What are Voluntary Benefits?

Comprehensive benefits are essential not only for successful businesses but also for the people who work for them. Employers offer voluntary benefits to help cover gaps in group health insurance, thereby supporting employee health and productivity. A robust benefits package improves job satisfaction among employees. Satisfied employees are more productive and more likely to stay with the company. Voluntary benefits allow employers to offer additional benefits without breaking the bank.

In this article, we delve into voluntary benefits, their advantages for employers and employees, and how to roll out a voluntary benefits plan your employees will love.

What are Voluntary Benefits

Voluntary benefits are exactly what the name suggests (a group of benefits, not just one single voluntary benefit) — optional benefits employers offer on top of the primary benefits package. These benefits increase the value because they provide more diverse options. 

By offering voluntary benefits, employers give employees the freedom to choose the benefits that best suit their needs and lifestyle. The most common examples of voluntary benefits include supplemental dental insurance, life insurance, gym memberships, and medical supplement plans. Voluntary benefits are sometimes also called fringe benefits. 

How Do Voluntary Benefits Work?

The employer selects the voluntary benefits it wants to offer its employees in addition to the basic benefits plan. Employees pick the voluntary benefits they want from the list and pay for them partially or fully through deductions in their salary packet. However, since these benefits are available at group policy rates, employees pay significantly less than what they would pay as individuals. 

Types of Voluntary Benefits

Broadly speaking, voluntary benefits can be categorized into a few categories: health, dental, vision insurance, wellness, security, financial, and personal. Although the list of possible add-on benefits can be long, here are each category's most common fringe benefits. 

Health Insurance

• Critical illness insurance – This coverage pays a lump-sum amount if an employee is diagnosed with a covered condition. 
• Cancer insurance—Cancer insurance is a supplemental health benefit that aims to reduce the financial burden of cancer treatment.  
• Accident insurance – This coverage helps mitigate the costs of treatment following an accidental injury.

Dental

Dental coverage typically covers routine and expensive procedures not included in most health insurance policies.  

Wellness

• Disability insurance: Employees who can’t work due to illness or injury receive a portion of their pre-disability income. 
• Gym membership coupons: Offering subsidized gym membership is one of the best ways for companies to show their employees that they care about their health and well-being. 

Critical Illness Insurance

• Life insurance: This coverage provides financial safety for an employee’s family in the event of their death. 

Financial Planning Services

Financial supplemental benefits plans aim to help employees better manage their financing by providing counseling on a range of financial topics, including: 

• Tax advice
• Investment advice
• Student loan debt
• Credit loan debt
• Saving
• Budgeting

Employee Assistance Programs

• Flexible work schedules—Flexible work arrangements allow employees to improve work-life balance and give them the freedom to work during the hours they are most productive. 
• Remote work benefits – Remote working gives employees more freedom and flexibility, saves them money and time, and offers a better work-life balance.  
• Pet insurance – This coverage helps employees reduce the overall costs of veterinary bills. 

Benefits of a Voluntary Benefits Program

A voluntary benefits program can offer numerous benefits to both employers and employees. For employers, a voluntary benefits program can help attract and retain top talent, improve employee productivity and engagement, and enhance their reputation as a desirable employer. For employees, a voluntary benefits program can provide financial security and peace of mind, offer a range of benefits to cater to different needs, and enhance their overall well-being.

Some of the benefits of a voluntary benefits program include:

• Health insurance: Voluntary benefits programs can offer different options, such as critical illness insurance, hospital indemnity insurance, and health savings accounts, to help employees manage their healthcare costs.
• Life insurance: Voluntary benefits programs can offer life insurance options, such as term life insurance and whole life insurance, to help employees protect their loved ones in the event of their passing.
• Disability insurance: Voluntary benefits programs can offer disability insurance options, such as short-term and long-term disability insurance, to help employees manage their finances in the event of a disability.
• Employee assistance programs: Voluntary benefits programs can offer different programs that help employees, such as counseling services and financial planning services, to help employees manage their personal and professional lives.
• Pet insurance: Voluntary benefits programs can offer pet insurance options, such as accident-only insurance and wellness insurance, to help employees manage their pet care costs.
• Benefits package: Voluntary benefits programs can offer a range of benefits, such as vision insurance, dental insurance, and identity theft protection, to help employees manage their finances and protect their health.

Reasons to Offer Voluntary Benefits for Employees?

A voluntary benefits plan is a win-win solution for employers and employees. Employers offer voluntary benefits to cover gaps in group health insurance, attract new talent, and enhance employee engagement. When a company provides a robust voluntary benefits package, and employees enroll in benefits schemes that fit their lifestyle, everyone usually comes out ahead.

