What are voluntary benefits?

Voluntary benefits are extra perks offered by employers that employees can choose to opt into, typically paid partially or fully out-of-pocket. Unlike mandatory benefits like health insurance or long-term disability insurance, retirement plans are optional and flexible. Think of them as an à la carte menu of types of voluntary employee perks that support different life stages, lifestyles, and personal needs.

At their core, voluntary benefits—also known as voluntary employee benefits—are supplemental offerings that go beyond the essentials. They may include things like dental, vision, critical illness insurance, accident coverage, pet insurance, legal assistance, or identity theft protection. 

From an employer’s perspective, these benefits help boost engagement, attract talent, and reduce turnover—all without drastically increasing the company’s budget. Meanwhile, employees get more control over their total rewards experience. 

Whether it’s voluntary insurance for unexpected life events or employee assistance programs and lifestyle perks that support mental health or financial wellness, these benefits enhance an employee’s sense of value and support.

Key takeaways from the blog

• Voluntary benefits give employees added flexibility, letting them choose perks that suit their lifestyle needs best.
  
• Employers who offer tailored voluntary benefits see better retention, morale, and engagement across all levels.
  
• From health perks to pet insurance, these customizable benefits are evolving to fit diverse, modern workforce expectations.

Why are voluntary benefits important?

In a world where one-size-fits-all no longer works, voluntary benefits let employers offer more—without ballooning the HR budget. These perks allow employees to pick what matters most to them, while companies stay competitive and mindful of the cost of voluntary benefits. Let’s unpack why these benefits really matter in the modern workplace.

• Supports diverse employee needs: No two employees have the same personal or financial situation. With voluntary employee benefits, workers can tailor their coverage—whether it's pet insurance for a dog parent or critical illness coverage for someone managing a health risk.
• Boosts recruitment and retention: Top talent looks beyond salary. Offering a voluntary benefits plan can be the difference between securing that rockstar candidate or losing them to a more flexible competitor. It shows your company supports life outside work.
• Encourages financial wellness: Many voluntary insurance options like accident or hospital indemnity plans offer a financial safety net. Employees gain peace of mind knowing they have extra protection during emergencies—without breaking the bank.
• Enhances job satisfaction: When people feel supported beyond the paycheck, morale naturally improves. Employees appreciate having access to voluntary benefits companies that offer choice, flexibility, and real-life support.
• Cost-efficient for employers: Since these benefits are usually employee-paid, employers can provide expanded perks without adding big out of pocket expenses. You offer more, spend less, and still earn loyalty.
• Increases benefit engagement: Employees are more likely to engage with benefits they’ve personally selected. That means better awareness, smarter usage, and fewer questions landing in HR’s inbox.

What are the pros of offering voluntary benefits?

Voluntary benefits aren’t just a workplace perk—they're the unsung hero of your total compensation strategy. While they give employees more choices, they also help employers create a more attractive, modern workplace. Here’s why offering voluntary employee benefits is a smart move to retain employees from both a retention and business standpoint.

• Low cost, high value for employers: Voluntary benefits are usually funded by employees, meaning companies can offer a broader benefits package without increasing their own expenses. It’s a cost-efficient way to stay competitive in hiring markets.
• Enhances recruitment and employer branding: Offering a rich voluntary benefits plan gives your company a hiring edge. Candidates increasingly look beyond salaries, and a strong benefits menu can signal a company that values employee well-being.
• Promotes financial wellness: Voluntary insurance options like accident or critical illness coverage reduce out-of-pocket burdens. These offerings help employees feel more secure about managing life’s unpredictable expenses.
• Supports diverse workforce needs: From pet insurance to legal assistance, voluntary benefits companies now offer employee benefit plans that meet modern lifestyles. It allows employees to choose what fits their life stage, culture, or family needs.
• Improves employee morale and satisfaction: Giving employees the flexibility to pick benefits creates a sense of autonomy. When employees feel seen and supported, engagement naturally increases.
• Encourages long-term retention: Offering competitive voluntary benefits for employees encourages them to stay longer. Employees are less likely to job-hop when they feel their total compensation package supports their personal goals.
• Flexibility to scale with business growth: As your business grows, your voluntary benefits plan can grow too. You can add new options or tweak offerings annually based on employee feedback and demographics.

What are some examples of voluntary benefits?

Voluntary benefits come in all shapes and sizes, giving employees the freedom to choose what suits their needs best. From health-focused perks to financial and lifestyle support, these benefits are designed to complement core offerings. Here are five examples and other voluntary benefits that companies commonly offer.

