Employee benefits are often defined as compensation paid by an employer to an employee over and above regular salary and wages. Employee benefits come in many shapes and sizes and are an integral part of an overall compensation package offered to employees. Employee benefits are essential in keeping current employees happy, and have become an important ingredient to attracting new and highly skilled employees to a firm.

Some employee benefits are required by law. For instance, an employer is required to make payments on an employee’s behalf for Social Security and Medicare benefits, as well as make unemployment benefit payments on behalf of employees.