Here are some common reasons why more and more employers have started offering voluntary benefits:

• Improve employees’ health and wellness: Fringe benefits like health insurance, dental insurance, and gym membership help employees stay healthy and access quality healthcare in case of a health problem. Studies show there’s a strong link between employee well-being and productivity. Healthier employees are happy employees, and happier employees are more productive, increasing productivity by up to 20%.
• Reduce employee stress: Benefits that help employees reduce workplace stress, such as flexible work schedules and generous paid time off, can help employees maintain a solid work-life balance. This improves productivity, increases job satisfaction, and reduces time off from work.
• Attract and retain top talent: A comprehensive employee benefits plan can help you attract top talent, as well as improve employee engagement, productivity, and retention.

Choosing the Benefits to Offer

Determining which voluntary benefits to offer depends on your organization’s goals and employees’ needs. If your company’s goal is to be more appealing to new and existing workers, offering a moderate number of benefits options likely to appeal to various employees makes sense. 

Different employees have different needs. For example, younger employees may prefer lifestyle benefits, like gym membership, while older employees may find plans that include health and life insurance more meaningful. Therefore, offering flexible benefits plans that allow employees to pick and choose benefits that are beneficial for them is a smart strategy. 

Cost and Tax Implications

The cost of a voluntary benefits program can vary widely, depending on the type of benefits offered and the number of employees participating. Employers may incur costs such as set-up or administrative fees, labor costs for rolling out and communicating the benefits to employees, and premiums for the benefits themselves. Employees may also incur costs, which can vary depending on the benefit type and associated premiums.

In terms of tax implications, certain voluntary benefits, such as group term life insurance and health savings account contributions, may be deducted pretax. Other types of benefits can only be deducted post-tax. Employers should consult with a tax professional to determine the tax implications of their voluntary benefits program.

To determine the cost and tax implications of a voluntary benefits program, employers should consider the following:

• Conduct employee surveys: Employee surveys can help employers determine which benefits are most important to their employees and how much they are willing to pay.
• The employer and employee: The employer and employee can share the cost of voluntary benefits, which can help reduce the financial burden on employees.
• Benefit employers: Voluntary benefits programs can benefit employers by attracting and retaining top talent, improving employee productivity and engagement, and enhancing their reputation as desirable employers.
• Group health insurance: Voluntary benefits programs can offer group options, such as health and dental insurance, to help employees manage their healthcare costs.
• Financial planning services: Voluntary benefits programs can offer financial planning services, such as retirement planning and investment advice, to help employees manage their finances.
• Out-of-pocket expenses: Voluntary benefits programs can help employees manage their out-of-pocket expenses, such as copays and deductibles, by offering benefits such as health savings and flexible spending accounts.
• Employee benefit plans: Voluntary benefits programs can offer employee benefit plans, such as life insurance and disability insurance, to help employees protect their loved ones and manage their finances in the event of a disability.

Implementing Voluntary Benefits in the Workplace

After you’ve identified business goals and understood employees’ needs and preferences, decide whether the benefits will be paid partially or entirely by the employees who enroll in the program. Next, determine if some benefits will be paid with pretax income, which leads to additional savings for employees. 

Contact different insurance providers and get price quotes. Comparing the offerings and pricing of multiple carriers is essential because some are likely to offer you better deals than others. Once you’ve zeroed in on a provider, announce the plan details to your employees. Most probably, the provider will send a representative to explain all the included options and how each of them works. Finally, include a short description of the voluntary benefits scheme in future job interviews to show prospective new employees that you have an employee-centric culture. 

Conclusion

Voluntary employee benefits plans offer companies an affordable way to attract and retain talented professionals, increase productivity and job satisfaction, reduce employees’ health issues, and prevent employee burnout. However, all of this is possible only if you design a benefits package based on your employees' needs and preferences.  

FAQs

Can employees customize their voluntary benefits?

Yes, many voluntary benefits programs give employees the freedom to choose the benefits (and coverage limits in the case of insurance plans) that best align with their needs. 

Are voluntary benefits taxable for employees?

Voluntary benefits may be taxable or non-taxable. Typically, the employee pays partially or fully for these benefits via payroll deductions. Some voluntary benefits can be funded with pretax payroll deductions. These benefits are usually taxable for the employees if and when they use them. Examples of voluntary benefits deducted pretax include group life insurance, disability insurance, and long-term care assistance plans.  

Can employees change their voluntary benefits selection throughout the year?

Employees may be able to update certain voluntary employee benefits annually or after major life events. For example, many life insurance plans allow policyholders to upgrade coverage when specific life events, such as marriage or child birth, happen. 

Are there any legal requirements or regulations around offering voluntary benefits?

As a caring Canadian employer, if you plan to offer your employees voluntary benefits, ensure those comply with federal and provincial laws and regulations, such as employment standard legislation, insurance regulations, and privacy laws. 

What factors should employers consider when selecting voluntary benefits providers?

Key factors to consider when picking a benefits provider include the array of benefits offered by the provider, its reputation and financial stability, ease of benefits administration, the pricing model, and cost-effectiveness.