• Voluntary life insurance: This gives employees the option to purchase extra life insurance coverage beyond what the employer provides. It’s often portable and customizable, offering peace of mind to those with dependents or financial commitments.
• Critical illness insurance: If an employee is diagnosed with a serious illness like cancer or stroke, this benefit provides a lump sum payment. It helps the eligible employees cover unexpected medical costs or income gaps during recovery.
• Legal assistance plans: Employees can opt into plans that cover legal advice, document preparation, or representation for personal matters. It’s an affordable way to get legal support without paying high hourly fees.
• Identity theft protection: This voluntary benefit option offers credit monitoring, fraud resolution, and restoration services. With cybercrime on the rise, identity protection gives employees added financial and emotional security.
• Pet insurance: A growing favorite, pet insurance covers vet visits, emergencies, and even routine care. It’s a unique voluntary benefit that resonates strongly with pet-loving employees across all age groups.

What are the limitations of voluntary benefits?

Voluntary benefits are helpful, but they’re not without drawbacks. While they add flexibility and appeal to compensation packages, there are some limitations employers and employees should consider. Here are five common challenges that come with offering a voluntary benefits plan.

• Limited employer contribution: Since voluntary employee benefits are usually paid for by the employee, there’s often little to no financial contribution from the employer. This might make the benefits seem less attractive, especially to employees expecting full coverage or cost-sharing.
• Low employee participation: If the options don’t align with employee needs—or if the value isn’t clearly communicated—participation rates can be low. Without good engagement, even the best voluntary benefits companies may not drive strong ROI for employers.
• Complexity in administration: Managing multiple vendors, enrollments, and deductions adds layers of complexity. Smaller HR teams may struggle to oversee a voluntary benefits plan without the help of streamlined technology or external support.
• Perceived inequality: Some voluntary benefits may favor certain demographics, creating perceived inequality. For instance, offering only childcare discounts might not appeal to employees without families, which can impact morale.
• Risk of outdated offerings: Without regular updates, benefit options can become irrelevant. It’s important to review and adapt offerings so they remain aligned with what are voluntary benefits for employees today—not just what worked five years ago.

How can you determine which voluntary benefits to offer your employees?

Choosing the right voluntary benefits isn’t just about copying what other companies offer—it’s about knowing what your employees truly value. A one-size-fits-all approach rarely works, especially in diverse teams. Here are seven steps to help you decide which voluntary benefits plan fits best.

1. Survey your employees: Start with a simple question: What do they actually want? Conduct anonymous surveys or feedback sessions to identify the voluntary benefits for employees that would be most appreciated and frequently used.
2. Analyze workforce demographics: Look at your team’s age groups, family status, and lifestyle trends. Voluntary insurance like pet coverage might appeal to younger staff, while eldercare support could be valuable to mid-career professionals.
3. Consider existing gaps: Review your core benefits package and identify what’s missing. If healthcare coverage for physical wellness but not mental health is provided, voluntary employee benefits like counseling access can fill the gap.
4. Check benefit utilization trends: Look at industry benchmarks or consult with voluntary benefits companies to understand what’s trending. Popular doesn’t always mean best, but it’s a good starting point to avoid blind spots.
5. Factor in budget constraints: Even though employees usually foot the bill, there can still be administrative or setup costs. Ensure your voluntary benefits plan aligns with your overall HR budget.
6. Collaborate with benefits providers: Work with vendors that offer customization, strong support, and educational tools. This makes it easier to tailor offerings that resonate and avoid a “benefits buffet” no one touches.
7. Pilot and review regularly: Try offering a small set of benefits initially and track participation. Regular check-ins ensure you’re adapting to evolving employee needs and keeping your voluntary benefits meaningful over time.

How employers and employees benefit from voluntary benefits?

Voluntary benefits go beyond basic compensation—they reflect how much a company actually cares. While employees enjoy tailored perks, employers gain strategic advantages in recruitment, retention, and culture-building. Here’s a breakdown of how both sides win when a solid voluntary benefits plan is in place.

Benefits for employers

• Boosts talent attraction and retention: Offering voluntary employee benefits can give your company an edge in hiring. When candidates see options like voluntary insurance or lifestyle benefits, it signals that you're thinking long-term about their well-being.
• Enhances employee satisfaction: When workers feel supported with options that match their needs, engagement naturally increases. A well-structured voluntary benefits plan contributes to a healthier and more loyal workforce.
• Reduces overall benefits cost: Because employees typically pay for these perks, employers can offer more without overextending budgets. It’s a smart way to expand benefits offerings without impacting core benefits costs.
• Reinforces employer brand: Aligning benefits with employee values strengthens your company’s identity. Voluntary benefits companies often help craft programs that reflect your culture and mission authentically.

