Employers Resource

What Are the Four Major Types of Employee Benefits?

We’ve been talking a lot about employee benefits – from savings clubs like FSAs and HRAs to employee perks and everything in between. But, one thing we don’t want to leave out is the basic needs your employees expect to be met before those other benefits come into play. What are the four major types of employee benefits? We’ll take a brief look at each.

“32% of U.S. employers are finding it more and more difficult to fill jobs at their companies.”

Manpower Group

Benefits play a vital role in attracting and retaining the talent you need for your business. But, before you get into the added perks that make your employees happy, take a look at the four major types of benefits your employees really need.

1. Medical

The most common (and often most essential) type of benefits employers can offer is medical coverage. The costs of health insurance, doctors and hospital visits, dental work, vision care, and prescriptions are rapidly increasing and employees are finding it more and more difficult to deal.

Unexpected medical expenses can cripple uninsured employees in an instant and that is why most talented employees have been cultured to expect basic medical coverage.  

To help with these expenses, some employers offer savings plans like the Flexible Spending Account or Health Reimbursement Account. These savings accounts will cover eligible expenses like:

  • Copays and prescriptions
  • Eyeglasses and contacts
  • First aid kits
  • Daycare expenses

2. Life

Another common employee benefit is life insurance or accidental death and dismemberment insurance. If one of your employees pass away, life insurance benefits will provide payments to the employee’s family to cover funeral costs and ongoing living expenses. If you’ve been involved with this process then you understand the incredible financial burden this can be on a family.

Accidental death and dismemberment insurance, or AD&D, provides a lump sum payment if death or dismemberment of an employee is the direct result of an accident. If the employee has both insurance benefits (life and AD&D) and they die due to an accident, both coverages will be paid to the families or beneficiaries.

Here is how that would work: If an employee has employer-paid group basic life and AD&D of $20,000 and also elects $30,000 supplemental life and AD&D for a total of $50,000 in coverage.


  • Example 1: If the employee dies of a heart attack (no accident) – benefit pays $50,000 ($20,000 basic life insurance and $30,000 supplemental life insurance)
  • Example 2: Employee dies in an auto accident (accident) – benefit pays $100,000 ($50,000 life insurance, $50,000 AD&D insurance)
  • Example 3: Employee loses an eye in an auto accident but doesn’t die – benefit pays a portion of the accident insurance for loss of limb (dismemberment insurance)


Expert Tip – If you currently offer one or both of these benefits to your employees, our client service team recommends that you check to make sure each of your employees has a beneficiary selected and it’s up-to-date. It’s tragic when something happens and this piece is found to be missing.

3. Disability

Employers can offer short-term and/or long-term disability insurance to their employees. If an insured employee is injured or has a lengthy illness, the benefit pays them during the period of time they are unable to work.

Short-term disability pays a portion of an employee’s salary if they become temporarily sick or are unable to work. For example: If an employee is out with a hernia, they might receive short-term disability payments.

In the event of a more permanent illness or injury preventing an insured employee from performing their duties, that employee would receive long-term disability payments.

4. Retirement

The most common type of retirement benefits is the 401(k) plan. This allows employees to deduct a certain percentage of each paycheck to put towards retirement savings. Some businesses choose to match the employee’s deduction or up to a certain percentage.

In the private sector, 65 percent of employees receive retirement benefits versus the 85 percent of local and state government employees.

What are the four major types of employee benefits? We hope these short summaries have helped you answer that question. 

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