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What is the difference between statutory and non-statutory benefits?

HR & Compliance

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Updated on:
April 11, 2024
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Updated on :

April 11, 2024
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What is the difference between statutory and non-statutory benefits?

What is the difference between statutory and non-statutory benefits?

A company’s benefits package is essential for employers to communicate their values, set culture, boost employee satisfaction and attract world-class talent. In most cases, employees choose to stay with an organization because of the company's benefits. 

Apart from retaining and attracting talent, offering comprehensive benefits packages in compliance with each country’s employment laws when hiring globally is crucial. Whether you’re an employee or an employer, it’s vital 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. 

This article breaks down the difference between statutory benefits and non-statutory benefits and their importance.

Classifying the different types of benefits

The key difference between statutory and non-statutory benefits is that employers must provide statutory benefits to employees. No matter where you hire, it is vital for employers to offer these benefits to their workforce by law. Neglecting to do so can result in hefty fines, penalties, and potential legal action from affected employees.

What are statutory benefits?

Statutory benefits are benefits mandated by law and provided to eligible employees by their employers. These benefits are typically related to employment and are designed to protect employees and ensure they receive certain minimum benefits.

Type of Statutory benefits in the US

Social Security and Medicare taxes 

Employers are required to withhold a portion of an employee's wages to pay for Social Security and Medicare taxes. These taxes provide benefits to retired and disabled individuals, as well as those who are eligible for Medicare.

Unemployment insurance 

Employers are required to pay unemployment insurance taxes to provide financial assistance to employees who have lost their jobs through no fault of their own.

Workers' compensation 

Employers are required to provide workers' compensation insurance to cover medical expenses and lost wages for employees who are injured or become ill due to their work.

Family and Medical Leave Act (FMLA) 

Employers are required to provide up to 12 weeks of unpaid leave to eligible employees for certain family or medical reasons, such as the birth or adoption of a child or a severe health condition of the employee or a family member.

Minimum wage and overtime pay 

Employers are required to pay their employees at least the minimum wage and provide overtime pay for hours worked over 40 in a workweek.

The specific statutory benefits to employees can vary depending on the state in which they work and the size of their employer.

What are non-statutory benefits?

Non-statutory benefits, also known as "fringe benefits," are benefits employers may provide to their employees but are not mandated by law. Employers offer these benefits as part of an overall compensation package to attract and retain employees, improve job satisfaction and morale, and promote a positive work culture.

Types of non-statutory benefits

Health insurance 

Employers may offer their employees medical, dental, or vision insurance as a benefit. While the law does not mandate the employers to offer health insurance, many do as a way to attract and retain employees.

Retirement plans 

Employers may offer 401(k) or other retirement plans to help employees save for retirement. While employers are not required to provide retirement plans, many offer them to help employees prepare for their future.

Flexible spending accounts (FSAs) 

Employers may offer FSAs to allow employees to set aside pre-tax dollars to pay for certain medical or dependent care expenses.

Paid time off (PTO) 

Employers may offer PTO as a benefit, which includes vacation time, sick time, and personal days.

Life and disability insurance 

Employers may offer life and disability insurance as a benefit to help protect employees and their families in the event of unexpected circumstances.

Tuition reimbursement 

Employers may reimburse employees seeking additional education or training.

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.

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When to offer: statutory vs. non-statutory benefits

Statutory benefits are mandatory benefits you must provide as an employer as directed by the federal and state governments. On the other hand, non-statutory benefits are flexible and you can curate specific benefits for your employees. However, the better non-statutory benefits you provide your employees, the more you can boost employee morale, satisfaction, productivity and retention. 

For instance, 

Company A provides non-statutory benefits, including health insurance, dental insurance, mental health well-being allowances, paid time off and a great retirement plan. In comparison, Company B provides paid time off and health insurance to its employees. 

With the above scenario, Company A is the clear winner as they provide a better benefits package to their employees.

Offer competitive benefits for your global teams with Skuad

Providing employees with a comprehensive benefits package is one of the easiest ways to attract the best international talent and improve employee retention.

However, building a compliant and comprehensive benefits package across all global markets is a near-impossible task without partnering with a global employment and payroll platform that can provide your company with local expertise on mandatory and supplemental benefits in the countries you wish to hire.

Skuad is a global employment and payroll platform that enables organizations to hire full-time employees and contractors in over 160 countries without setting up subsidiaries or legal entities. Skuad’s platform also helps organizations onboard talent, manage payroll, and ensure compliance with country-specific employment laws and tax regulations. 

In addition, we handle your entire employment lifecycle so that you can scale your business operations compliantly, with reduced efforts and a top-notch HR administration.

To know more about Skuad, book a demo today.

About the author

Catalina Wang is a Human Resource Consultant. She manages recruitment, onboarding, and contract administration staffing for many organizations and remote teams. She’s passionate about efficient HR management and the impact of tech on hiring practices.

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