Many organisations focus heavily on salary negotiations, yet overlook how employee benefits quietly shape retention, compliance, and workforce stability.
When benefits are unclear or misaligned, they increase turnover risk, weaken trust, and expose businesses to unnecessary legal and operational gaps. This guide explains the most common types of employee benefits, what is legally required, and how employers can design compliant and competitive benefits packages.
TL;DR
- Employee benefits include mandatory benefits required by law and optional benefits designed to support wellbeing, engagement, and retention.
- Mandatory employee benefits vary by country but typically cover social security, health insurance, and statutory leave.
- Best practices for employee benefits are balanced legal compliance, employee needs, and long-term business sustainability.
What are employee benefits?
Employee benefits are non-salary forms of compensation provided by employers to support employees’ financial security, health, and overall wellbeing. They complement base pay and form a core part of the total rewards package.
Unlike salary which is fixed and immediately tangible benefits often deliver long-term value, protecting employees against risks such as illness, income loss, or retirement insecurity. For employers, benefits are not just a cost item, they are a strategic HR tool.
Salary vs Employee Benefits
Salary compensates employees for their work today. While employee benefits protect, motivate, and retain employees over time.
While salary influences short-term hiring decisions, benefits increasingly determine whether employees stay, engage, and perform sustainably especially in competitive talent markets.
Why Employee Benefits Matter Beyond Compensation
Well-designed benefits:
- Reduce turnover and replacement costs
- Improve employee wellbeing and productivity
- Strengthen employer branding and trust
- Support compliance with labour regulations
For HR leaders, benefits act as a stabiliser aligning business continuity with employee expectations.
Checklist: Main Function of Employee Benefits
- Ensure legal and regulatory compliance
Support employee wellbeing and security - Increase motivation and engagement
- Attract and retain qualified talent
Mandatory social insurance benefits
Mandatory employee benefits are those required by law and must always comply with local labour regulations. While the structure and contribution rates differ across countries, the purpose remains consistent: to provide baseline protection for employees against key life and work-related risks.
For employers, these benefits form the foundation of legal compliance. Any additional benefits should be built on top of this statutory baseline not used as a substitute.
Social insurance
Social insurance is a core component of mandatory employee benefits in most jurisdictions. It typically covers retirement pensions, unemployment support, work-related injury insurance, and maternity-related benefits.
Both employers and employees contribute a legally defined percentage of the employee’s salary to fund these schemes. The exact contribution rates, benefit levels, and eligibility conditions vary by country, but the principle remains the same: shared responsibility for long-term income security.
In practice, social insurance helps employees maintain financial stability during periods when they cannot earn income, while employers fulfil their statutory obligations.
Health insurance
In many jurisdictions, employers are required to contribute to a basic health insurance system. This ensures employees have access to essential medical services and reduces the financial burden of healthcare costs.
Mandatory health insurance should be clearly distinguished from voluntary or private coverage.
Unemployment insurance
Unemployment insurance provides temporary income support for employees who lose their jobs under qualifying conditions. It acts as a financial safety net, allowing individuals time to seek new employment without immediate financial distress.
Maternity / sick leave contributions
Statutory maternity, paternity, and sick leave benefits protect employees during health-related or family events. Depending on local regulations, employers may contribute directly to benefit funds or administer paid leave in coordination with social insurance systems.
These protections are critical not only for employee wellbeing but also for legal compliance and employer credibility.
Additional insurance and healthcare
Beyond statutory requirements, many organisations offer additional insurance and healthcare benefits. These benefits are among the most valued optional employee benefits in competitive labour markets.
These benefits reflect an employer’s commitment to long-term employee care rather than minimum legal compliance.
H3: Private health insurance
Private health insurance supplements mandatory coverage by offering broader provider networks, shorter waiting times, or higher reimbursement limits. For employers, it is one of the most valued benefits, particularly among senior and specialist roles.
Life insurance
Life insurance provides financial protection to employees’ dependents in the event of death. Group life insurance policies are commonly used, offering cost efficiency while reinforcing the employer’s duty of care.
Critical illness insurance
Critical illness insurance provides a lump-sum payment when employees are diagnosed with serious medical conditions. This support helps employees focus on recovery without immediate financial pressure and is increasingly valued in high-stress or ageing workforces.
Retirement and savings plans
Retirement and savings benefits support employees’ long-term financial wellbeing and play a key role in retention, particularly for experienced and senior employees.
In Vietnam’s HR market, retirement benefits are often used to encourage loyalty and long-term commitment.
Voluntary social insurance (VSI)
Voluntary social insurance is a government program that lets employees add extra retirement contributions on top of required ones. Employees usually pick how much to contribute, and some employers help by matching part of these contributions.
VSI offers flexibility while strengthening retirement security.
Supplemental retirement plans
Some organisations establish their own retirement plans separate from statutory systems. These plans may be funded by the employer, the employee, or both, providing additional income security after retirement.
Employee savings schemes
Employee savings schemes encourage individuals to set aside a portion of their income for specific goals such as housing, education, or emergencies. Employers may support these schemes through structured programs or preferential conditions.
