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What's the difference between statutory and non-statutory benefits?

Identifying the different types of benefits.
July 12, 2022
Oyster Team
Tablet screen showing employee benefits

It doesn’t matter if you’re an employer or working as an employee, it’s important to understand the difference between statutory and non-statutory benefits. A lack of knowledge in this area could cost you time, money, and other resources sooner than you think.

In this article, we break down what makes a benefit statutory or non-statutory, and why it matters to you. 

Identifying different types of benefits

The primary difference between statutory and non-statutory benefits is that statutory benefits must be provided to employees. If you’re an employer, you’re required by law to provide your workforce with these benefits. Neglecting to do so can result in hefty fines and penalties, as well as potential legal action from affected employees.

What are statutory benefits?

Statutory benefits vary from country to country. In the United States, for example, here are three of the most well-known statutory benefits:

  • Social Security: Social Security provides regular payments during an employee’s retirement years, based on a percentage of pre-retirement income.It’s paid for through FICA tax withholding from an employee's pay and is matched by the employer. 
  • Medicare: Medicare is a form of federal health insurance offered to qualifying individuals. Medicare is also paid for through FICA tax withholding from an employee’s pay and is matched by the employer. 
  • Workers’ compensation insurance: Workers’ compensation coverage provides a benefit to anyone who is injured on the job. This protects employees in the event of a work-related injury or illness that hinders their ability to work in the future. 

What are non-statutory benefits?

There’s more gray area with non-statutory benefits, since what’s provided is up to the employer’s discretion. Some of the most commonly offered non-statutory benefits include:

  • Health, dental, and vision insurance
  • Life insurance
  • Short-term and long-term disability insurance
  • Retirement plans
  • Paid-time off

Some employers provide all of these benefits, among others. Other employers don’t provide any non-statutory benefits, and they’re under no legal obligation to do so.

When to offer: statutory vs. non-statutory

As an employer, you must provide employees with statutory benefits as outlined by the federal government and any state and local regulations. 

You have more flexibility with non-statutory benefits. Since you don’t have to provide these, it’s your decision as to the package you create for employees. 

As a general rule of thumb, the more non-statutory benefits you provide, the more enticing your company will be to job candidates and current employees.

Take for example two companies:

  • Company one provides non-statutory benefits including health insurance, dental insurance, vision insurance, unlimited paid time off, and retirement plan matching.
  • Company two provides non-statutory benefits including health insurance and 10 days of paid time off every calendar year.

Which of these two companies has a better chance of attracting and retaining talent? It seems pretty clear that company #1 provides a better benefits package.

Statutory vs. non-statutory benefits: frequently asked questions

Now that you have a clear understanding of the difference between statutory and non-statutory benefits, it’s time to answer some key questions as they pertain to your specific company. 

1. Do you have a list of statutory benefits that you’re responsible for?

The most important thing to remember here is that statutory benefits vary from country to country. For instance, statutory benefits in the United States aren’t the same as in India.  

2. What non-statutory benefits do you currently provide?

Once you know your non-statutory benefits inside and out, you can answer two additional questions:

  • Are they competitive?
  • Are they affordable?

3. How much do you currently spend to cover all of your non-statutory benefits?

Cost factors heavily into the non-statutory benefits that you provide. You don’t have to pay every last dollar of every benefit. It’s common for employers to ask that employees cover a portion of the cost, such as for medical insurance. 

4. Are your employees asking for specific non-statutory benefits?

It’s always a good idea to take cues from your employees. Even if they’re not making specific requests, it doesn’t mean they’re satisfied. Consider sharing a survey that allows you to collect feedback. 

Do you need help?

This is a lot of information to take in, and you likely have questions or concerns. Our all-in-one global employment platform can help you better understand and manage both statutory and non-statutory benefits.

For example, if you want to provide your distributed team with health insurance, we make it simple to do so. You can provide coverage to employees in more than 180 countries, but not until you have an account. Sign up today to learn more and test drive our industry-leading platform!

About the Author

Oyster is a global employment platform designed to enable visionary HR leaders to find, hire, pay, manage, develop, and take care of a thriving distributed workforce.

About the Author

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