Benefits for employees

• Offers personalized support: Employees can pick and choose based on their life stage—be it student loan help, critical illness insurance, or wellness perks. It adds a layer of flexibility that traditional packages rarely provide.
• Improves financial security: Voluntary insurance helps cover unexpected costs, from dental to disability. These safety nets give employees peace of mind, especially when traditional coverage has limitations.
• Encourages proactive well-being: Wellness programs, mental health support, and gym discounts motivate healthier habits. Employees feel empowered, not just medically, but emotionally and mentally too.
• Simplifies access to services: By enrolling through their employer, employees often get discounted rates and easy payroll deductions. It removes barriers and makes signing up for voluntary benefits far more convenient.

How to set up a voluntary benefits plan?

Launching a voluntary benefits plan isn’t just about adding perks—it’s about aligning them with your team’s actual needs. Done right, it becomes a long-term investment in employee well-being and company culture. Here’s how to set it up a smart, sustainable way.

1. Assess your workforce’s needs: Start with a survey or focus groups to understand what employees truly want. Whether it’s voluntary insurance, lifestyle perks, or wellness support, data helps you prioritize benefits that actually matter. This avoids guesswork and boosts participation from day one.
2. Set clear objectives: Know your “why” before diving in. Are you trying to improve retention, enhance engagement, or stay competitive? Your goals will guide the structure of your voluntary benefits plan and determine which voluntary benefits companies or tools to partner with.
3. Choose the right providers: Partner with voluntary benefits companies that offer flexibility, compliance support, and seamless tech. A good provider should help you scale, provide education for employees, and ensure ease of enrollment across demographics.
4. Design a diverse benefits menu: Offer a mix of options—voluntary medical benefits, legal aid, mental health programs, etc. The key is to cater to a range of age groups, life stages, and preferences without overwhelming employees with too many choices.
5. Integrate with payroll and HR systems: Make it simple for employees to enroll and manage their selections. A strong backend integration avoids administrative headaches and ensures that voluntary employee benefits are easily accessible and error-free.
6. Communicate and educate: Just offering benefits isn’t enough—employees need to know what’s available and why it matters. Use emails, webinars, and benefit fairs to explain what voluntary benefits are for employees and how to make the most of them.
7. Review and refine regularly: Your workforce evolves, and so should your benefits. Use annual reviews, employee feedback, and usage data to update your voluntary benefits plan. Keeping it relevant ensures long-term value for everyone involved.

Top 15 voluntary benefits to offer in 2025

The workplace isn’t what it used to be—and neither are employee expectations. From lifestyle perks to personalized protections and health coverage, voluntary benefits in 2025 are about flexibility, well-being, and real-life support. Here's a look at the top 15 voluntary employee benefits that are making waves this year.

1. Voluntary health insurance: A must-have for those looking to bridge coverage gaps. Voluntary medical benefits like dental, vision, and critical illness insurance give employees peace of mind—especially if they have high-deductible health plans.
2. Mental health and wellness programs: Therapy stipends, meditation app access, and counseling sessions are all in high demand. These offerings help employees manage stress and boost resilience—essential in today’s hybrid work environment.
3. Financial wellness services: From budgeting tools to student loan repayment assistance, this benefit helps reduce financial stress. Voluntary benefits companies often package these as part of comprehensive wellness offerings.
4. Legal assistance plans: Legal insurance covers will preparation, landlord disputes, and even divorce proceedings. It’s a popular pick among employees who want expert help without expensive attorney fees.
5. Pet insurance: Yes, fur babies matter. This quirky but beloved benefit covers vet visits, emergencies, and preventive care—great for attracting pet-loving millennials and Gen Z workers.
6. Identity theft protection: With online fraud increasing, employees value identity protection. It’s a low-cost, high-impact voluntary insurance plan that protects both finances and peace of mind.
7. Life insurance upgrades: While basic life insurance is often employer-funded, employees can choose voluntary coverage for higher amounts. It allows for customization based on family needs and financial goals.
8. Accident insurance and disability insurance: This covers income loss and medical costs in case of injury or disability. It’s a practical choice for employees with physically demanding roles or active lifestyles.
9. Fertility and family planning benefits: Support like IVF coverage, egg freezing, or adoption assistance is increasingly important. These inclusive benefits reflect a workplace culture that supports diverse family paths.
10. Commuter benefits and transportation assistance: Especially helpful in urban areas, this includes pre-tax transit passes, bike reimbursements, or ride-sharing support. It’s a smart perk as hybrid work evolves.
11. Employee purchase programs: These allow employees to buy big-ticket items like electronics or furniture via payroll deductions. It’s a convenient way to make essential purchases manageable.
12. Home and renters insurance: Employees appreciate having the option to protect their personal property through group plans. It’s a less obvious but practical addition to your voluntary benefits plan.
13. Emergency savings programs: These help employees build a cushion for unexpected expenses. Contributions are usually made directly from payroll, making it a stress-free way to save.
14. Gym memberships and fitness perks: Access to fitness apps, local gyms, or even wellness stipends encourages a healthier lifestyle—benefiting both physical and mental health.
15. Education and skill-building stipends: Covering courses, certifications, or even hobbies, this benefit fuels continuous learning. It’s also a great retention booster in industries where development matters.

