Benefits vs incentives

What are benefits and incentives?

These are two common terms that you may have already heard of. However, they are often confused as synonyms, but don’t let that fool you. Let’s look at the definition of both terms and see their similarities—but also their differences.

Benefit definition

The term benefit (often referred to as employee or corporate benefit) refers to additional non-monetary rewards employees receive in addition to salary. They facilitate and improve employees’ daily lives and help them meet their individual needs (more below).

Offering employee benefits makes it easier for employers to attract and retain employees. It makes the company more attractive as a place to work and it helps increase the motivation and satisfaction of employees.

Incentive definition

The term incentive refers to rewards, either monetary (bonus) or non-monetary (some kind of benefits), that employees can earn by achieving good results at work. 

A perfect example of this would be achieving specific sales targets or acquiring a certain number of new customers. Incentives are an excellent method for employers to encourage the team and improve their performance (“incentivise”). 

An exciting incentive will increase employees’ motivation and urge them to work more efficiently, but also more happily. For example, offering a team event, a language course, a trip, or concert tickets for their favourite band can really incentivise an employee to work harder.

What distinguishes benefits from incentives?

Benefits and incentives basically serve the same purpose: To motivate employees. Nevertheless, there are significant differences that HR managers should be aware of:

• Requirements:
  The main difference between the two is that incentives are always linked to conditions—such as a specific work result achieved by the employee in question.
  On the other hand, benefits are generally granted unconditionally and independently of performance to every employee in the company, even to less productive team members.
• Payout:
  The difference becomes even more apparent if you take a look at the time both bonus are given. 
  Regular benefits are granted to all employees at the beginning of the month. On the contrary, incentives are only paid out at the end of the month. Although, variations are possible and might happen during the month. Moreover, only if the specific goals were achieved.
• Purpose:
  Incentives serve more as a motivation for better performance. Employee benefits, however, are increasingly seen as a sign of support and appreciation to the employee. Not only does it increase employee loyalty, but it helps strengthen the employer branding.

Why are employee benefits essential?

Particularly, young employees expect employers to do something for them (which doesn’t just mean regular salary payments and raises). They want to know from the start what benefits they get from working with your business. 

According to a Statista survey, many employees nowadays choose where to work based on how well the company supports their lifestyle and how they will facilitate their everyday life. 

A great way to get the attention from candidates is by communicating your employee benefits and soon-to-be benefits in your job advertisement. Furthermore, you can also add information regarding your business’ benefits to your career page. 

Benefits thus play a central role in a company’s talent acquisition efforts. An attractive offer increases the chances of attracting skilled employees who fit in with the company culture.

However, benefits also influence whether the new employees are satisfied with their job and want to stay with the company long-term.

Thus, especially in the current era of the Great Resignation, they are a vital tool for retaining talent and keeping them in the company

Further benefits for your business

Besides this, you can also benefit from several other valuable advantages (as mentioned earlier) if you can come up with an appealing benefits program tailored to your business. The following advantages include:

• Stronger employee retention
• More satisfied, engaged employees
• Increase in productivity
• More positive, enjoyable work culture
• More attractive employer image

What benefits do employees want?

Depending on the type of company, team size, and industry, different benefits (and incentives) are possible. Currently, there are specific business benefit trends. 

For example, benefits that improve the work-life balance are well-liked among employees. These include:

• Flexible working models (such as the 4-day week)
• Remote and home office options
• Mobility options (e.g., a company car or paid travel passes)
• Fitness and health offerings (e.g., in-house fitness classes)
• Family-friendly benefits (e.g., maternity leave, paternity leave, or childcare services).

Benefits that serve personal and professional development are also growing in popularity. The world of work is constantly changing, and the fear of being unable to keep up is increasing. Therefore, the following are in high demand as well: 

• Education and training opportunities (e.g., language courses or work coaching)
• Joint career planning 
• Sabbaticals 

Due to the uncertain pension situation, company pension plans are also gaining popularity.

Additionally, personal and professional development benefits are also becoming more popular these days.