As a part of total reward provided to employees, benefits serve functions similar to pay. Benefits contribute to attracting, retaining and motivating employees. Different employees look for different types of benefits. Employers need to examine their benefit package regularly to see whether they still meet employee’s needs and expectations. At the same time, benefit packages are more complex than pay structures, so benefits are harder for employees to understand and appreciate. Even if employers spend large sums on benefits and services, if employees do not understand how to use them or why they are valuable, the cost of the benefits will be largely wasted. Employers need to communicate effectively so that the benefits succeed in motivating the employees.
Overall, employers are concerned about balancing various issues related to benefits providing to employees. Several forces have made benefits and services a significant part of compensation packages. One is that law requires employers to provide certain benefits, such as contributions to pension plans and employment insurance. Also tax laws can make benefits favourable.