.
The Bureau of Labor Statistics, like the International Accounting Standards Board, defines employee benefits as forms of indirect expenses. Managers tend to view compensation and benefits in terms of their ability to attract and retain employees, as well as in terms of their ability to motivate them.
Employees – along with potential employees – tend to view benefits that are mandated by regulation differently from benefits that are discretionary, that is, those that are not mandated but are simply designed to make a compensation package more attractive. Benefits that are mandated are thought of as creating employee rights or entitlements, while discretionary benefits are intended to inspire employee loyalty and increase job satisfaction. Based on this, Klonoski proposed definitions of both discretionary and non-discretionary benefits as a manager would view them: “Discretionary employee benefits are those organizational programs and practices that are not mandated by regulation or market forces, and that improve employee performance by increasing job satisfaction or organizational loyalty. Non-discretionary employee benefits are those organizational programs and practices that are mandated by regulation or market forces, and that create an employee right, entitlement, or expectation.”
Viewed from this perspective, things like casual dress codes, flextime, and telecommuting can be considered employee “benefits” whether or not they produce an expense to the organization offering them. If employees prefer to dress casually or to have flexible hours or to work from home they may be inclined to seek and less likely to leave employers that offer these things.