What Are Voluntary Benefits? And Should Your Business Offer Them?
In the U.S., employee benefits constitute almost one-third (31.7%) of total compensation costs.  With that in mind, it makes sense that HR leaders and benefits administrators are continuously looking for ways to ensure that the benefits part of their total rewards package is cost-effective and meets their employees' needs. 
What is a total rewards package?
Total rewards is the combination of benefits, compensation and rewards that employees receive from their organizations. This can include wages and bonuses as well as recognition, workplace flexibility and career opportunities.
Offering voluntary benefits is a strategy that can help your business find that middle ground. If you’re an HR professional or business leader who hasn't considered the advantages this strategy can bring to your organization, we’re here to help get you up to speed.
We talked with business leaders who have embraced voluntary benefits and combed through Gartner research in order to understand what this strategy is, why businesses choose to adopt it, and what kind of organizations typically see the most success from doing so.
So without further ado, let’s get into it.
Let’s start with the basics: What are voluntary benefits?
Voluntary benefits are services offered through an employer that are paid for (either entirely or partially) by employees. Life insurance, as well as pet coverage, identity theft protection, and legal and financial counseling services are all examples of voluntary benefits an organization might choose to offer.
Unlike statutory benefits (which employers are required by law to provide to their employees), employees can choose whether they’d like to participate in voluntary benefits or decline them. If they choose to enroll in a voluntary benefit, they contribute to the plan through payroll deferral and receive access to discounted group rates. Organizations typically choose to offer voluntary benefits in tandem with statutory benefits in order to provide supplemental coverage at a relatively low cost.
Examples of voluntary benefits
The types of voluntary benefits businesses offer vary greatly from organization to organization, but here are some examples of what you can provide: 
Critical illness insurance
Term life insurance
Short-term disability insurance
Factors such as the geographic location of an organization and the demographics of their workforce typically drive what a business chooses to offer. For instance, we spoke with Calloway Cook, the president of Illuminate Labs , who shared with us that his organization chooses to offer a coworking space stipend as a voluntary benefit because they are a fully-remote company:
president of Illuminate Labs
Why do businesses choose to offer voluntary benefits?
As we touched on above, voluntary benefits are not a substitute for statutory benefits. Instead, they are “extras” that employees can choose to opt into.
Businesses that offer voluntary benefits usually do so in order to bolster their total rewards package at little or no cost. But there are other advantages associated with offering voluntary benefits which could drive businesses to embrace them, as Stavros Zavrakas, managing director at Orthogonality Ltd , shares:
managing director at Orthogonality Ltd
To Zavrakas’ point, attracting and retaining talent, as well as improving productivity, are both motivators for businesses who embrace voluntary benefits:
Improved talent retention and acquisition: In Software Advice’s Company Culture Survey*, 24% of employees ranked perks and benefits among their top three job satisfaction factors. Only compensation, work-life balance, and job security were considered more important. Our point? Including “extras” in your benefits offerings is a great way to improve your employees’ job satisfaction and attract high-quality talent to your business. If your budget is tight, offering voluntary benefits is a cost-effective way to do this.
More productive employees: Evidence points to the fact that employees who are mentally and physically healthy are more productive at work.  So, helping provide the resources your employees need to feel their best on and off the clock can decrease absenteeism and disengagement, and in turn, contribute to better business performance.
How much do voluntary benefits typically cost?
Because voluntary benefits plans are paid for through deferred compensation, employers can offer them to their workforce at no extra cost.
However, there are a few different types of voluntary employee benefits plans, and some are paid for (at least in part) by the business: 
Type of plan
How it’s funded
Traditional voluntary plans
Employees select the benefit option that meets their needs and budget, then pay 100% of the cost (usually at a discounted group rate).
Voluntary buy-up plans
Employers pay for a basic level of coverage and employees are given the option to add-on (and pay for) additional coverage.
Employees pay for a bundle of various basic insurance plans (such as dental and vision) for convenience and discounted rates.
How to determine which voluntary benefits to offer your employees
If you think voluntary benefits might work for your organization, follow the three steps outlined below in order to determine which programs your workers would be most likely to take advantage of.
