Non-mandatory benefits (sometimes called “voluntary” or “discretionary” benefits) are perks and programs that go above what the law requires. Unlike mandatory benefits—such as Social Security, unemployment insurance, or ACA-compliant health coverage for employers with 50+ full-time equivalent (FTE) employees—non-mandatory benefits are offered at the employer’s discretion.
These benefits play a crucial role in making a workplace competitive. According to the Society for Human Resource Management (SHRM), benefits rank among the top 3 factors contributing to job satisfaction (up there with pay and a respectful work environment) and many employees say they would consider switching jobs for better perks.
Mandatory vs. non-mandatory benefits
It helps to distinguish clearly between what’s required by law and what’s optional.
Legally required (mandatory) benefits
Employers in the U.S. are obligated to provide certain baseline protections, including:
Social Security and Medicare contributions (The Federal Insurance Contributions Act, FICA taxes)
Unemployment insurance (varies by state)
Workers’ compensation insurance (varies by state and industry)
ACA compliance for Applicable Large Employers (ALEs): Organizations with 50+ FTEs must offer affordable health coverage that meets minimum essential coverage (MEC) standards.
For health coverage specifically, our recent article on essential health benefits explains what ACA-compliant plans must cover—ten categories ranging from hospitalization and maternity care to mental health and prescription drugs.
Non-mandatory (optional) benefits
Non-mandatory benefits can include:
Core voluntary perks: Retirement plans, dental and vision insurance, life insurance.
Financial perks: Tuition reimbursement, student loan repayment, commuter benefits.
Lifestyle perks: Flexible/remote work, wellness stipends, childcare/backup care, pet insurance, Employee Assistance Programs (EAPs).
These extras aren’t legally required, but they significantly influence recruitment, retention, and morale.
Why non-mandatory benefits matter
Even though they’re not required, discretionary benefits have outsized value:
Recruitment: Top candidates weigh benefits heavily when evaluating job offers. In tight labor markets, unique perks can set an organization apart.
Retention: Employees who feel supported are less likely to leave. Studies show comprehensive benefits packages correlate with higher job satisfaction and loyalty.
Culture: Perks like flexible schedules, wellness stipends, or mental health support reinforce organizational values.
Cost-effectiveness: Some benefits (like flexible hours or EAPs) are relatively low-cost compared to their impact on satisfaction and productivity.
Meeting generational needs: Gen Z employees often value flexibility, mental health support, and professional growth, while Baby Boomers may prioritize retirement contributions or supplemental health coverage (According to a report from Trinet, an HR platform).
Enhancing employer brand: Unique perks like pet-friendly offices or wellness stipends create a story employers can share in recruiting campaigns and on social media.
Adapting to remote/global work: Non-mandatory benefits such as home office stipends, coworking memberships, or asynchronous PTO policies are increasingly critical for distributed teams.
For nonprofits and small businesses in particular, non-mandatory benefits can be a smart way to compete with larger employers that have bigger salary budgets.
ROI and business impact of non-mandatory benefits
Investing in optional benefits isn’t just about morale:
Turnover costs: Replacing an employee can cost 30–150% of their annual salary. Benefits that improve retention quickly pay for themselves.
Productivity gains: Wellness programs and flexible work reduce absenteeism and increase engagement.
Employer reputation: Glassdoor reviews and word-of-mouth often cite perks and flexibility as reasons employees recommend a company.
Examples of high-value non-mandatory benefits
Here are categories and examples that are resonating with today’s workforce:
1. Health and wellness enhancements
Dental and vision coverage (not always included in medical plans)
Wellness stipends for fitness memberships, apps, or home office setups
Mental health resources, such as Employee Assistance Programs (EAPs)
2. Financial security and growth
Retirement plans (401(k), SIMPLE IRA) with or without employer match
Student loan repayment assistance
Tuition reimbursement or professional development stipends
Commuter benefits for transit and parking
3. Family-friendly benefits
Paid parental leave (beyond state minimums)
Backup childcare services
Flexible scheduling or remote/hybrid work options
Adoption or fertility support benefits
4. Lifestyle and unique perks
Pet insurance or pet-friendly offices
Free or discounted meals
“Flex holidays” employees can use for cultural or religious observances
Stipends for hobbies, wellness, or learning
Offering even one or two of these perks can make a nonprofit or small business stand out in a crowded job market.
Compliance note: Don’t confuse optional with unregulated
Even non-mandatory benefits may come with rules. For example:
Retirement plans are governed by ERISA (reporting, fiduciary responsibilities).
Tax-advantaged benefits like FSAs, HSAs, or commuter benefits must follow IRS contribution and use rules.
Wellness programs may need to comply with nondiscrimination and privacy requirements under HIPAA or the ADA.
