Employee benefits: definition, types, importance, and examples

Employee benefits: definition, types, importance, and examples
Jobstreet content teamupdated on 12 April, 2024

In today's competitive job market, employees are looking for more than just a high salary when deciding which employer to work for. Now, they're also considering benefits such as leaves, health insurance, and flexible work arrangements. Employees may also look for companies that offer education and training opportunities. Providing a competitive package with attractive perks and benefits can help you lure top employees. Here's what this article will cover:

What are employee benefits? 

Employee benefits are any form of compensation that companies provide to employees through programmes, policies, or services. These are in addition to their base salaries and wages. For example, an employee benefits package may include health insurance, life insurance, annual leave, and retirement benefits. Some employee benefits are mandatory according to the Employment Act 1955.

Other voluntary benefits vary depending on the company. Employers often give additional incentives to attract and keep top workers. Some popular benefits include gym memberships, mobile allowances, or free snacks at work.

Advantages of employee benefits 

Providing employee benefits helps both the employer and the employee. Here's why:

Improved employee morale and job satisfaction

Offering non-mandatory perks and benefits is a way to show employees that the company values and appreciates them. This can help staff feel more fulfilled. The Society of Human Resource Management found that 92% of employees say their benefits are important to their overall job satisfaction.

Demonstrating to employees that you care about their personal needs can boost staff morale. This can lead to a more positive workplace environment and increase company loyalty. Satisfied employees are also more eager to do their best at work.

Attraction and retention of top employees

According to the 2022 Randstad Employer Brand Research Survey in Malaysia, 74% of the respondents ranked "attractive salary and benefits" as the most important employee value proposition. When highly skilled individuals have multiple job offers, they're likely to choose the company that has the most generous benefits and perks package. You may get more top people to work for you by offering an enticing package. List it in job ads to increase your chances of finding top talent.

It's not enough to attract great workers. You need to keep them. The annual Salary Survey by Robert Walters found that 60% of employers nationwide struggle to keep their top employees. If you're struggling with a high turnover rate, it may be a good move to work on the benefits package. Attracting and retaining the best team members increases productivity levels and saves the company time and money from hiring efforts.

Increased productivity and engagement

When you design your benefits packages, consider if employees will have sufficient rest and a healthy work–life balance. Employees are more likely to be effective and productive when they're healthy and happy. When employees are in good physical and mental health, they're less likely to go on sick leave. This can be good for the company in terms of higher output and lower workplace absenteeism.

Enhanced company culture and employer branding

The employee benefits package communicates the values and beliefs of the company. It can show that the company truly cares about its employees' overall well-being and life outside of work. For example, you may offer employees family leave to care for their young children or ageing parents. This also fosters a culture of caring and support within the organisation.

Employee benefits can improve the company's public image and attract clients and customers. Clients are more likely to work with a company that values its employees. They may feel more confident that the company is committed to the project and the business relationship. Likewise, customers who hold the same core values as a company may be more likely to purchase goods and services from it.

Employee benefits examples 

The types of employee benefits that companies offer are constantly changing according to the needs of employees. Here's a list of benefits you may want to add to your employee benefits package:

Health insurance and medical coverage

Man looking at computer plaid shirt

Offering a comprehensive health and life insurance package can show your employees that you care for them and their families. Here are descriptions of the different types of insurance:

Medical insurance

For an employee to be productive, they first need to be healthy. Providing medical insurance means that employees don't need to worry about doctor visits and hospitalisation costs. Medical insurance can also cover major surgeries, such as the removal of a brain tumour or open-heart surgery. It can also help offset the costs of chronic or terminal illnesses, such as kidney failure or cancer. Employees can feel safe knowing that the company will help cover their medical expenses if they face any health issues.

Dental insurance

Dental insurance pays for employees' regular dental checkups. Dental insurance also covers the cost of procedures they may need to undergo, such as root canals, extractions, or crowns. This is usually separate from health insurance.

Optical insurance

You can offer employees optical or vision insurance to cover the costs of routine eye exams. Optical insurance also usually covers the cost of new glasses or contact lenses. Providing this insurance supports employees in caring for their eyes.

Disability insurance

PERKESO is a social insurance scheme that covers work-related injuries, disabilities, and death in Malaysia. According to the Employment Injury Scheme and the Invalidity Scheme, PERKESO provides free medical treatment, facilities for physical or vocational rehabilitation, and financial assistance to workers. An employee qualifies for this insurance if an accident or disease has reduced their ability to work or left them unable to work.

Employers may add to the state insurance by purchasing disability insurance for their employees. This means that the employee's beneficiary will receive a lump-sum payment in the event of permanent disability.

