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

There are two types of employee benefits: benefits that are required by law and benefits that are provided by employers on a voluntary basis. In legal terms, these different types of benefits are known as statutory and non-statutory benefits.

Navigating mandatory and non-mandatory employee benefits can be confusing, especially when hiring employees in different countries where different laws apply. Not providing employees with all the benefits they are legally entitled to can lead to fines and lawsuits that can cost a business a lot of time, money, and resources.

Understanding the difference between statutory and non-statutory benefits is important for businesses that want to ensure compliance. But what are statutory benefits? What are examples of non-statutory benefits? And when should companies offer which type of benefit?

Statutory employee benefits is the collective word for all the benefits employers are legally obligated to provide to their employees. Mandatory benefits vary from country to country. They are typically linked to standard employee rights, such as paid time off, sick pay, pension, and other contributions to statutory social security schemes.

The aim behind mandating employers to provide certain benefits to their employees is to protect employees from economic hardship and financial risks resulting from job loss, long-term sickness, and other personal circumstances that might endanger an employee’s income.

Respecting the legal requirements regarding mandatory employee benefits is crucial for businesses of any size. Employers who neglect their legal obligations towards their employees risk hefty fines, penalties, and lawsuits from employees whose rights have been violated.

A country’s statutory requirements regarding employee benefits are an important factor to consider when deciding where to expand. For instance, the high social security contribution rates for employers are one of the reasons why hiring employees in France is not the most attractive option for globally expanding businesses.

Non-statutory benefits (also known as voluntary benefits, fringe benefits, perks, or non-mandatory benefits) are all the employee benefits an employer provides in addition to what is required by law. Voluntary benefits can take on many different forms, ranging from cash benefits to material goods to additional services provided by the company.

Depending on the company’s global benefits management strategy, non-statutory fringe benefits can be provided as additional perks to all employees or be offered at the employer’s discretion on a case-by-case basis. The main motivation for businesses to offer more than the legally required minimum standard in terms of employee benefits is to make their compensation packages more attractive for potential recruits and increase the effectiveness of their global talent acquisition strategy.

The main difference between statutory and non-statutory benefits is that they serve different purposes. The purpose of statutory benefits is to provide employees with a certain level of financial security and protection against the risk of economic hardship resulting from job loss or other.

Non-mandatory employee benefits, on the other hand, are additional perks employers offer in order to diversify their compensation packages and enhance their chances of attracting and retaining talent. Voluntary benefits are often more cost-effective for businesses than offering higher salaries and wages while providing employees with attractive financial benefits at the same time.

Knowing what counts as mandatory and non-mandatory benefits isn’t always easy. That’s why we have compiled a list of examples that can help you get a better understanding of which benefits are required by law and which ones aren’t.

Statutory benefits examples

There may not be a global standard for mandatory employee benefits, but there are many similarities between different countries. Examples of statutory employee benefits include:

• Health insurance,

• Pension insurance,

• Workers’ compensation or statutory accident insurance,

• Disability insurance,

• Unemployment insurance,

• Long-term care insurance,

• Housing fund,

• Severance pay,

• 13th month salary,

• Gratuities,

• Overtime pay,

• Minimum wages, or

• Statutory leave entitlements, such as paid annual leave, maternity leave, parental leave, and more.

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Non-statutory benefits examples

It’s important to remember that statutory and non-statutory benefits differ from one country to the next. Depending on what benefits are required a country’s labor laws, examples of non-statutory benefits can include:

• Additional insurance coverage (e. g. supplemental health insurance, life insurance, dental insurance, and more),

• Flexible working hours,

• Remote work,

• Bonuses,

• Company car or phone,

• Gym membership,

• Meal or housing allowance,

• Remote work stipend,

• Additional paid vacation days,

• Stock options,

• Employer-paid workations,

• Financial support for employee relocation,

• Childcare assistance,

• Employee wellness program, or a

• Corporate retirement savings plan.

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Employers who fail to comply with the legal requirements surrounding social security contributions, paid time off, overtime pay, and other statutory employee rights risk costly lawsuits and fines for non-compliance. That’s why statutory benefits are non-negotiable, regardless of the company’s size.

When it comes to non-mandatory benefits for employees, employers have more flexibility. There is no obligation for employers to provide any voluntary benefits that go beyond legal requirements. However, not offering any additional perks significantly reduces a business’s chances of attracting talented workers.

Companies that don’t offer any fringe benefits or perks are far less attractive to potential candidates than competitors who do. The same goes for talent retention. Voluntary benefits like flexible working hours or mental health programs can go a long way in ensuring employees stay with the company.

In a nutshell, the better the benefits package offered by a company, the better its chances of attracting and retaining talent. There may be no legal obligation for employers to go beyond the legally expected minimum, but organizations that try to minimize their benefits expenses are likely to suffer from secondary consequences, such as increased employee turnover. That’s why businesses should have a firm strategy for managing international compensation and benefits.

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Navigating mandatory and non-mandatory benefits in a single jurisdiction may not pose a big problem for most businesses, but things change as soon as an organization starts operating in multiple countries. 

For one thing, statutory and non-statutory benefits vary from country to country. For another thing, employees are entitled to the statutory benefits that apply under the laws of the country where they are located. This means that businesses have to be familiar with the rules and regulations of each country where they hire employees.

Organizations with a globally distributed team therefore have to conduct thorough research on which benefits they need to offer to employees in the different jurisdictions. For instance, if a company hires employees in Singapore, India, Germany, and France, it must ensure that each employee receives all the benefits he or she is entitled to under local laws, which may differ from country to country.

Managing this level of complexity is almost impossible for small and medium-sized businesses that don't have a large HR department with the necessary expertise in international employment compliance. That’s why managing statutory benefits in different countries generally requires the help of local employment law experts, such as Employer of Record providers (EORs).

Working with a local Employer of Record is a popular option for businesses that struggle to manage statutory and non-statutory benefits for international employees. EORs are experts for all things employment and compliance relating to the jurisdictions where they offer their employment outsourcing services.

They not only enable the client business to hire local talent without establishing a legal entity in the hiring country, but they also ensure full compliance with local employment laws and statutory benefits requirements. Additionally, they can offer advice on what additional benefits and perks are typically offered and expected by candidates.

Lano works with a global network of experienced Employer of Record partners that can help you hire, manage, and pay employees in more than 170 countries worldwide. Find the EOR partner that best suits your business and put your global benefits management on autopilot. 

Book a demo with one of our global employment experts and start managing statutory and non-statutory employee benefits anywhere in the world in full confidence.