If you are a business owner or are responsible for obtaining benefits for your company, you may be in the process of building a benefits package. While perks like vacation days and tuition reimbursement can be nice to offer, not all employee benefits are required by law. It is important to be aware of what laws mandate employee benefits so that you can budget wisely. Learn more about what employee benefits are required by law and how you can acquire the most attractive employee benefits for your company.
Social Security and Medicare Taxes
Regardless of the size of the business, every employer in the U.S. is required to match their employees’ social security and Medicare tax contributions. The cost of these contributions can range based on the age of the employee and their earned income. At the start of employment, each employee should complete certain tax forms. The employer then uses this information to create a W-2 form which is used to report wages. To verify identities, employers typically use a Social Security verification system which helps minimize the risk of identification errors. This system also ensures each employee is rightfully credited for their Social Security and Medicare tax contributions.
Employers, no matter how many employees they have, are required to carry unemployment insurance. Both part-time and full-time workers are entitled to unemployment benefits in the event that they become involuntarily separated from the company, such as during a layoff of workers. Unemployment insurance can also be used if a former employee files a wrongful termination claim against an employer and the business owner does not have the proper documentation to support the termination. The cost of unemployment insurance differs from state to state. Companies must register with their state workforce agency to manage payments.
Businesses are required to carry workers’ compensation insurance which acts as a wage replacement and medical benefit if an employee should become injured or ill while performing job duties. There are several different options available to business owners building their benefits package. First, an employer can choose to self-insure which means that the business owner takes the risk of providing benefits. Employers can also choose to acquire coverage through their state which can be more costly, but results in a more consistent premium payment system. Workers’ compensation is essential for all employers as it helps protect business owners from potential lawsuits.
There are some employee benefits that are mandated only in certain states. Disability insurance is one such benefit that provides partial wage replacement insurance coverage to employees that suffer an illness or injury caused by a non-work related reason that causes them to miss work. Disability insurance is only mandated for businesses in the following states: New York, California, New Jersey, Hawaii, Puerto Rico, and Rhode Island. In all other states, business owners have the option to provide disability insurance benefits to their employees. The cost of the policy is usually paid for in full by the employee.
Family Medical Leave
Family medical leave benefits are required by law for any business that employs 50 or more full-time equivalent (FTE) employees. This type of benefit allows employees to receive up to 12 weeks of unpaid medical leave per year while still maintaining their job and benefits. Family medical leave can be used for the birth of a child, the adoption of a child, to care for an immediate family member with a serious medical condition, or for an employee to care for their own serious medical condition. Employers are not required to financially compensate an employee during a medical leave.
The Affordable Care Act (ACA), a law enacted in 2010, requires any employer that has more than 50 FTE employees to offer “acceptable” health insurance. If a business owner fails to offer health insurance to their employees, they could face steep penalties from the federal government at tax time. As there is currently a lot of talk about modifying or replacing the ACA, business owners may soon see changes that result in them not having to offer health care benefits to employees. However, for the time being applicable large employers must continue to comply with ACA regulations.
Certain employee benefits are put in place for the rights of workers. Employees may be entitled to certain other benefits, such as:
- Time off for jury duty or to vote. While the regulations involving time off for jury duty service or voting differs from state to state, nearly every state mandates that an employer provides adequate time off for these events.
- Time off for/reinstatement after military service. The Uniformed Services Employment and Reemployment Rights Act (USERRA) require business owners to provide applicable employees with time off and/or reinstatement of a prior position following military service.
Benefits Not Required by Law
There are a number of employee benefits that are not required by law, but that you may still want to consider adding to your benefits package. The right benefits can be useful in attracting new talented professionals and maintaining your existing staff. Some non-required benefits include certain forms of supplemental insurance, life insurance, retirement savings plans, dental and vision care, wellness programs, and some salary perks. If you are looking for ways to make your business more competitive and build a team of highly-qualified workers, offering some of these non-required benefits may help.
Learn More About Employee Benefits
While employers are not required to provide employees with certain benefits, they are required to meet certain regulations if they do decide to offer these perks. For example, a business owner is not required to offer retirement planning benefits to their workers. However, if they decide to offer retirement planning, they must meet certain rules and regulations set forth by the Employee Retirement Income Security Act (ERISA). For more information about what employee benefits are required by law or to acquire employee benefits for your company, contact the employee benefits brokers at BBG Broker today.