Retirement benefits for senior and long-tenure employees
Long-service benefits, such as seniority allowances or additional retirement contributions, reward loyalty and help reduce turnover among experienced staff.
Time off and flexible work arrangements
In addition to insurance and financial benefits, time off and flexible work arrangements play a decisive role in how employees experience their workday—and their lives beyond it. When designed thoughtfully and aligned with legal requirements, these benefits help employees recover, manage personal responsibilities, and sustain long-term performance.
For employers, time-related benefits are no longer viewed as “nice to have.” They are a strategic response to burnout, productivity loss, and rising expectations around work-life balance.
Paid annual leave
Paid annual leave is employer-approved time off when employees still receive their regular pay. Most countries set a minimum number of paid leave days, and companies often give more based on how long someone has worked there or their own policies. In Vietnam, it is common to start with 12 paid leave days per year and increase this as employees gain more years of service. This approach meets legal requirements and also rewards employees for staying with the company. Annual leave policies must comply with local labour laws regarding how leave is earned, carried over, or paid out upon leaving. In many places, unused statutory leave cannot be lost, so it is important to track and clearly communicate leave balances.
Sick leave
Sick leave allows employees to take time off when they are unwell, without loss of income, subject to company policy and statutory requirements. Many organisations offer a defined number of paid sick leave days per year either fully employer-funded or coordinated with social insurance schemes. Clear procedures for notification and documentation help balance employee care with operational continuity.
Sick leave entitlements, medical certification requirements, and payment obligations vary by jurisdiction. Employers should ensure their policies align with statutory minimums and data privacy regulations when handling medical information.
Remote work & hybrid policies
Remote and hybrid work arrangements allow employees to perform their roles outside a traditional office setting, either full-time or on a mixed schedule. Clear remote work policies typically define eligibility, working hours, data security, performance expectations, and equipment responsibilities. When structured properly, these arrangements improve flexibility without compromising accountability.
Employers should regularly review policies to reflect evolving labour guidance and compliance expectations.
Flexible working hours
Flexible working hours allow employees to adjust their start and end times while meeting agreed working hour requirements. Common models include flexible start times, compressed workweeks, or core-hour systems. These arrangements give employees greater control over their schedules, supporting caregivers, parents, and employees managing personal commitments.
Clear documentation and manager training are essential to ensure consistency and fairness.
Additional compensation and perks
Beyond base salary and mandatory benefits, additional compensation and perks play a powerful role in shaping how employees perceive their employer. When designed thoughtfully, these offerings signal recognition, flexibility, and care—qualities that top talent increasingly prioritise when choosing where to work.
Unlike mandatory benefits, these forms of compensation are discretionary. Their value lies not in quantity, but in how well they align with employees’ real needs and expectations.
13th-month salary (Vietnam context)
A 13th-month salary is an additional annual payment, typically equivalent to one month’s base salary, paid at the end of the year or during a major holiday period. In some markets, it is customary; in others, it remains a voluntary employer practice.
For employees, a 13th-month salary represents predictability and appreciation. For employers, it serves as a strong retention tool, particularly when positioned as a reward for loyalty and consistent contribution throughout the year.
Performance bonuses
Performance bonuses are variable payments awarded based on individual, team, or company performance against predefined goals.
A transparent bonus structure motivates employees to exceed expectations while reinforcing a performance-driven culture. When aligned with business objectives, bonuses create a direct link between employee contribution and company success
Stock options / ESOPs
Stock options and Employee Stock Ownership Plans (ESOPs) grant employees the right to acquire company shares, either immediately or after a vesting period.
Equity-based incentives appeal strongly to senior talent and high-potential employees who want to share in long-term company growth. They foster ownership thinking and encourage employees to stay invested in the organisation’s future.
H3:Allowances (meal, transport, phone)
Allowances are fixed or reimbursed payments designed to offset specific work-related or daily living expenses.
Meal allowances help employees manage daily food costs, especially in cities with high living expenses.
Transportation allowances reduce the financial burden of commuting, making roles more accessible and attractive.
Mobile phone allowances support connectivity for roles requiring frequent communication, without shifting costs to employees.
Allowance structures may be subject to tax or social contribution rules depending on jurisdiction. Clear classification and documentation are essential to remain compliant.
Learning & development budgets
Learning and development (L&D) budgets provide financial support for training, certifications, conferences, or skill development initiatives. Top candidates increasingly assess employers based on growth opportunities. Offering dedicated L&D budgets demonstrates a commitment to continuous learning and long-term career development—key factors in attracting ambitious professionals.
Wellness programs (Gym or club memberships)
Wellness programs offer benefits that support employees’ physical and mental health, such as gym memberships, fitness classes, and access to recreational clubs. In high-pressure jobs, these programs help reduce stress, boost morale, and maintain performance. These factors are becoming more important when people choose where to work.
When well-designed, extra compensation and perks help align company rules with a positive workplace culture. They turn the job relationship from a simple transaction into a real connection, making it easier for organizations to attract, motivate, and keep talented people.
