Last updated: August 2025
Offering a competitive benefits package can help your company to hire and retain top talent. In fact, workers value benefits so much that Mercer’s 2024 People Risk report revealed that 46% of employees would give up a 10% pay increase in exchange for more well-being benefits.
Unfortunately, creating a benefit package from the ground up can be challenging.
The good news is that this guide will explain everything you need to know to design an employee benefits program that will make people want to work for your business — and stay loyal to it for the long haul.
How to design an employee benefits package and launch your first program
Designing an employee benefits program involves:
Identifying the needs of your workers
Understanding the legal rules you’ll have to follow
Creating a program that’s within your budget — but still delivers value
Finding the right partners to put your program in place
The high cost of administering employee benefits packages is one of the big challenges small businesses face. Overcoming the challenge can pay dividends: while only 65% of employees today report being satisfied with their jobs, the right benefits program can dramatically improve morale, productivity, and overall loyalty.
Considering this, your ultimate goal should be to create a competitive benefits package that improves employees’ lives while aligning closely with company objectives.
Here are five steps to make that happen.
1. Understand the basics
To build a strong package, start by understanding the different types of employee benefits you may include.
Quick-reference: Types of Employee Benefits
Core Benefits: Health insurance, dental insurance, vision insurance, life insurance, short- and long-term disability
Financial Benefits: Retirement plans (401(k), SIMPLE IRA), bonuses, stock options, profit-sharing, HSAs, FSAs, tuition reimbursement, student-loan repayment
Fringe & Lifestyle Benefits: Flexible/remote work, wellness stipends, backup care, pet insurance, Employee Assistance Programs (EAPs), learning stipends, free books, onsite yoga, cafeteria/flexible benefits plans
There is a wide range of employee benefits packages. Some companies provide generous perks such as subsidized health insurance, ample paid leave, and employer retirement contributions. Others offer the bare minimum or even no benefits at all.
To create the right employee benefits package for your business, start by evaluating different kinds of workplace perks that should be part of your plan.
Some possible options include:
Health insurance
Dental and vision insurance
Life insurance
Flexible spending accounts (FSAs) and health savings accounts (HSAs)
Retirement plans (with or without a company match)
Bonus pay or profit-sharing
Paid time off, sick days, and family leave options
Use of a business vehicle
Gym memberships, wellness stipends, or mental-health apps
Fringe benefits are non-cash perks beyond standard wages. Some are non-taxable, such as employer-paid health insurance premiums, HSA contributions, and dependent-care assistance (within IRS limits). Others — like wellness stipends, moving-expense reimbursements above IRS limits, or personal use of a company car — are treated as taxable income to employees.
Certain benefits are also more common than others. For example, the Bureau of Labor Statistics reports that 72% of workers have access to medical benefits through work. By contrast, only 34% of private-sector workers receive long-term disability insurance. Well-qualified employees typically look for core protections such as retirement plans and health coverage — but the more well-rounded your benefits offering, the easier it becomes to recruit and retain talent. In fact, 59% of employees provided with 10 or more well-being benefits say those perks make them less likely to want a new job.
2. Consider your company culture and employees’ needs
Most companies can only afford to offer a limited number of benefits. Identify which perks will matter most by considering both your workforce and your culture.
The Society for Human Resource Management reports that health insurance, retirement savings plans, vacation time, flexible work opportunities, and family-friendly benefits remain the most in-demand. However, expectations differ by company type. Employees at startups often value remote-friendly policies and flexible scheduling. Teams with more tenured staff may prefer richer health insurance, life insurance, and disability protection. You can conduct simple surveys or offer a cafeteria-style plan — where employees choose between taxable and tax-advantaged benefits — to personalize your offering.
3. Establish a budget
Benefits are an investment — and a meaningful one. The Bureau of Labor Statistics reports that while the cost of wages and salaries averages $32.92/hour, the average cost of benefits adds $15.00/hour. Determine what percentage of total compensation you can sustainably allocate to benefits, keeping in mind that strong packages often lower turnover and improve productivity.
4. Evaluate the legal and compliance considerations
Employee benefits are governed by a web of regulations. The Employee Retirement Income Security Act (ERISA) sets standards for retirement and health plans. The Affordable Care Act (ACA) outlines minimum health-coverage requirements and employer obligations — especially once you employ 50 or more full-time equivalents (FTEs). Certain fringe benefits trigger IRS reporting requirements.
Before rolling out new benefits, ensure you understand your obligations — or partner with experts who do — to avoid costly compliance mistakes.
5. Find and partner with providers
The final step is execution. Benefits administration can be complex and time-consuming, particularly when dealing with payroll deductions, carrier relationships, and compliance reporting. The right vendors and tools simplify implementation and allow your HR team to stay focused on strategy — not paperwork.
Thatch helps companies of all sizes deliver affordable, flexible health-benefits programs through an ICHRA (Individual Coverage Health Reimbursement Arrangement) model. Instead of choosing one group plan, employers set a fixed benefits budget, and employees choose the individual health insurance plan that best fits their needs. Thatch automates enrollment, compliance, and reimbursement while giving employees significantly more choice.
Frequently Asked Questions About Employee Benefits
What is typically included in an employee benefits package?
A standard benefits package often includes core protections like health, dental, and vision insurance, along with financial benefits such as retirement plans and performance bonuses. Increasingly, employers also include lifestyle perks such as flexible work arrangements, wellness stipends, and mental health support.
What are fringe benefits?
Fringe benefits are perks provided in addition to salary. Examples include company cars, gym stipends, wellness allowances, and tuition assistance. Some fringe benefits are tax-exempt (like employer-paid health premiums), while others are taxable based on IRS rules.
Which employee benefits are tax-deductible for employers?
Employer contributions to health insurance, HSAs, retirement plans, and dependent care assistance programs are typically tax-deductible business expenses. Tax treatment can vary, so employers should consult a tax professional.
How much do benefits cost employers on average?
According to the Bureau of Labor Statistics, benefits account for approximately 30%–35% of total employee compensation, though exact budgets vary depending on company size, industry, and geographic location.
What is an ICHRA?
An Individual Coverage Health Reimbursement Arrangement (ICHRA) is a type of health benefit that allows employers to reimburse employees tax-free for individual health insurance premiums. It offers cost control for employers and greater flexibility for employees choosing their own plans.
Set your budget — Thatch handles the rest. Ready to build a benefit package that helps you win (and keep) great people? Request a demo today.