Technology’s role in managing voluntary benefits programs

Managing voluntary benefits programs used to be a manual, messy ordeal. Now, tech makes it smoother, smarter, and more personalized than ever. From automation to analytics, here’s how digital platforms are changing the way companies—and employees—experience voluntary employee benefits.

• Simplifies enrollment and selection: Digital portals guide employees through their voluntary benefits plan options with user-friendly dashboards. They can compare offerings, costs, and coverage instantly—no paperwork or HR back-and-forth.
• Personalizes employee experience: AI-driven tools recommend voluntary insurance products based on life stages, job roles, and needs. This personalization makes it easier for employees to find what’s relevant—like pet insurance for a dog parent or critical illness cover for a caregiver.
• Automates compliance and documentation: Tech platforms ensure all voluntary benefits are compliant with federal and state laws. Automatic updates and audit trails help HR teams stay in line without drowning in admin.
• Offers real-time analytics and insights: Employers can monitor enrollment trends, usage rates, and satisfaction scores. These insights help adjust offerings based on what’s actually valued—no guessing games required.
• Enables seamless integrations: Modern HR tech stacks integrate with payroll, benefits providers, and communications tools. This creates a unified system that makes managing voluntary benefits companies and plans easier for everyone involved.

How to customize voluntary benefits based on employee demographics?

One-size-fits-all is officially out. Today’s diverse workforce expects voluntary employee benefits that actually fit their lives. Customizing a voluntary benefits plan based on employee demographics not only increases engagement but also ensures your offerings remain relevant and appreciated.

1. Conduct demographic assessments: Start by gathering anonymized data on age, gender, location, family status, and job roles. These details help identify patterns and preferences across groups—like younger workers leaning toward student loan assistance, or older ones prioritizing health screenings.
2. Segment employee groups: Divide your workforce into meaningful segments based on shared needs or characteristics. For example, new parents may value childcare support, while Gen Z may want mental wellness apps and tech-savvy voluntary insurance solutions.
3. Use feedback surveys: Ask employees what they actually want. Feedback through pulse surveys or during open enrollment helps you validate assumptions and discover hidden needs—like niche perks that improve engagement.
4. Offer flexible benefit menus: Avoid bundling irrelevant perks. Use cafeteria-style plans that let employees pick and choose voluntary benefits that match their unique situations and financial priorities.
5. Adjust based on life events: Enable mid-year updates when major life changes happen—marriage, children, relocation. Making benefits adaptable keeps them useful and relevant throughout different life stages.
6. Review engagement data regularly: Track which benefits are most used by which demographic segments. Use the data to refine offerings and make strategic changes that drive satisfaction.
7. Communicate benefits in tailored ways: Different age groups and backgrounds respond to different messages. Use segmented communication—emails, videos, webinars—to explain voluntary benefits for employees in language and tone that resonates with them.

Common mistakes employers make with voluntary benefits

Voluntary benefits can be a game-changer when done right. But without proper planning, even well-intentioned offerings can miss the mark. From poor communication to limited flexibility, let’s break down the common mistakes employers make when rolling out voluntary benefits plans.

