Perks, Benefits, and Employee Rewards — What’s the Difference?

The difference between perks, benefits, and rewards: Perks are “nice-to-haves,” benefits are government-mandated “need-to-haves,” and rewards are linked to performance.


Perks, benefits, and rewards. These tools are the shiniest in your belt when it comes to attracting and retaining top talent.

Revisiting your company culture? Interviewing an exciting new hire? Let’s take a minute to break down what each of these categories means. And, how to unlock their power to transform employee experience, engagement, and your hiring strategy.

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What are benefits? What are perks? What are rewards?
6 examples of benefits 6 examples of perks 3 examples of rewards
Why benefits matter Why perks matter Why rewards matter

What are employee benefits?

The U.S. Dept of Labor provides this snappy definition: Benefits are non-wage compensation offered to employees. Additionally, benefits:

  • Fall into two groups: voluntary benefits and legally required benefits.
  • Are more likely than perks or rewards to appear in a contract.
  • Include financial staples like health insurance that the employee would likely fund on their own if not provided by the employer.
  • Are offered to all full-time employees and may be adjusted based on role or tenure, but are not tied to performance.

So, want to break it down further? The National Compensation Survey groups benefits into five categories. They are paid leave, supplementary pay, retirement, insurance, and legally required benefits.

Examples of employee benefits

🗓  Paid Time Off (PTO): This falls into the paid leave category. It may include vacation, sick time, and maternity leave. And though it seems counterintuitive, offering generous PTO gives your company a huge boost in productivity. Studies show links between PTO and greater employee morale and retention.

💰  Stock options: These fall into the supplementary pay category. That’s because stock options have favorable tax implications for employees. As a plus, they also align your employees’ interests with the company’s success.

💵  401(k) plan: Providing 401(k) plans, especially those that match, to help your employees secure their futures. Plus, this offering increases retention. 40% of employees working at companies that don’t offer 401(k) plans say they’d jump ship for one that did.

🤒  Health insurance: Health insurance is essentially a form of compensation. If you didn’t provide it, your workers would have to pay for it themselves. But health benefits also give your company a leg up. That’s because healthy employees are more likely to have higher job performance and take fewer sick days.

👩🏽‍💼 Workers’ compensation: This falls under the category of legally required benefits. So items in this category, which protect basic workers’ rights, are affected by state and federal laws. Others include Social Security, Medicare, unemployment benefits, and overtime.

🚈  Pre-tax transit assistance: Metro passes and paid parking are fantastic benefits to offer your workers. Because your company can provide them at relatively low cost, and reap the rewards of helping employees get to work on time.

Why are employee benefits important?

Because now more than ever, companies are weighing their budgets with care. And employee replacement is costly. According to SHRM, replacing an employee can cost 6 to 9 months of their annual salary in recruiting, onboarding, lost productivity, and more.

So it literally pays to keep employees happy. According to the U.S. Chamber of Commerce, 56% of Millennials agree that a quality benefits package impacts their choice of employers. And 63% indicate that great benefits are a reason to stay with an organization. A strong benefits package is the bare minimum for your company to attract and retain talent.

And great benefits go beyond hiring. 70% of American workers are stressed about health, jobs, and finances. And more than 20% spend 5+ hours each week thinking about that stress at work. So think of the benefits you offer as an investment in focused, happy employees, and your company’s success.


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What are employee perks?

Perks (from “perquisites,” for our fellow word nerds) are offerings from the employer that go above and beyond the salary and benefits package. Think of it this way: Benefits cover “need-to-haves.” So perks are “nice-to-have” bonuses, like paid gym memberships or free in-office lunches. Additionally, perks:

  • Are less likely than benefits to appear in a contract.
  • Cover expenses that employees might not fund on their own.
  • Highlight company culture and values.
  • Are offered to all full-time employees, and maybe some contractors; they do not scale based on tenure or performance.

Note: Employees may consider positive elements of the job a “perk.” (Think short commutes, or an engaging boss). However, for human resources purposes, perks are offerings from the company that makes working there more appealing.

Examples of employee perks

⏰  Flexible hours or remote work. 41% of employees with this perk rank it as the most important one they receive. Plus, it benefits you. When employees are less stressed about getting to work, productivity increases. As a result, scheduling flexibility promotes lower absenteeism.