How to Design an Attractive Employee Benefits Package
An effective benefits package is intentional, compliant, and aligned with business strategy
Step 1 Understand Employee Needs
The first step is to understand who your workforce is today and who you want them to be in the future. Employee needs can vary widely depending on the criticality of their role, their career stage, and changes in your industry. High-impact or hard-to-replace roles often require stronger benefits to keep employees engaged and ensure stability.
At this stage, companies start building a talent pipeline for the future. Benefits should support current employees and also help attract and keep the people who will drive business success in the coming years.
In practice, HR teams should:
- Segment employees by role type and career stage
- Identify critical and scarce positions
- Gather data through surveys, interviews, and exit insights
Benefits designed around real employee needs are far more effective than generic, one-size-fits-all packages.
Step 2 Ensure Legal Compliance
Before adding new benefits, employers need to ensure they fully comply with local labour laws. Required benefits like social insurance, health insurance, unemployment insurance, and statutory leave are the foundation of any benefits package.
Once compliance is covered, talent mapping helps HR leaders match optional benefits to different groups of employees while staying within legal and budget limits. This approach reduces risk, maintains consistency, and makes benefits easier to defend during audits or disputes. Putting compliance first protects both the company and its employees, building trust and long-term stability.
Step 3 Balance Cost and Impact
Not all benefits offer the same value. The best benefits balance cost with a clear impact on retention. Instead of raising pay for everyone, HR leaders should consider:
- Which benefits matter most to critical roles
- Where benefits can reduce turnover risk
- How benefits support leadership continuity
When benefits are part of effective succession planning, they help retain future leaders, support job changes, and reduce last-minute hiring. In this way, benefits are an investment in reducing risk, not just a cost.
Step 4 Communicate Benefits Clearly
Even the best benefits will not work if employees do not understand or value them. Clear communication is key to making sure benefits are used and appreciated.
HR teams should:
- Explain benefits in simple, practical language
- Use onboarding, internal portals, and regular updates
- Connect benefits to employee life stages and career growth
When communication is open, benefits become visible rather than hidden costs. This helps build trust, engagement, and a strong employer brand.
Common Mistakes Companies Make with Employee Benefits
Even programs created with good intentions can miss the mark if they lack insight, clear communication, or regular review. Often, the problem is not the budget but a mismatch between what is offered and what employees truly value.
By understanding these common mistakes, organisations can prevent quiet disengagement and make sure their investment in benefits has a real impact.
One-Size-Fits-All Benefit Design
Many companies offer the same benefits package to everyone, thinking it will work for all employees. However, employee needs can vary widely depending on age, family situation, career stage, and personal circumstances.
HR should check in with employees regularly through surveys, feedback sessions, and demographic data reviews. When possible, offer flexible benefits so employees can pick what matters most to them, while still following legal requirements.
Not Keeping Up with Industry Trends
Companies don’t update their benefits for years, even as employees’ needs and work styles change. This can lead to insufficient flexibility, outdated parental leave policies, or no remote work options.
Look at what other companies in your industry offer and watch for new trends. Update your policies bit by bit to stay current, while ensuring everything still works well and complies with the law.
Failing to Align Benefits with Company Culture
Sometimes, benefits programs don’t match the company’s values. For example, a company might claim to value innovation but offer little support for learning and development. Offer benefits that support your culture, whether that means helping families, encouraging new ideas, or investing in growth. When your values and benefits align, it builds trust among employees.
Build and Manage Employee Benefits Without Complexity
A well-designed employee benefits package gives companies an edge in Vietnam’s fast-changing job market. When businesses offer more than just base pay and support employees’ health, finances, growth, and well-being, their teams become more engaged, loyal, and productive.
As companies grow, managing employee benefits often becomes complicated. It involves staying compliant, handling administration, and keeping things consistent across teams. A delivery-first workforce approach can help solve these challenges.
Sunbytes has more than 14 years of experience helping international teams. We help companies create and manage employee benefits that meet legal requirements, can grow with the business, and fit real delivery needs. By offering Acceleration Workforce Solutions, Digital Transformation Solutions, and Security Solutions, Sunbytes helps leaders focus on strategy instead of just administration. This way, benefits systems can grow with the company and help attract and keep top talent in Vietnam.
FAQs
The most common employee benefits include mandatory benefits required by law and optional benefits offered to improve employee wellbeing and retention. Mandatory benefits typically cover social insurance, health insurance, unemployment insurance, and statutory leave. Optional benefits often include private health insurance, additional paid leave, performance bonuses, allowances, learning and development budgets, and flexible work arrangements. Together, these benefits form a total rewards package that supports both compliance and competitiveness in the labour market.
Some employee benefits are required by law, while others are optional under local labour rules. In Vietnam, employers must provide social insurance, health insurance, unemployment insurance, and statutory leave. Optional benefits such as private insurance, bonuses, allowances, or flexible work policies are not required by law but are common ways to attract and retain employees. Employers should make sure they meet all legal requirements before offering extra perks.
Employees are most attracted to benefits that support their health, financial security, work-life balance, and career growth. This often means access to good healthcare, flexible work options, competitive bonuses, paid time off, and opportunities to learn new skills. As expectations change, benefits that offer flexibility and long-term value are often more important than one-time financial rewards, especially for experienced or high-performing staff.
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