A Surprising History of Employee Benefits — From Caesar to Kaiser with Much In-Between

Posted 3rd August 2022 • Written by Susanna Kim on LinkedIn • • • • •

Subsidized groceries and restaurant meals. Peloton memberships. Fertility treatments. Modern perks and benefits are routinely used to keep employees happy. But the strategic use of employee perks is hardly new. In 13 BCE, Caesar Augustus gave his retiring soldiers a pension.

Augustus was trying to keep his legions from rebelling. Today’s leaders, instead, deploy benefits to attract and retain talent.

As companies everywhere expand and refine their benefit portfolios to appeal to today’s job seekers, here’s a loosely historical look at the evolution of some of the more popular benefits:

Paid leave: Giving employees a break

Some religions have mandated at least a weekly day of rest since before recorded history. But business leaders long spurned this ancient wisdom. Andrew Carnegie, for example, gave steel workers one day off . . . every year — the Fourth of July, U.S. Independence Day. It’s no wonder that with grueling, daily 12-hour shifts, his workers weren’t lining up to visit the libraries that he famously funded. 

Though the U.S. has never mandated paid vacation, most employers eventually decided it fostered productivity. Even President William Howard Taft suggested in 1910 that everyone should get two to three months’ paid vacation. 

“The American people,” Taft said, “have found out that there is such a thing as exhausting the capital of one’s health and constitution.”

Taft’s idea didn’t land well with most captains of industry and other political leaders — likely owners of vacation homes themselves — so he never pushed for it. But some employers in the early 1900s believed that workers stuck inside most of the day should get time off so they could be more efficient. For instance, department stores in the 1920s sponsored their workers to go to lakeside or seaside vacation camps. In 1926, automaker Henry Ford cut the workweek on his pioneering assembly lines from 48 hours to 40. Though that extra day off each week wasn’t technically a benefit, it was given because Ford believed it would increase productivity (and simultaneously increase customers for his cars). 

In the Nordic countries, time off became more widely accepted if not mandated. For example, unions largely drove Sweden’s move toward paid time off in 1938. 

The U.S. remains the only country in the OECD that doesn’t provide employees with a statutory minimum number of paid days off, whereas vacation-friendly nations like Chile (15 days of paid leave each year), Luxembourg (26), the United Kingdom (28), and New Zealand (20) all seem to embrace a more Taftian outlook. 

Today, private employers are experimenting with unlimited vacation policies and even mandated time off to get workers some R&R. 

Retirement benefits: A carrot to reward loyalty and longevity

Still dreaming of the day you hand in your company badge and then enjoy endless days of leisure? 

The concept of retirement benefits can be traced as far back as the Roman Empire, when soldiers were offered a lump sum (roughly 13 times their annual salary) in return for their service. The story goes that Augustus Caesar believed that retired soldiers could start an uprising against the empire but that well-compensated veterans would choose not to threaten his rule. 

In Great Britain, a limited number of government employees in the 17th and 18th centuries received pensions. The first pensions offered by private companies came from firms associated with the government, such as the Bank of England (which launched its program in 1739).  

In the U.S., it took awhile for the concept to gain steam in the private sector. In 1875, the American Express Company established the first corporate pension plan in the U.S. It was open to employees 60 and up who had been with the firm for two decades. Large corporations in other industries followed suit — giving them an effective way to keep employees working for them. 

The U.S. Congress passed the Revenue Act in 1978 and that law included Section 401(k), which gives employees a tax-free method to defer compensation from bonuses or stock options. It paved the way for Ted Benna, a benefits specialist at Johnson Companies, to establish the first 401(k), which is a tax-advantaged retirement savings plan.

Life insurance: The original golden handcuffs

Life insurance might not be thrilling for office workers who don’t face daily peril, but it has long been a crucial incentive for those who do treacherous work. The modern concept is rooted in Ancient Rome, where burial clubs covered funeral expenses when military members died. Later, sailors and traders facing the risks of swashbuckling sea life used burial associations as a safeguard. 

Without employer-sponsored life insurance, there weren’t many options in some communities but to simply to “pass the hat” to provide for the deceased’s family. But as industrial accidents became more commonplace, so did individual life insurance plans and mutual benefit associations. 

The mail order business Montgomery Ward & Company of Chicago offered the first employer-sponsored group life insurance in the U.S. in 1912. The perk was intended to entice employees to stay longer for the sake of family security. One observer said at the time: “The wife of the employee realizing that termination of employment meant the termination of the insurance, consequently used her influence toward his continued employment.”

Today, life insurance is among the most common benefits that companies offer. Often, an employer will cover a set payout — say, the employee’s annual salary — and then the employee can purchase more and have the cost taken out of their paycheck.

Healthcare: Insuring and ensuring the physical well-being of the workforce

Most industrialized countries, from Canada to South Korea to the Czech Republic, have national healthcare systems. In the U.S., the story has unfolded differently with a push to incentivize and further develop a private system. Employers have long sought a prescription that will deliver good health for a good price. 

When French settlers flocked to California during the Gold Rush, the French Mutual Benevolent Society (or La Société Française de Bienfaisance Mutuelle) was founded in San Francisco in 1851. It served as America’s first health maintenance organization. And its primary purpose was to serve the medical and social needs of people of French origin who endured the arduous journey around Cape Horn and backbreaking mining work once they arrived. 

In the 1930s and 1940s, industrialist Henry J. Kaiser partnered with innovative surgeon Sidney Garfield to provide quality, affordable healthcare for thousands of workers, first, at the Grand Coulee Dam in Washington State and later at the Kaiser Shipyards in Oakland. The Permanente Health Plan served as a model for voluntary prepaid medical plans and was the direct precursor to today’s HMOs. 

In the U.S., given the enormous expense of private insurance, healthcare remains a powerful lever for attracting and retaining employees. Many companies offer dental and vision coverage along with their medical plans and some have started to offer even more specialized benefits like fertility coverage and mental health services.

Family benefits: Changing support for evolving households

They say it takes a village to raise a child. Well, it certainly takes time. The move for paid parental leave may seem like a modern phenomenon, but it started at least a century ago. During World War I, governments and employers in a number of countries needed a female workforce for what was often exhausting work in factories. In the immediate wake of the war, activists who formed the International Labor Organization from Europe, Asia, and North and South America called for 12 weeks of paid maternity leave, free medical care around pregnancy, and other job protections for pregnant and nursing mothers. 

Decades later, many countries have experimented with providing family benefits for men and women. Sweden became the first nation in the world to replace gender-specific maternity leave with parental leave in 1974. 

Today, in most industrialized countries, though not the U.S., paid family leave is a right. There are other caretaker rights that large employers must also abide by, depending on the country. And the most resourceful employers now provide subsidized or onsite family care, leave for new parents, adoption support, and more. 

Final thoughts: Benefits, they are a-changin’

When it comes to employee benefits, companies want to stand out from the crowd by showing they understand workforce needs and major trends — social and economic. 

Family leave, for example, is increasingly available not just to parents but all caretakers of the “sandwich” generation. And companies are chipping in to help employees with student debt repayment because financial well-being often goes hand in hand with emotional well-being. 

In the future, to anchor benefits in inclusivity, some businesses could also very well offer an à la carte menu of benefits to meet the needs of a diverse workforce. That will likely mean giving employees more say in choosing the benefits that matter to them. And companies are likely to offer more perks that cater to their hybrid workforce, including home-office equipment reimbursement or home meal delivery.

When perks really meet the pressing needs of a workforce and keep it happy, productive, and in place, they are as much employer benefits as employee benefits.

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