Life insurance

PERKESO also covers employees in the event of death. It provides for an employee's dependents through a pension. Employers can purchase private life insurance for employees as an added benefit. This shows that the employer cares for the welfare of employees and their families if an unfortunate event occurs.

Retirement plans and pension schemes

Currently, civil servants enjoy a pension scheme. This means they get a monthly payout after they retire. The amounts are based on their final salary and years of service. Private company workers contribute to the Employees Provident Fund (EPF) instead, which is a required savings and retirement scheme.

Under the EPF, workers contribute 11% of their monthly income, while employers contribute a minimum of 12% of the workers' salaries. Private companies can voluntarily pay a higher rate as an added incentive. Workers can fully withdraw from the EPF once they reach the age of 55.

Paid time off and vacation policies

It's mandatory to offer annual leave and sick leave. There are other types of leaves that the company can offer on top of the statutory requirements. Here are the details of the different types of paid leave:

Annual leave

According to the Employment Act 1955, employees have a right to at least eight days of annual leave per year for their first two years of employment. For two to five years of employment with the same employer, this entitlement increases to 12 days per year. If the employee works for more than five years with the same employer, they're eligible to take 16 days of paid leave each year.

Employers can offer more days of annual leave than the statutory requirement as an added benefit. You can allow employees to carry forward any unused leave into the next year. Or you can let them encash their unused annual leave.

You can calculate the amount based on their ordinary rate of pay. Carrying forward of leave and leave encashment are not legal requirements, but they're additional incentives you can offer.

Sick leave

Sick leave, or MC leave, is a type of leave that employees can take if they're sick or injured. Under the Employment Act, the minimum sick leave entitlements depend on how long the employee has worked. Employees who've worked for the same employer for less than two years may take up to 14 days of sick leave per year. This figure goes up to 18 days for employees who've worked between two and five years. Those with more than five years of service can take 22 days.

Make the sick leave application process straightforward for quick approval. Provide clear guidelines. Give access to sick leave policies so that employees can refer to them. For example, make sure employees know the time limit for informing the company of their illness. You should also let them know if they need to turn in medical certificates. Depending on your company policy, you may extend the sick leave beyond the statutory requirement if an employee needs more time to recover.

Maternity and paternity leave

Woman at office and smiling

Maternity leave gives a new mother time to bond with her baby and recover from childbirth. According to the Employment Act, female employees are eligible for 98 days of paid maternity leave. Even though maternity leave is a statutory right, there are still some conditions the employee needs to fulfil.

They must have been your employees within the four months leading up to their leave. Or, they must have worked for a total of 90 days in the nine months prior to confinement. However, maternity allowance only applies to the first five children.

Married male employees may take seven days of paid paternity leave according to the Employment (Amendment) Act 2022. To qualify, they must have worked for the same employer for at least 12 months before the start of the paternity leave. They also need to inform their boss of the pregnancy at least 30 days before the due date or as soon as possible after the child is born.

Employers can offer extended maternity leave to provide additional support to new mothers. This may be in the form of paid or unpaid leave on top of the required 98 days.

Compassionate leave

You can provide compassionate leave to employees when one of their close family members passes away. It allows them to take paid time off to organise or attend the funeral and grieve their loss. It's not mandatory by law for employers to provide compassionate leave, but many companies grant two to five days to their employees. Providing compassionate leave shows your concern for your employee's well-being and sympathy towards them.

Marriage leave

Marriage leave is not a statutory requirement. But you can grant it to employees to celebrate their wedding day and go on their honeymoon. The typical length of leave is one to three days.

Flexible work arrangements

Working remotely, either partially or fully, has become the norm in recent years. Employers can offer flexible work arrangements, such as telecommuting or part-time work. This can help employees balance their work and personal responsibilities. For example, employees with young children or elderly parents may prefer to work from home.

Wellness programmes and fitness benefits

Here's a breakdown of the benefits in this category:

Physical wellness

Health and wellness benefits include gym memberships, on-site fitness classes, and health coaching. Some companies may also have a workplace gym with fitness instructors to help employees stay physically fit. Healthy and fit employees are less likely to fall sick and be absent from work. That can help the company save on healthcare costs.

Mental health

Mental health is essential to employees' well-being. Workers may face mental health issues, such as chronic stress, anxiety, or depression due to work or personal problems. Companies may cover the costs of therapy or counselling sessions to support employees.

Education and training opportunities

Companies can help employees to pursue further education. They can subsidise tuition fees or offer student loan repayment programmes for employees who want to get a specialised certification, post-graduate diploma, or degree. Employers can also give them one or two years of unpaid leave to become full-time students. This can help workers learn new skills and advance in their careers.

