Employee benefits are not merely schemes to ensure employees earn significantly more than stated in their base salary. Employee benefits are crucial perks to employees that allow them to live a higher quality of life, be covered against work or professional perils, and have higher morale and productivity.
Moreover, employee benefits are a powerful retention tool. According to data, 62% of employees would leave their current job for better benefits.
Employee benefits are not optional in most states. There are statutory employee benefits that businesses must provide to their workforce. These include FICA, Social Security, Medicare, unemployment insurance, workers’ compensation, and health insurance.
Here’s a look into employee benefits and the statutory ones you must consider.
What are Employee Benefits?
Employee benefits are non-wage compensations employers provide employees in addition to their regular salaries and wages. Employee benefits are typically classified into three categories, which include statutory benefits, standard benefits, and voluntary benefits.
Statutory benefits are employee benefits mandated by law. On the other hand, standard benefits are employee benefits typically offered as a standard within an industry or sector. Voluntary benefits are additional benefits a company provides at will based on internal policies and other factors.
What’s the Importance of Employee Benefits?
Employee benefits are essential for more than just legal reasons. Here are the top reasons you should consider giving your employees remarkable benefits.
Talent Retention
Full employee benefits typically vary across organizations. Therefore, some employee benefits will suit your workforce better than others. If your list of benefits suits your workers’ needs, they’re likelier to stick with your business, with data showing that businesses offering excellent employee benefits experience about 56% lower employee turnover.
Attracting Talent
Two jobs with the same salary can vary significantly when employee benefits are considered. Therefore, your benefits package is one of the most significant factors that will make you stand out against other businesses.
For instance, data shows that 88% of employees prefer organizations with dental, health, and vision insurance benefits on top of flexible hours.
Boosting Employee Loyalty and Satisfaction
Employee benefits are an investment in your workforce. Employees are likelier to stick with an employer who shows they value them and appreciate their output. Therefore, they’re more loyal and satisfied with their work setting.
Healthier Employees
Most statutory employee benefits ensure that you have a healthy and productive workforce. These benefits improve your employee’s access to healthcare and wellness or enrichment programs, which ensure they’re healthier, happier, and more productive at work.
Encouraging Inclusion
Providing the correct set of employee benefits helps improve inclusion in the workplace by showing your organization’s dedication to catering to the needs of all employees. Inclusion is highly promoted when you include thoughtful employee benefits such as parental leave, domestic partner benefits, and floating holidays.
Which Employee Benefits Are Mandated by Law?
Here are the primary employee benefits that your organization must provide by law.
FICA, Social Security, and Medicare
FICA, Social Security, and Medicare are employee benefits partly funded by the employer and employee. These benefits are financed through taxes provided by the Federal Insurance Contributions Act (FICA).
Medicare and Social Security offer separate programs designed to aid elderly U.S. citizens. Social Security benefits are accessible to retirees who’ve worked for at least ten years and paid for the benefits through Social Security taxes. These benefits are also accessible to disabled individuals under 65 years.
Medicare specifically offers medical care coverage for Americans aged 65 and above who have worked and paid for Medicare benefits through the applicable taxes for at least a decade.
Social Security tax is available to employed and self-employed individuals, with employed individuals typically paying 6.2% while self-employed workers pay 12.4% as tax. Medicare is also available to employed and self-employed individuals, with both paying 2.9% in tax for the benefits.
Workers’ Compensation Insurance
Workers’ compensation insurance offers financial support to persons unable to work due to illness or injury received at the workplace. The state mandates that all employers provide this benefit to cover injured or fallen sick employees while dispensing their on-the-job duties.
Workers’ compensation insurance covers medical bills and a limited income for the employee within the recovery period.
Different states impose different waiting periods, limitations, and the amount and type of coverage. Therefore, you must check the exact requirements of the state your business is operating in to stay compliant.
Unemployment Insurance
Unemployment compensation or insurance is a set of payments funded by the Unemployment Tax Fund. Also known as unemployment benefits, this employee benefit is mandated in most states. It is used when employees are laid off or if a former employee files a wrongful termination claim against your business.
Every state imposes unique regulations on the base wage for calculating payments for this benefit. The cost of this insurance will depend on your organization’s layoff and termination processes. The clearer and fairer they are, the less they’ll cost you. Inversely, the higher the wrongful termination claims, the higher the insurance rates will be.
Family and Medical Leave Act
Family and Medical Leave Act (FMLA) allows eligible employees of covered employers to take unpaid, job-protected leave for specific medical and family reasons. FMLA typically applies to employers with 50 or more employees within the private sector and all employers in the public sector.
The FMLA allows eligible employees up to 12 weeks of job-protected, unpaid leave over a 12-month period. You can also take up to 26 workweeks of unpaid, job-protected leave over a 12-month period for a Military Caregiver Leave.
Some of the qualifying reasons for FMLA include the birth of a child, caring for an immediate family member with a severe or chronic illness, or dealing with a chronic or severe personal illness.
Health Insurance
The Affordable Care Act (ACA) mandates companies with 50 or more full-time employees to provide them with healthcare coverage. These companies must also report to the IRS the cost and type of insurance plans they offer their employees through W-2 forms.
Failing to provide adequate health insurance as a mandated organization can lead to hefty federal fines and penalties.
Disability Insurance
Disability insurance gives partial wages to employees experiencing an injury or illness outside the office that requires them to miss at least a week of work. This employee benefit is not federally mandated.
However, five states, including California, Hawaii, New Jersey, Rhode Island, and New York, including Puerto Rico, legally mandate this benefit.
Disability insurance works similarly to medical coverage, with employers choosing to cover some or all of the policy’s cost. They can also pass the entire cost of the coverage to the employee through payroll deduction.
Have an Expert Guide You
Offering employee benefits is crucial to ensuring a high talent retention rate, employee satisfaction, and loyalty in your workplace. Contact an expert and learn the specifics of the state and locations your business is operating in.
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