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One of the most important and widespread trends in employee satisfaction recently has been an increased interest in the benefits employers provide for their staff. In fact, many recent studies (including this one) show that employees today are just as—if not more—interested in a good benefits program as they are concerned with the height of their salaries.
This has translated into companies offering a great employee benefits plan having the upper hand when it comes to both hiring and retaining top-tier talent.
However, if you are a small business owner that’s just getting started and can’t really afford to offer a sophisticated benefits package, it’s important to know that there are still benefits that must be provided.
There are legally required benefits that are considered mandatory for just about all businesses—ones that every company must offer to their staff according to federal regulations and laws.
What Are Employee Benefits?
Anything that can be considered a non-wage form of compensation that employers offer to their employees in addition to regular wages and salaries can be considered an employee benefit.
Generally speaking, there are three types of employee benefits that a company can offer; legally required benefits, benefits that might not be required but are considered standard, and non-standard but desirable benefits that represent perks that a smaller percentage of businesses offer.
In this blog post, we are going to focus on those that are required by law and explain exactly what they are and why your business is obligated to provide them.
Legally Required Benefits
The employee benefits that are required by law are typically benefits that are considered absolute necessities for ensuring the health and safety of employees. That’s why these benefits are standard across all states and industries and are enforced by laws that were created by the U.S. Department of Labor to ensure that all employers are giving their employees access to them.
Of course, there are always exceptions and regulations that vary from state to state, which is why it’s important for all employers to be sure that they are following the legal requirements for their specific location. If you’d like a clarification on labor laws and mandatory employee benefits, it’s always best to consult a legal professional that specializes in these fields.
However, generally speaking, the following are employee benefits that are usually mandatory, no matter where your business is located in the U.S.
Social Security and Medicare are benefits that are funded in part by the employer and the employee. Both entities fund Social Security and Medicare benefits through taxes prescribed by the Federal Insurance Contributions Act (FICA).
Many assume that Social Security and Medicare are the same things, but they are actually separate programs. However, what they do have in common is that they are both programs that are designed to provide aid to older Americans. Social Security is available to retirees who have worked for at least 10 years and paid Social Security taxes. Disabled people under the age of 65 can also receive Social Security benefits.
Medicare provides health insurance coverage for Americans who are 65 or older, have worked, and have paid Medicare taxes for at least a decade.
Employers are required to withhold Social Security tax at 6.2%, equal to or above the maximum Social Security Wage Base, which is currently at $142,800. People who are self-employed will need to pay tax at 12.4%.
Both regularly employed and self-employed Americans will pay a medicare tax that’s set at 2.9%.
Workers Compensation Insurance
Workers compensation insurance is mandated by law in every state but Texas. When a company purchases workers comp insurance, they are covered for costs related to workplace injuries suffered by employees.
If an employee is injured, the company files a workers compensation claim. Once the claim is approved, the insurance company will cover all costs related to the injury, which can include medical bills, lost income, rehabilitation costs, and in the worst-case scenarios, workers compensation insurance can pay death benefits as well.
Unemployment benefits, sometimes referred to as unemployment insurance or compensation, consist of payments funded by the Unemployment Tax Fund.
Every employer must carry unemployment insurance, which is most often used when people are laid off from the company or if a former employee files a claim of wrongful termination against the company if they were fired for undocumented or undisclosed reasons.
When it comes to unemployment benefits, every state has its own regulations in regards to the base wage upon which payment calculations are made. Employers that want to save on this insurance should work on putting together clear and fair termination processes and protocols. Obviously, the more wrongful termination claims that are filed against you, the higher your unemployment insurance rates will be.
Even though rates differ from state to state, all companies need to pay unemployment benefits for every part and full-time employee.
Required for Businesses With 50+ Full-Time Employees
Once your company grows to an organization of 50 or more employees, there are additional employee benefits that become mandatory.
These two employee benefits are also ones that many smaller companies regularly offer their employees even if they are not mandated to do so. They are considered standard benefits offers for companies that want to attract top talent and retain their best employees.
According to the Affordable Care Act (ACA), any company that employs 50 or more full-time staff members must provide them with healthcare coverage. They also need to report to the IRS regarding the cost and types of insurance plans they are offering their employees by way of W-2 forms.
If your company does not offer affordable or sufficient health insurance to your full-time staff, it could be penalized by the federal government.
Family and Medical Leave
The Family Medical Leave Act (FMLA) requires that companies with 50+ full-time employees provide staff with up to 12 weeks of unpaid leave with protected job security.
This is one of the most important and in-demanded employee benefits today with so many people struggling to balance work and family life. Employees want to be assured that they are going to be able to take time off from work when they need to without running the risk of being fired for being absent.
An employee qualifies for family and medical leave if they have worked for the company for at least 12 months and have worked a minimum of 1,250 hours before taking paid leave.
Disability Benefits Required In Certain States
There are five states in which employers are legally required to carry disability insurance for their employees; California, Hawaii, Rhode Island, New Jersey, and New York plus Puerto Rico.
Again, there are many companies that offer disability benefits to their employees even if they are not required to do so because it is viewed as a highly desirable employee benefit by many workers.
Disability insurance protects employees who might have to miss work as a result of injuries or illnesses that are not work-related.
Disability benefits will usually cover partial or total disability and benefits for employees with disabilities range between 50-66% of their pre-disability income. Pay benefits typically begin three to six months after the beginning of disability.
If you’d like to learn more about disability insurance, unemployment insurance, employee healthcare plans, or any other employee benefits programs in order to put together an attractive package for your staff, don’t hesitate to reach out to one of our employee benefits specialists at any time.
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