Employers can send their workers for training to ensure their skills are up to date. They can also do in-house training by inviting coaches and industry professionals to conduct seminars and workshops. Knowing the company's commitment to investing in them can encourage employees to continue working there.

Childcare assistance

Employers may offer subsidies for infant care or childcare. They may also provide on-site day care so employees can travel to and from work with their children and see them during lunchtime. This can help working parents cope with their family obligations.

Designing an effective employee benefits programme 

Follow these strategies to create a meaningful and impactful employee benefits package:

Assessing employee needs and preferences

It's best to customise the benefits you offer to meet the employees' specific needs. You can do this by first understanding your employee demographics. This includes their ages, family structures, lifestyles, and goals. Do you have many employees with young children? If so, you may want to create policies and programmes that support them in parenthood. For example, you could set up a childcare facility at the workplace or offer more days of childcare leave.

Benchmarking industry standards and competitors

Man and woman reviewing a table with graphs

It's important to keep up to date with all the mandatory employee benefits to ensure compliance. For example, the number of days of paid maternity leave increased from 60 days to 98 days at the start of 2023. Do market research to find out about the average industry offerings and popular plans. This can help you understand market needs and stay competitive in your benefits offerings.

Determining your budget

Think about how much the company can afford to spend on benefits programmes. If you're offering a plan for the first time, get quotes from potential suppliers to create an estimate. If you have an existing plan, you already have some data to set a budget.

As the cost of some benefits may increase, prepare projections. You also need to factor in new hires for the year and the costs of their benefits. Consider working with a benefits specialist to guide you in this process.

Tailoring benefits to match the organisational culture

Employee benefits and company culture typically go hand in hand. Offering meaningful employee benefits enhances company culture. At the same time, the company culture should influence the types of benefits it offers. For example, if the company values community engagement, it could give paid time off for volunteering. If the company believes in rewarding hard work, it could give a travel or shopping voucher to the best-performing employee of the month.

Communicating benefits effectively to employees

Policies are useless if employees don't know about them. Increase awareness of benefits by mentioning them in company newsletters, emails, and Q&A sessions. When onboarding new hires, give them an attractive and informative sheet that summarises all the company's benefits. Regularly communicating these extras can help employees access them.

Collecting employee feedback

Employees' wants and needs change as they go through different stages of life. Younger employees may be keen on free snacks and travel discounts. As they get older and start families, their priorities tend to shift. They may want policies that let them spend more time at home, such as telecommuting options.

Use surveys or focus groups to understand their opinions about the company's employee benefits. You can also gather suggestions from them. This will help you enhance your benefits packages to meet employees' needs better.


Offering employee benefits is essential to making your staff feel valued and appreciated. It helps you find and hold onto highly skilled individuals, which can be beneficial for the company. It also enhances the company's public image. Get employee feedback to assess their uptake of the benefits programmes and understand their opinions. Research competitors to learn about the latest benefits, and update policies and perks to keep your staff satisfied and loyal.


Here are answers to frequently asked questions about this topic:

  1. What are some common types of employee benefits?
    ⁠Some common types of employee benefits are health insurance, annual leave, retirement plans, and flexible work arrangements. Other benefits include childcare support, educational opportunities, and health and wellness programmes.
  2. How do employee benefits contribute to employee satisfaction?
    ⁠Employee benefits make team members feel valued and cared for. They also help workers to have better work–life balance. Employee benefit programmes can improve the overall well-being of employees by preventing burnout. Healthier and happier employees contribute to a positive work environment. These factors can lead to an increase in employee satisfaction.
  3. What are the key factors to consider when designing an employee benefits programme?
    ⁠Consider the changing needs of your employees. Keep up to date with the benefits that your competitors are offering. You can update your benefits programmes to help keep your employees from leaving. It's also important to think about how to reflect the company's culture in the employee benefits programme. For example, if the company believes in building strong families, it should include policies that allow employees to spend more time with their families.
  4. How do employee benefits impact employee retention and recruitment?
    ⁠Generous employee benefits help to attract the best performers to work for the company. Team members feel more appreciated due to the benefits they receive. They may become more loyal to the company and less likely to leave. This can increase retention rates and boost the company's image. When there's a low turnover rate, more individuals may want to work for the company.
  5. Are employee benefits legally required?
    ⁠Yes, there are some mandatory benefits. Employers need to provide statutory benefits to their employees according to national labour laws. For example, healthcare and retirement contributions are requirements. Employers wanting to attract superior workers should offer added benefits, such as extended maternity leave.

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