The four major types of employee benefits are the most important benefits packages to employees among many employee benefits.
To increase employees’ job satisfaction, employers must better understand the four major types of employee benefits.
In some states, these four major types of employee benefits are required by law; therefore, it’s worth your time to know them properly.
What Are The Four Major Types of Employee Benefits?
Four major types of employee benefits are life insurance, retirement plans, medical coverage, and disability insurance.
4 major types of employee benefits include:
- Retirement Plans
- Medical Coverage
- Life Insurance
- Disability Insurance
1. Retirement Plans
Retirement plans are also known as pension plans. Employees’ retirement plans are funded by deducting a certain percentage of employees each paycheck.
Retirement plans give employees financial stability when employees leave from work or go to retirement.
Some common types of retirement plans are SEP IRA, 401(k), Roth IRA, and solo 401(k).
A 401(k) is the most popular type of employee retirement plan benefit that the employer gives.
Pension plans as employee benefits are a common type of employee benefits that most organizations offer.
2. Medical Coverage
Whether you call it medical coverage or health insurance, they are considered the same employee benefits.
Medical insurance is one of four major types of employee benefits. And even part-time employees are also eligible for medical insurance benefits.
Employees’ medical coverage pays for employees’ prescription drugs, hospitalization expenses, physician and surgeon fees, and wellness care.
Employers offer medical insurance to their employees to reduce healthcare costs.
Some big companies like Twitter, Boston Consulting Group, GoDaddy, and ZocDoc offer their employees full medical insurance.
3. Life Insurance
Many employers provide life insurance as employee benefits. Life insurance is a contract between the insurance policy owner and insurer.
Life insurance is a legal contract that pays a death benefit to insurance beneficiaries after the insured dies.
Life insurance is a non-mandated employee benefit by law. Most companies offer life insurance as an employee benefit to their full-time employees only.
Typically, employers offer group-term life insurance because this type of life insurance is much cheaper than individual life insurance.
Employees stay eligible for life insurance as long as they work for an employer. Employees’ life insurance expires when employees get out of work or go to retirement.
4. Disability Insurance
Disability insurance is also known as disability income insurance, income protection, or DI.
Disability insurance benefits ensure employees’ income if employees cannot work due to illness or accident for a period of time.
To attract better employees, Disability insurance can be an attractive employee benefit.
Disability insurance is divided into two categories: Long-term and short-term disability insurance.
An employee is only eligible for long-term disability insurance when an employee cannot work for a long time.
If an employee cannot work for a short period of time, that employee will be included in short-term disability insurance.
Final Thoughts
Most employers provide four major types of employee benefits to their employees.
Not all of the 4 major types of employee benefits are mandatory by law, but companies offer these employee benefits to meet employees’ job satisfaction.
Medical insurance and retirement plans both are the most valued benefits for employees.
Employers should consider the four major types of employee benefits to make attractive employee benefits packages.
Avery is a writer for To Employee covering employee management, employee benefits, and job searching. Avery brings extensive experience in management, and career development. She is the founder of Toemployee.com and also head writer.