Employee Benefits Plan
Strictly speaking, “benefits” refer to non-wage or non-monetary incentives that an employee receive in recognition of his or her contribution to a company. When one speaks of employee benefits plan, it has now come to mean both benefits and “compensation” (monetary) incentives due to an employee.
An employment benefits plan is a financial package that puts in place a fund for the purpose of providing retirement or separation compensation and other benefits to a regular employee upon formal separation from a company after a pre-determined period of service. The employee benefits plan is managed by a trustee, usually a bank or a financial management or investment firm.
This type of employee compensation is probably the strongest employment benefit offer that a stable and organized company can offer its workforce.
Employers who offer this package often attract the most qualified and professional staff who seek proper compensation for the expertise and experience they will be bringing to the company. An employment benefits plan is also a major factor in employee retention, since their funds grow the longer they stay with the company.
The plan usually comes in two types: The Defined Contribution or Provident Plan, where the employee contributes a percentage of his monthly salary to the retirement fund and the employer matches that contribution; and the Defined Retirement Plan, where only the employer contributes to the plan, and the retirement income is calculated based on a percentage of an employee’s monthly salary.