• Assuming all employees want the same benefits: Not everyone values the same perks. Offering a rigid, one-size-fits-all plan ignores the diversity in your team’s needs, leading to low engagement and wasted investment in underused voluntary employee benefits.
• Failing to educate employees: If employees don’t understand what voluntary benefits are or how they work, they won’t use them. Skipping clear, ongoing communication is one of the biggest blockers to benefit adoption and ROI.
• Offering too many confusing options: While choice is good, overwhelming employees with too many voluntary benefits can lead to analysis paralysis. Without guidance, employees might opt out entirely or choose benefits that don’t truly serve them.
• Not updating offerings regularly: Trends and needs evolve—what worked three years ago might be irrelevant now. Sticking with outdated voluntary insurance or perks means missing the chance to stay competitive and aligned with current employee needs.
• Ignoring voluntary benefits utilization data: If you’re not tracking how benefits are being used, you’re flying blind. Utilization data reveals what’s working and what needs tweaking, helping you shape smarter voluntary benefits plans over time.
• Overlooking legal compliance: Some employers assume voluntary benefits don't have compliance requirements—but they do. Misclassifying benefits or mishandling payroll deductions can land you in legal hot water, especially if working with third-party voluntary benefits companies.
• Neglecting to vet vendors properly: Choosing providers without checking their service quality or financial stability is risky. Voluntary benefits companies vary in reliability—partnering with the wrong one can hurt employee trust and your reputation.

Legal compliance and voluntary benefits: What HR should know

Voluntary benefits may be "optional," but compliance is not. HR professionals need to understand that these perks still come with regulatory strings attached. From tax treatment to nondiscrimination rules, here’s what every HR leader should keep on their radar when managing a voluntary benefits plan.

• Understand the difference between ERISA and non-ERISA plans: Some voluntary employee benefits fall under ERISA (Employee Retirement Income Security Act), while others don’t. If the employer is endorsing or contributing to the plan, ERISA rules may apply—bringing specific reporting, disclosure, and fiduciary duties into the mix.
• Be clear on tax implications for each benefit: Not all voluntary insurance options are tax-free. Some benefits are pre-tax (like certain health-related ones), while others must be taxed as income. Misclassification can lead to payroll tax issues and back payments during audits.
• Comply with Section 125 for pre-tax benefits: If employees are paying for benefits through pre-tax deductions, you must have a valid Section 125 cafeteria plan in place. Without it, the entire voluntary benefits plan may lose its tax-advantaged status, causing issues for both the employer and employees.
• Avoid discrimination in plan access: Your voluntary benefits plan must not favor highly compensated employees over others. The IRS has specific nondiscrimination requirements, especially for plans offering pre-tax advantages or insurance-like coverage through payroll deductions.
• Monitor third-party vendors and contracts: HR should vet all voluntary benefits companies and review contracts for compliance risks. Ensure vendors follow privacy laws (like HIPAA), avoid misleading claims, and have clear procedures for disputes or cancellations that won’t put your company at legal risk.

FAQs

1. What are voluntary medical benefits?

Voluntary medical benefits are health-related insurance plans employees can opt into at their own expense. These often include dental, vision, critical illness, accident, or hospital indemnity insurance coverage. While not core health insurance, they supplement major medical plans and offer additional financial protection. Employers offer them through payroll deductions, making access easier and often at lower group rates.

2. What are the most popular voluntary benefits?

Popular voluntary benefits include dental insurance and vision insurance, life insurance, disability coverage, critical illness plans, and wellness programs. In 2025, mental health support, financial counseling, and student loan repayment assistance are also trending. These options allow employees to tailor coverage to their needs, improving satisfaction and making voluntary employee benefits a valued part of any benefits package.

3. How can small businesses offer voluntary benefits affordably?

Small businesses can offer voluntary benefits without significant cost by using group plans where employees pay premiums. Partnering with voluntary benefits companies that specialize in small business needs can streamline setup. Many plans require no employer contribution but still offer competitive pricing, making voluntary benefits an accessible option for attracting and retaining top talent on a budget.

4. What’s the difference between voluntary and supplemental benefits?

Yes, voluntary benefits can be reviewed and updated annually, usually during open enrollment. Employers can assess employee needs, vendor performance, and budget impact to decide on adding or removing offerings. Employees can also adjust their selections each year. Keeping the voluntary benefits plan current ensures alignment with workforce demographics and evolving employee expectations.

5. Can voluntary benefits be changed or updated annually?

Yes, voluntary benefits can be reviewed and updated annually, usually during open enrollment. Employers can assess employee needs, vendor performance, and budget impact to decide on adding or removing offerings. Employees can also adjust their selections each year. Keeping the voluntary benefits plan current ensures alignment with workforce demographics and evolving employee expectations.

6. What are voluntary benefits for employees

Voluntary benefits for employees are optional perks offered through the employer that provide extra coverage or services. Employees choose which ones they want and typically pay for them via payroll deductions. These benefits can range from voluntary insurance to wellness programs and fringe benefits , and they enhance financial, physical, and mental well-being—giving workers more flexibility and control over their total compensation.