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

Perks, benefits, and rewards: When it comes to attracting and retaining top talent, these company offerings are among the shiniest tools in your belt.

Whether you’re talking organizational culture or 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, productivity, and your competitive hiring strategy.

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What are benefits? What are perks? What are rewards?
Examples of benefits Examples of perks 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.

Want to break it down further? The National Compensation Survey groups benefits into five categories: 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 and may include vacation, sick time, and maternity leave. Though it seems counterintuitive, offering generous PTO gives your company a huge boost in productivity, with studies showing greater employee morale and retention.

💰 Stock options: These fall into the supplementary pay category. Stock options have favorable tax implications for employees while also aligning your employees’ interests with the company’s success.

💵 401(k) plan: Providing 401(k) plans, especially those that match, offer a great tax-favored benefit that helps 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: Healthy employees are 25% more likely to have higher job performance and take fewer sick days.

👩🏽‍💼 Workers’ compensation: This falls under the category of legally required benefits. 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: 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?

It’s no secret that we’re in a historically competitive hiring market, and the new generation of employees places a premium on great benefits:

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. For your company to put its best foot forward in attracting and retaining top talent, a strong benefits package is the bare minimum.

But 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. Think of the benefits you offer as an investment in focused, happy employees, and your company’s success.

Learn the best employee behaviors to recognize and reward →

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. While benefits cover “need-to-haves,” 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.

Though employees may consider positive elements of the job a “perk” (think short commutes or an engaging boss), 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, and scheduling flexibility promotes lower absenteeism.

🥗 Free lunches, snacks, and coffee: The benefits of providing healthy meals and snacks in-office include increased collaboration, decreased employee turnover, and up to 150% higher employee productivity.

💪 Gym memberships: Health-oriented perks a fantastic supplement to employee health insurance. Healthy employees are more productive than their unhealthy colleagues, who cost employers $73.1 billion per year and file twice as many compensation claims.

⛺️ Employee retreats: These bonding opportunities help your employees connect with their teammates, which pays off big in productivity — 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 can garner by offering childcare are undeniable. When Patagonia began providing on-site childcare to employees, it recouped $500k  in taxes, 30% of costs in employee turnover, and 11% in employee engagement.

🎓 Tuition assistance: Even considering the costs, tuition assistance or reimbursement is a win-win for employees and companies, promoting professional growth, increasing retention, and letting 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 organizational 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. The nominal costs of these programs and offerings are far outweighed by the benefits of having happy, engaged employees. (Feeling inspired? Check out more ways to supercharge your company culture.)

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 note that they feel motivated to work harder when their boss shows appreciation. So go above and beyond — and beyond that — 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 to honor work anniversaries. Celebrating employee tenure, and highlighting achievement, is a fantastic way to demonstrate appreciation for your workers’ success, and encourage continued loyalty.

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

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

Learn about Kazoo’s strategic employee rewards


Why are employee rewards important?

Because rewards reflect an employee’s performance, this class of benefit offers a unique opportunity to let workers know their specific contributions are valued. This drives worker productivity and morale. Plus, the immediacy and visibility of rewarding good work can boost employees’ intrinsic motivation to do well, unlike other benefits like PTO and tuition assistance.

Rewards also have an enormous impact on retention. One study, polling 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

At the end of the day, remember that your benefits, perks, and rewards package represents more than just a shiny hiring incentive — it’s an opportunity to optimize engagement and build a powerful culture for your current employees, too.

As you build out your organizational offerings, make sure they’re appealing and beneficial to the workers at different stages of life and profession who make up your workforce. This includes new parents and near-retirees, workers pursuing continuing education, those who need to work remotely to care for ill or aging family, and more.

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