As unemployment rates near their 24-year low, it's becoming difficult for small employers to attract new employees, much less hang on to old ones. To help fight the labor shortage, large companies are piling on employee benefits such as medical insurance, pension plans, and generous vacation time. It's not an east task. Employees now analyze their salaries as a total compensation package, which includes the base salary as well as the benefits' total value. Although disability insurance can still be purchased individually, it is now generally thought of as an employee benefit.
Large employers like to take advantage of economies of scale.
They, of course, can't do that with cash. Tax laws look kindly on employers who offer, and employees who accept, certain fringe benefits. Generally, the IRS allows employers to fully deduct these offerings, while also exempting employees from taxes on the benefits. These incentives are available as long as employers comply with the required antidiscrimination and reporting requirements. Pure, company-funded cafeteria plans are not often used because they are considered too expensive.