Why offer benefits to employees?

1. Attract and retain employees. Many employers offer benefits in order to attract and retain the most qualified employees and to motivate their performance. Some employers consider benefits to be part of the corporate culture.
2. Gain tax advantages. There are tax advantages that make offering benefits to employees attractive to employers, including the deductibility of contributions to the plans or plan costs, the avoidance of current taxation by employees on employer contributions, the tax-free accumulation of earnings in retirement plans, and the exclusion from taxation of unrealized gains.
3. Protect employees' security. When an employer offers a benefit plan that follows the rules contained in federal or state laws, employees know their benefits are protected. There are special rules that apply to defined benefit pension plans that are regulated by the Pension Benefit Guaranty Corporation (PBGC), which guarantees minimum pension benefits to participants in these employer-sponsored retirement programs.
4. Reduce costs through group purchasing. Employers can offer employees reduced prices for expensive benefit coverage when they purchase benefits for all employees.
5. Reward employees for service with the employer. Benefit plans can be structured to reward employees who remain with the organization. For example, employees must work for a specified period of time before they may participate in plans. Retirement plans provide the opportunity to integrate service and salary into the benefit formula.
6. Reflect the total compensation value. Employers who communicate the value of employee benefits capitalize on a cost they incur and make it positive. A total compensation approach places value on salary as well as all types of benefit payments and fringe benefits.
7. Work with employees as partners. When employees contribute to purchase benefits, they are acting with the employer as responsible partners. Employees may be asked to pay for some or all of the benefits, make investment decisions or elect coverage.
8. Avoid penalties. Although the federal rules are complex, employers offering retirement and welfare plans must follow them, unless the employer is specifically excluded, or risk fines, penalties or court actions.

Why offer benefits to employees?