For those who are thinking of establishing their small business and hiring employees, it is important to understand the different benefits that employees are entitled to. Knowing what benefits are legally required, and what is available to employers, is essential to staying in compliance with the law as well as keeping your employees satisfied and productive.
Required Benefits for Employees
All employers, regardless of the size of their business, are legally required to provide some benefits and have certain types of insurance. Social security taxes are paid in half by employers, and there is a 1.45 percent additional for Medicare required by federal law. Unemployment insurance is often also required, although this varies from one state to another. Hence, you should check with the law applicable to the state where your business is situated. You’ll have to register with the workforce agency in your state if this is required.
Disability benefits or worker’s compensation is a required employee benefit, offering employees financial support if they suffer from an injury or disability due to occupational hazards. Just as with unemployment insurance, worker’s compensation is mandated by the state. Disability insurance is required for employers located in Rhode Island, New York, Hawaii, California, Puerto Rico and New Jersey. However, if your employees are situated in other states, it is optional to provide them with private insurance.
Family and medical leave is another required benefit, as per the Family and Medical Leave Act, or FMLA. This is applicable to employers who have at least 50 employees working in their company. All employees are entitled to a 12-week unpaid and job-protected leave, which applies to any 12-month period. Eligible employees are those who have to take a leave due to immediate family care, childcare or birth, as well as personal health conditions.
Also, all business with at least 20 employees whose employees were required to report to work on over 50 percent of the usual business days in the previous year are entitled to the Consolidated Omnibus Budget Reconciliation Act of 1985 or COBRA. This Act offers a continuation of earlier health coverage at lower rates for retirees, former employees, former spouses, dependent children and spouses.
In addition, the recent Affordable Care Act will require all employers with at least 50 full-time employees to cover health insurance for at least 95% of employees as well as their dependents, or pay a fine. The so-called “Employer Mandate” was delayed several times, but has already taken affect for most businesses, and the remainder will likely be required to begin sometime in 2015.
There are certain benefits that employers may opt to provide their employees, in order to incentivize them and create goodwill. These optional benefits include diverse leave policies, retirement plans, as well as more comprehensive life and health care insurance, to name just a few. Offering to subsidize employee education is also a good way to make more productive employees.
Employers should take the time to make an analysis of what their employees need. Some companies that are pressed to find talented employees offer more attractive benefits to lure in superstars. Others take a more bare-bones approach and only require what the law mandates. The choice is yours.