As an employer or benefits manager, the benefits you offer aren’t just perks for employees — they’re also important to the success of the business. Managing benefits takes the right people — and sometimes the right software, because there’s a lot to keep track of. The amount of effort you put into managing a benefits program is directly related to its success. Running a strong employee benefits program can help you forge a productive, loyal workforce – a key to achieving business goals.

This guide can help HR leaders and business owners create a strong benefits program, simplify benefits administration and strengthen the business.

What are employee benefits?

Employee benefits are non-wage compensation given to employees in addition to their regular salary or pay. Benefits are different from compensation because they’re non-cash perks, and they’re generally not taxable. Compensation is a direct payment that can include things like stock options, commissions and bonuses. Benefits aren’t cash but can support employees’ financial well-being by helping with the cost of health insurance, matching retirement savings and providing discounts through group insurance programs. They also can support employees’ work-life balance with paid time off, flexible work options, even gym memberships. Together, compensation and benefits create a total rewards package.

What is benefits administration?

A benefits administrator builds and manages an employee benefits program. In a smaller company, administering a benefits program may be handled by the HR department. A larger business may devote a full-time manager to the role.

What does a benefits administrator do? In a nutshell:

• Selects benefits offered in a package 
• Serves as the primary point of contact for educating employees on benefit options, enrollment and changes in the plan  
• Manages compliance with federal, state and local laws and regulations, including the Employee Retirement Income Security Act (ERISA), Affordable Care Act (ACA), Health Insurance Portability and Accountability Act (HIPAA), COBRA, IRS and Department of Labor reporting and non-discrimination rules 
  
• Reviews enrollment levels and tracks which benefits are used or valued by employees 
  
• Adjusts the plan and changes providers as needed to expand offerings, change premiums or align with changes in employee needs 
  

Why are employee benefits important?

Offering competitive benefits is one way a business can support employee well-being, which is a powerful tool for attracting top talent, boosting employee morale and keeping skilled workers. While employee benefits cost an average of $15 per hour worked in 2025, according to the Bureau of Labor Statistics, those costs are almost entirely tax deductible.

What employers gained was significant. The International Foundation of Employee Benefit Plans (IFEBP) reports that organizations offering health and voluntary benefits, including insurance, report higher levels of employee retention and engagement compared to those that do not. A more loyal and productive workforce can translate to reduced costs and contribute to a business’ long-term success in many ways.

• Employee hiring. Strong benefits packages are a potent persuader when negotiating to hire highly skilled workers. 
• Morale and retention. Employees who feel their companies care about their well-being are both more productive and more willing to stay at their jobs longer, saving money by reducing costs related to hiring and training new employees.  
• Compliance. Federal laws require some employee benefits, and a benefits manager can make sure a business is following the rules. 
• Health and wellness. Benefits like health insurance, mental health services and wellness programs like gym memberships can help reduce sick days and increase productivity. 
• Diversity and inclusion. Maintaining benefits that fit your employee population can help make the workplace feel more inclusive and fair.  

Companies with scant or poorly managed benefit programs, on the other hand, can face employee dissatisfaction, low morale, higher turnover and compliance risks.

Types of employee benefits

Understanding the full range of benefit types is essential to building a strong offering.

Mandatory benefits

According to the Bureau of Labor Statistics, these benefits are required by federal or state law:

• Health insurance if a company has 50 or more full-time employees 
• Social Security and Medicare taxes 
• Unemployment insurance 
• Workers’ compensation 
• Family leave if an employer has 50 or more full-time employees 

Voluntary benefits

These benefits are not currently required by law, but a comprehensive benefits package can offer strong incentives for employee hiring and productivity.

• Health insurance. Even if not required for smaller employers, companies find that health insurance is the most important benefit to employees and potential new hires. 
• Dental and vision insurance 
• Flexible spending accounts (FSAs) or health savings accounts (HSAs). Tax-advantaged ways to manage healthcare expenses. 
• Life and other insurance. Employers may offer options like life insurance, disability insurance and personal excess liability coverage. 
• Retirement plans: These include 401(k) plans and pension programs. 
• Disability benefits. Short- and long-term disability plans can help replace lost income. 
• Flexible work schedules and work-from-home options 
• Well-being programs. Gym memberships, fitness clubs, meditation apps.  
• Extras. Pet insurance, tuition reimbursement, commuter benefits like transit and parking passes. 
• Affinity group insurance programs: These programs offer employees convenient access to group-based discounts on insurance, such as: 
  
  • Auto insurance
  • Home insurance
  • Personal excess liability coverage

Learn more about how to build a comprehensive benefits package.

Steps in effective benefits administration

1. Decide what benefits to offer. Use employee surveys, industry benchmarks and business goals to identify the most relevant benefits for your team. 
2. Choose providers. Get quotes, check references and look at what it will take to administer programs. 
3. Ensure and maintain compliance. Stay up to date on state and federal laws and regulations. 
4. Balance the cost and value for the business and employees. 
5. Diversify benefits to serve employees at different life stages. 
6. Communicate clearly so employees engage fully and understand the value of their choices. 
7. Administer benefits efficiently by tracking usage and costs and responding as needed. 
8. Regularly review and update offerings as needs evolve. 

Tips on improving benefits management

• Look for ways to make it easy for employees to personalize their benefits. Tailoring benefits to their needs can boost engagement and satisfaction.  
• Reduce payroll errors. This can keep costs down. Some companies use HR software to accomplish this.  
• Communicate with employees about their benefits through email, social media, the company portal — any platform available that reaches employees where they are. 
• Keep track of benefits usage. This shows how engaged employees are and where to make changes.   
• Maintain detailed records. This helps with compliance, audits and reviews. 
• Select scalable platforms that can grow with your business