1. Survey employees to find out what kind of benefits they want
In order to improve employee satisfaction at your organization through perks and benefits, you need to get to the root of what your employees actually want when it comes to their total rewards package. Johannes Larsson, CEO and founder of Financer.com , puts it this way:
CEO and founder of Financer.com
Even though employees can opt out of perks and benefits they don’t need or want, the best strategy is to tailor the options you provide to their preferences—especially considering that only 63% of employees affirm that the benefits their company offers meet their needs. 
Using a survey tool, develop a questionnaire that allows employees to give feedback about their preferences for additional benefits and perks. If you need help with this, download our Employee Benefits Feedback Questionnaire below.
2. Analyze the demographics of your workforce
Understanding the demographic makeup of your workforce is an essential step to developing a strong benefits package. For example, research from LiveCareer  shows that baby boomers value healthcare and retirement benefits the most, while Gen Xers prefer perks such as flexible working arrangements and on-site daycare.
Most human resources software tools are built to collect and store data on your employees, and analyzing this information in order to identify trends in the makeup of your workforce can help you make better decisions about the benefits you choose to offer.
Use the survey results from step one and information on your workforce’s demographics to determine what kind of benefits you should prioritize. We also suggest cross-referencing reports, such as LiveCareer’s Different Generations in the Workplace 2022 Study , for a better understanding of trends in the benefit preferences of employees.
3. Evaluate your current benefits offerings
Lastly, you should analyze your current employee benefit plan options and their enrollment levels in order to optimize your offerings moving forward. If you have benefits administration software, this should be relatively easy. Utilization scores and usage rates are generally very accessible within these platforms, as well as information about which plans individual employees are actively enrolled in.
Paychex Flex shows a list of employees and the plans they’re enrolled in (Source)
Take note of any plans that are underutilized, and if they aren’t a statutory requirement, consider converting these plans into voluntary benefits.
Further, consider what’s missing—do your employees have to use a spending account, such as an HSA (health savings account), to cover vision care? Do current medical insurance plans account for extended hospital stays, or should you look into offering hospital indemnity coverage on a voluntary basis? Understanding where your benefits strategy is currently falling short will help you determine what gaps in coverage your voluntary benefits strategy can close.
Interested in bringing voluntary benefits to your organization? Here’s what to do now.
According to Gartner, only a little over half (54%) of employees report their benefits enable them to be more effective at their job.  But there’s a solution to this problem, and it’s to offer more personalized benefits.
If you don’t have the budget to bankroll supplemental insurance coverage and perks, voluntary benefits are a great option for your organization. Follow the three steps we provided above to determine which kinds of voluntary benefits you should offer to your employees, then, prepare to propose this change to leadership with the following actions:
Get your organization’s CHRO on board: Talk to your department leader about the advantages voluntary benefits can bring to your organization. Be sure to explain that these programs are optional for employees and are paid for through a payroll deduction.
Research voluntary benefits providers: Create a shortlist of benefit providers that can deliver the plans and perks your employees most want. If you’re looking for a place to start, check out our benefits management services directory.
Put together a proposal: With the help of your CHRO, create a proposal that outlines the advantages of offering voluntary benefits. Be specific about the kinds of benefits employees want (use your survey results for this), present several provider options, and break down the expenses (if any) your business would incur.
Definition of Total Rewards, Gartner Human Resources Glossary
What Are Voluntary Benefits?, BambooHR
Group Voluntary Benefits, Guardian
Stavros Zavrakas, LinkedIn
* Capterra’s 2022 Company Culture Survey was conducted in December 2021 among 958 employees at U.S. companies with at least six employees: 332 who work fully on-site (e.g., in an office, store, or other central location), 300 who work fully remote, and 326 who split their time between working on-site and remote (i.e., a hybrid model). The goal of this survey was to learn how hybrid and remote work formats impact different aspects of company culture.
Note: The screenshots of applications included in this article are examples to show a feature in context and are not intended as endorsements or recommendations.