What Are the Four Main Types of Employee Benefits?

September 4 | 2019

Some employers offer paid parental leave. Others provide tuition reimbursement. Yet others provide pet insurance for employees’ furry friends. Outdoor clothing giant Patagonia even pays its employees two months’ pay to leave their job and volunteer for a worthy cause.

While these are all great employee perks provided by some companies, there are four types of benefits that are more commonly offered by employers and desired, or even expected, by top talent.


Medical coverage is the most common—and most essential benefit employers can offer. Major medical expenses can debilitate uninsured employees. From dental work to unexpected hospital visits, good medical coverage helps employees avoid the burden of heavy healthcare-related debt.


Employer-provided life insurance eases the financial burden on families in case of a loved one passing. This insurance can help cover funeral costs and ongoing living expenses. Similarly, if death or dismemberment of an employee is the direct result of a workplace accident, accidental death and dismemberment insurance (AD&D) pays a lump sum. If an employee has life and AD&D insurance through their employer, and they die as the result of an accident, both coverages will be paid to their families or beneficiaries. As an aside, it’s critical that employees keep beneficiary information up to date.


Short- and long-term disability insurance pays employees in case they can’t work due to injury or illness. If an employee becomes ill and is unable to work for an extended period of time, long-term disability insurance will pay them while they are home. Similarly, short-term disability insurance pays a portion of an employee’s salary if they become temporarily sick or are otherwise unable to work. Some short-term disability policies even pay for new mothers to take maternity leave. Disability insurance provides employees with much-needed income during a disabling event, and employers with peace of mind knowing the employee’s financial needs are met while they convalesce.


Nobody wants to work forever, so retirement planning is important for everyone. Some employers choose to offer retirement benefits for their employees. A study by the Bureau of Labor Statistics shows that just over half of Americans participate in a retirement plan at work.

The most common, the 401(k) plan, lets employees save and invest a piece of their paycheck, pretax. Employees get to watch their money grow, all based on their contribution and chosen portfolio of investments. Employers that offer 401(k) plans may even choose to match an employee’s contribution.

Other employers offer pensions which provide a set monthly income in retirement. A pre-determined formula, including years of service in the company, employee’s age and compensation, is used to determine the amount a retiree will receive each month. Both employee and employer contribute to a pension. These are common in government organizations and large companies.

*Under the Affordable Care Act (ACA) of 2010, medical benefits are required by law if an employer has more than 50 full-time employees. For the purposes of the ACA, a full-time employee is one who works at least 30 hours per week.


Medical. Life. Disability. Retirement. Four main categories of benefits that employers should consider while working to attract, hire and retain employees. Medical coverage is a pillar of financial security in the face of medical uncertainty. Life and AD&D insurance provides a little bit of peace in a time of grief and worry. Short- and long-term disability insurance eases the financial burden when the unexpected happens. And a good retirement benefit allows employees to more fully enjoy their post-employment life.