🥗  Free lunches, snacks, and coffee. The benefits of providing healthy meals and snacks are huge. Increased collaboration? Decreased employee turnover? Up to 150% higher employee productivity? Yes, please! Working remote? No problem. Just send your employees coupon codes for ordering in.

💪  Gym memberships: Health-oriented perks are a fantastic supplement to employee health insurance. That’s because healthy employees are more productive than their unhealthy colleagues. Those coworkers cost employers $73.1 billion per year. And they file twice as many compensation claims.

⛺️  Employee retreats: These bonding opportunities help your employees connect with their teammates. Which pays off big in productivity. It’s a 20-25% increase, according to the McKinsey Institute.

🍼  Childcare: This perk teeters on the brink of the “benefits” category. But no matter how you group it, the benefits your company gets from offering childcare are undeniable. When Kazoo customer Patagonia began providing on-site childcare to employees, it recouped $500k in taxes. Plus, 30% of costs in employee turnover, and 11% in employee engagement.

🎓  Tuition assistance: Tuition assistance or reimbursement is a win-win for employees and companies. That’s because it promotes professional growth and increases retention. Plus, it lets companies deduct $5,250 per employee per year in taxes.

Why employee perks are important

Perks can be a huge advantage in the hiring process. But they also reflect your company culture and values to current employees.

53% of employees whose companies offer perks? State that those perks give them a better quality of life, and make them feel valued. So the nominal costs of these programs and offerings are far outweighed by the benefits of having happy, engaged employees.


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Why Your Company Needs a Recognition & Rewards Programwhy your company needs a rewards and recognition program

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What are employee rewards?

Unlike benefits and perks, rewards are directly tied to performance. If benefits are “need-to-haves” and perks are “nice-to-haves,” think of rewards as “inspiring-to-gets.” Rewards:

  • Are unlikely to appear in a contract (bonuses may be an exception).
  • May include financial rewards, recognition, or other honors.
  • Can be tied to performance and contribution, or role and tenure.
  • Highlight and promote employee engagement and company culture.

A little recognition goes a long way. 80% of employees say that they feel motivated to work harder when their boss shows appreciation. So go above and beyond by implementing an employee rewards program that recognizes employee work.

Examples of employee rewards

🏆  Milestone rewards: These include financial bonuses, honorary ceremonies, shared meals, and more. They honor work anniversaries. Milestones are a fantastic way to demonstrate appreciation for your workers’ continued loyalty.

📈  Performance-based bonuses: Reward your employees for meeting goals, exhibiting professional growth, and outperforming their peers. Why? Because these bonuses generate friendly competition between teams. Plus, they encourage collaboration within teams. And, they motivate workers to perform better.

🎁  Employee reward catalog: Celebrate employee achievement company-wide with a rewards catalog! Because this allows employees to cash in kudos for gifts, swag, and experiences. Meaningful employee rewards, like those offered by Kazoo’s recognition and rewards platform, have a positive impact on company culture. And they can garner up to a 50% reduction in turnover.


If they dream it, you can offer it as a custom reward with Kazoo.
Kazoo’s Recognition & Rewards platform

custom rewards

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Why are employee rewards important?

Rewards reflect an employee’s performance. So rewards are an opportunity for workers to see how you value their contributions. The great news? This drives worker productivity and morale. Plus, the immediacy and visibility of rewarding good work boosts employees’ intrinsic motivation to do well!

Rewards also have an enormous impact on retention. One study of 1,700 people found that more than half were planning to leave their job within the next year. Strikingly, 69% of those noted that they’d be encouraged to stay with their employers if they offered recognition and rewards. With turnover costing more than $15,000 per employee, a solid rewards and recognition program is a worthy investment.


Tying it all together

Remember: Your benefits, perks, and rewards package represents more than just a shiny hiring incentive. Because it’s an opportunity to optimize engagement and build a powerful culture for your current employees, too.

So as you build out your organizational offerings, make sure they’re appealing and beneficial to all those in your workforce. Remember, this includes new parents and near-retirees. Also, workers pursuing continuing education, those who need to work remotely to care for ill or aging family, and more.

At Kazoo, we’re passionate about creating great employee experiences. That’s why our all-in-one employee experience platform lets you manage recognition and rewards. Plus performance management (like goals, feedback, and check-ins) and data-driven surveys all in one place. So learn what we can do for you!

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