Employers should always check IRS, DOL, and state-specific requirements before rolling out new perks.
Global Considerations for Non-Mandatory Benefits
When hiring internationally, employers must consider that non-mandatory benefits vary widely by country:
In Europe, generous vacation allowances may be mandated by law, but wellness stipends or childcare support can differentiate an employer.
In the U.S., flexible work and retirement plans are optional but often expected by skilled workers.
In Asia-Pacific, housing or commuting allowances may be more common than wellness perks.
For distributed teams, many companies rely on an Employer of Record (EOR) provider to ensure compliance with local benefit standards and to offer culturally relevant perks.
How non-mandatory benefits fit with EHBs
Think of it this way:
Mandatory benefits = the legal baseline (FICA, unemployment, ACA coverage for ALEs).
Essential Health Benefits (EHBs) = the federal standard for what ACA-compliant health plans must cover in the individual and small-group market.
Non-mandatory benefits = everything else you add to make your workplace attractive and supportive.
By combining these three layers, employers can build a package that is compliant, competitive, and aligned with employee needs.
FAQs about non-mandatory benefits
Are non-mandatory benefits tax-free?
Some are, depending on the type. Health insurance premiums, retirement plan contributions, and commuter benefits may qualify for favorable tax treatment. Others, like wellness stipends, may be considered taxable income. Always check IRS rules.
Can nonprofits offer non-mandatory benefits?
Yes. In fact, nonprofits often rely on creative perks—like flexible schedules, extra PTO, or wellness programs—to stay competitive when salary budgets are limited.
Which non-mandatory benefits are most popular with employees?
Surveys consistently rank retirement plans, flexible work, and mental health resources as the most valued optional perks.
How do I choose which non-mandatory benefits to offer? Start with employee input, then benchmark against competitors in your industry.
What’s the difference between fringe benefits and non-mandatory benefits? “Fringe benefits” is a tax term for benefits provided in addition to wages; some are mandatory, many are optional. “Non-mandatory benefits” are simply those not required by law.
Can employees opt out of non-mandatory benefits? Yes. Participation is generally voluntary, especially for perks like retirement contributions or wellness stipends.
Implementation challenges & best practices
Rolling out non-mandatory benefits requires careful planning. Common pitfalls include:
Compliance issues: Some perks are subject to federal, state, and local legal requirements, including potential tax implications (e.g., wellness stipends may be taxable income).
Communication gaps: Employees often undervalue benefits if they don’t fully understand them.
Mismatch with workforce needs: Offering benefits employees don’t want wastes resources.
Best practices:
Use employee surveys or focus groups to identify priority perks.
Benchmark against industry peers.
Launch with pilot programs before scaling.
Provide clear, written policies for each benefit.
Review uptake and feedback annually.
Key takeaways
Non-mandatory benefits are optional perks beyond the legal minimum.
They complement mandatory protections and ACA-required Essential Health Benefits.
High-value examples include flexible work, retirement savings plans, student loan support, and wellness programs.
Even small nonprofits or startups can offer competitive packages by focusing on creative, affordable non-mandatory benefits.
Quick comparison: Mandatory vs. essential health benefits vs. Non-mandatory benefits
| Category | Definition | Examples | Who Must Provide |
|---|---|---|---|
Mandatory Benefits | Legally required protections all employers must provide (varies by size and state). | Social Security & Medicare (FICA), unemployment insurance, workers’ comp, ACA coverage for 50+ FTEs | All employers (requirements vary by size and state law) |
Essential Health Benefits (EHBs) | Ten categories of care that ACA-compliant individual and small-group health plans must cover. | Hospitalization, maternity & newborn care, mental health, prescriptions, pediatric dental & vision | Insurance carriers offering ACA-compliant individual/small-group plans |
Non-Mandatory Benefits | Optional perks offered at employer’s discretion to attract and retain employees. | Retirement plans, flexible/remote work, tuition reimbursement, pet insurance, wellness stipends, EAPs | Voluntary—offered by employers who want to enhance competitiveness |
See our full guide to Essential Health Benefits for details on the ACA’s EHB requirements.
Mandatory vs. Non-Mandatory Benefits
| Category | Mandatory Example | Non-Mandatory Example |
|---|---|---|
Health | ACA-compliant medical coverage (for ALEs) | Dental, vision, wellness stipend |
Retirement Security | Social Security, Medicare contributions | 401(k) contributions |
Work/Life | FMLA leave (where required) | Flexible work schedules, pet insurance |
Financial | Unemployment insurance | Life insurance, disability coverage, student loan repayment, commuter stipends |
Last updated: September 2025
This article is for general educational purposes and is not legal advice. The opinions shared here belong to the author and are not official statements from Thatch. For legal and tax questions, please consult a qualified professional.
