Difference Between Traditional and Voluntary Employee Benefits
In many cases, workers rely on their employers to provide access to benefits that they wouldn't be able to afford on their own. These include benefits such as health insurance, retirement savings plans and life insurance. However, changing economic conditions and workplace trends draw an important distinction between employers that offer traditional benefits programs and those that use a voluntary benefits model.
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Definitions
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Traditional employee benefits are loosely defined as benefits that employers offer to all of their full-time workers who meet basic eligibility guidelines. These guidelines may include service time or contract status, but a traditional benefits plan covers most workers automatically. A voluntary benefits plan is not automatic, and individual workers must instead elect to participate. Each type of plan can offer any number of specific benefits, often at varying levels from which an employee can choose. Voluntary benefits have expanded significantly in recent years to include such options as cancer or critical illness coverage, pet insurance, legal plans, identity theft programs, auto coverage and homeowner insurance.
Who Pays
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One of the most significant differences between traditional and voluntary benefits is who pays for the benefits. While traditional benefits are paid for by employers, or the cost is split between employers and workers, voluntary benefits typically rely on employees to pay the full cost of participation. Employers simply provide access to these benefits plans and the discounts that come from participating in group plans rather than purchasing the benefits individually outside of work. For example, in the case of group health insurance, the risk is spread out over all workers, with each paying the same premium through paycheck deductions, resulting in a lower price than any individual worker would pay for an individual policy outside of work.
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Coverage
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To keep costs down, voluntary employee benefits policies often include a minimal level of coverage, or the option for minimal coverage. For example, a voluntary health care plan may exclude dental or vision coverage but offer it for an additional fee. With voluntary benefits employees can choose their own levels of coverage. With a traditional benefits plan, the employer selects which coverage to offer and employees do not necessarily have options to pay for add-on coverage as part of the same policies.
Impact
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Both employers and employees feel the impact of a switch between traditional and voluntary benefits. As more employers begin to offer voluntary benefits in place of traditional plans, the value of a traditional benefits package increases. Employees can weigh job offers based not only on salary offers but also whether benefits are traditional or voluntary. Employers can use a voluntary benefits program to save on gross payroll.
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