Understanding compensation - Non cash compensation / benefits
- Sanjay Gupta
- Sep 2
- 4 min read
Srini has now understood the cash and cash equivalent components of his compensation. These are the fixed salary, bonus, health and 401K plan. (Fixed and variable ; Healthcare and retiral benefits )
Reading through the employee manual, he discovers that he is also eligible for a number of non-cash benefits.
These include
1. Life / disability insurance
2. Paid time off
3. Tuition reimbursement
4. Gym, fitness membership
5. Childcare / day care
6. Flex working hours
Life / disability insurance
Life insurance
In March 2024, 62% of civilian workers were offered group life insurance benefits by their employer. It was 58% for private sector and 83% for state and local government (1)
This is a term life insurance, payable in the event of the demise of an employee.
The typical payout is between 1 and 2 times the annual income of the employee and provides income continuation for 1 – 2 years. Srini’s employer’s policy will pay 2 years of base income.
If the premium for this insurance is paid by the employer, it is considered a taxable perk and the premium is added to taxable wages of the employee (for policies which pay more than $50,000)
Some employers offer options to increase the insured amount of the term life insurance. For that the additional premium is borne by the employee.
Disability insurance
Disability insurance ensures income continuation in the event of a disability which prevents an employee from working. This covers injuries incurred outside the workplace.
Disability insurance comes in two forms, short term and long term
Short term disability insurance coverage can be as short as 3 months and typically for 6 months. Long term disability payments kick in after this and can extend up to the age of 65.
Short-term disability insurance was available to 40% of civilian workers in March 2020, and long-term disability insurance to 35% (2).
15% of the covered employees were required to pay for these short-term disability plans, and 6% for long term plans. Srini’s employer requires the employee to pay to participate in this plan.
If the employer pays the premium, the insurance proceeds are taxable when paid. If the employee pays the premium, the insurance proceeds are not taxable.
Paid leave
Between 79% and 96% of workers in different industries get paid time off with 10 – 24 days being the range of days off. The number of eligible days tend to increase with years of service. (3)
In addition to his, 77% of the workers in the private sector were eligible for paid sick leave In Feb 2023 (4). Most plans offered paid sick leave of 5- 7 days.
While these are the two most popular paid time off benefits, companies also offer paid time off for jury duty, bereavement, and personal exigencies.
Tuition reimbursement
Per SHRM data, 48% of employers offer tuition reimbursement.
Tuition reimbursement plans encourage skill building to add to proficiency on the job or in a future job. Some plans also allow for tuition reimbursement for skills which may not have a bearing to the employee’s line of work.
Up to $5250 in tuition reimbursement is tax free to the employee.
If the expense is beyond this amount, it becomes a taxable perquisite to the employee unless it can be demonstrated that it is spent on a skill essential for the employee to maintain current employment or improve skills in his/her job.
Srini’s employer conducts 5 – 7 days of in-house training and skill enhancement programs for all employees every year. Tuition reimbursement is offered only for skill enhancement which cannot be provided in-house.
Gym an and fitness memberships
Seen as a lifestyle and health benefit, some companies offer these membership plans to encourage employees to invest in their fitness and health.
Memberships can be offered directly by the employer, or in some cases through a health plan.
For the most part this benefit allows an employee to avail membership at a discounted rate. The cost of the membership is borne by the employee.
In Srini’s case, the health insurer has signed up with a fitness management company which offers a range of services, including gym memberships, at a discounted rate.
Child care / day care
56% of US companies offered some form of childcare assistance in 2022. (5).
Child care assistance ranges from help in getting priority enrollment in day care centers, reimbursement for a day care center or in-home care. A very small percentage of employers (6%) have some form of day care available on or close to premises.
Flex working hours
Flex working hours allow workers to align work hours with their lifestyle.
Some examples of flex schedules are
A parent structuring working hours to coincide with the schedules of its child by starting the day early and wrapping up by the time the child gets back from school or aftercare.
Working 10 hours a day and then taking a 3 day weekend
Starting early or late and then working 8 hours
Working in two shifts of 4 hours with a long break in between
Working less than 40 hours a week
Making these flex arrangements work requires alignment among team members who work together to ensure that all are available for collaborative activities.
Srini works in the office four days a week. His team has agreed that they will work remote on Friday and have all in person meetings and interactions from Monday through Thursday.
In closing
In addition to cash and cash equivalent benefits of fixed wage, bonus, healthcare and 401K, many employers offer other benefits too
Life and disability insurances give income continuation
Tuition reimbursements and gym/fitness memberships to enable skill and health enhancement
Paid time off, childcare benefits and flex working schedules to enhance quality of life and better work-life balance.
All of these aim to make employees more secure, healthier and happier.
Keep swinging!
References
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