As the market for skilled labor tightens, the ways in which employers support their employees have grown in tandem.
Companies today are doing anything and everything they can to attract, engage, and retain top talent, and a direct result of this is more comprehensive total compensation plans.
Because of the expansion and increased investment in total compensation packages, now more than ever, the industry needs clear definitions of what benefits, perks, perk stipends, andlifestyle spending accounts(LSA) are. Continuing without a consensus, people will continue to be confused, time and money will continue to be wasted, and worst of all — we won’t understand our employee’s actual needs.
Below are the elements of compensation we’ll cover in this piece:
- Compensation
- Salary
- Benefits
- Perks
- Perk Stipends/Perk Allowances
- Lifestyle Spending Accounts
Compensation
Compensation Definition:
While once considered just salary, the definition of compensation has expanded to describe the entire package that employees receive for their labor.
Compensation includes salary, bonus commission, stock options, benefits, perks, and any other additional financial or non-financial extras.
According to anErnst & Young report, 63% of respondents said that an employer which “provides fair compensation and good benefits” was a leading factor in determining the level of trust to place on their employer.
Sources:Small Business Chron,The Balance Careers
Benefits
Benefits Definition:
Benefits are non-salary compensation given to employees.
There are two forms:
1. Government-mandated benefits and company-determined benefits.
2. Benefits that employers are required by federal or state law to provide (within specific parameters):
Below are examples of benefits a company can offer to make their organization a more attractive place to work. They often include insurance, retirement benefits, health-related accounts, and formalized paid time off.
Examples of benefits:
- Paid time off (aka holidays, vacation, and sick days)
- Health insurance
- Dental insurance
- Vision insurance
- Disability insurance (short-term and long-term)
- Retirement benefits: 401(k)
- Healthcare spending or reimbursem*nt accounts (HSAs,FSAs,HRPs, andHRAs)
What benefits are not:
- Commuter stipends or benefits
- Lifestyle spending accounts
- Flexible work location or working hours.
- Things that have tax advantages. While it’s true some do have tax advantages such as ROTH 401k or an FSA, not all of them do.
Sources:The Balance Careers,HR Zone benefits definition.
Perks
Perks are additional ways to support the needs of employees beyond salary or benefits and include ones that are purchasable and programmatic.
(Read here to find all the secrets you need to know to build a top-notch perks program)
Purchasable perks include catered lunches, books, fitness stipends, pet insurance, and student loan forgiveness. Programmatic perks are policy-driven advantages to working at a company such as being pet-friendly, Summer Fridays, or remote work.
Perks are one of the largest umbrellas of offerings as many items fit within them.
Examples of offerings:
- Beer
- Car allowances
- Career coaching services
- Casual dress
- Catered meals
- Charitable matching
- Child care (in-office support or subsidized)
- College loan repayment services
- Commuter Stipends
- Company outings
- Conferences & training
- Continuous Learning Stipends
- Dedicated time for learning
- Fitness Stipend
- Flex Work Hours
- Game Room
- Generous Parental Leave
- Gym memberships
- Happy Hours
- Lifestyle spending accounts
- Meditation rooms
- Mentorship Programs
- Online learning classes & courses
- Onsite gym
- Performance bonus
- Pet-friendly office
- Pet insurance
- Professional memberships
- Certificates
- Recreational clubs (company-sponsored teams)
- Relocation assistance
- Remote work opportunities
- Sabbatical leave
- Software stipends
- Summer Friday’s
- Tech goodies stipend
- Tuition reimbursem*nt
- Volunteering opportunities
- Wellness programs
Other, less-discussed perks:
- Birthday lunches or gift cards
- Spot bonuses
- President’s Club
To see a comprehensive list, check out thisemployee perks listing page.
What perks are not:
- A company’s mission, vision, and values.
- Strong leadership or managers.
- Excellent programs or processes.
- Working close to the office.
Sources:JustWorks, ComptEmployee Perks,Robert Half
Perk Stipends/Allowances
Perk stipends are monetary amounts allocated to employees for them to spend on perks that align with specific company policies, values, or culture initiatives. The amounts can be given to employees on credit cards, paid back through reimbursem*nt (while accounting for taxes), or through a lifestyle spending account.
Examples of perk stipends:
- Continuous learning stipends
- Remote work stipends
- Family perk stipends
- Travel stipends
- Software stipends
Examples of companies using perk stipends today:
- Airbnb:$2,000 a year to spend on travel.
- Qualtrics:$1,500 a year to spend on experiences.
- Facebook:$4,000 in “baby cash” stipendfor new parents.
- Microsoft: Annual$800 “StayFit” reimbursem*ntto pick your favorite way to stay fit physically, emotionally, and financially.
- Basecamp: $100/month for health and wellness, $100/month for massages, $1,000/year for continuing education, and $1,000/year for charitable giving with matching.
- Buffer: $20/month for continuous learning, $3,000/year dependents grant, and $200/month remote work stipend.
- Circle:$200 a month to spend on lunches.
Sources:Perk Stipends: Everything You Need to Know.
Example of a Lifestyle Spending Account.
In the example to the left, Sam’s company has allocated $100 per month to spend in the following categories: learning, health & wellness, and food.
This month, Sam purchased books and a gym membership, paid for lunch with her team, and still has $20 remaining.
How would you spend your $100 this month?
I Want LSAs
Lifestyle Spending Accounts
A lifestyle spending account is an employer-contributed account set up for employees so that they are able to purchase the perks which are most meaningful to them and their needs.
To set up alifestyle spending account, companies set basic parameters for their employees’ lifestyle spending accounts including how much each employee can spend, within what timeframe, in which categories, and who pays the taxes. Companies often align the categories of spending with the mission, vision, values, culture, or company goals.
Lifestyle spending accounts are an ideal option for companies that wish to personalize their employee perks, support satellite offices or remote employees, ensure IRS tax compliance with perks, and remove the administrative burden on HR for managing individual perks and vendors.
This sounds perfect, doesn’t it? Want to learn more about how LSAs work?Read all you need to know about them here.
Sources:HR Daily Advisor,Lifestyle Spending Account eBook.
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