Your business needs great employee benefits if you want to attract and retain top talent. Most often, when people reference employee benefits, they're usually talking about voluntary employee benefits. However, there is a difference between involuntary and voluntary benefits.
Voluntary benefits include tuition reimbursements and vacation days, which a business may offer to stay competitive. Choosing not toprovide voluntary benefits will not have any legal ramifications.
On the other hand, involuntary benefits are legal requirements and can result in fines and other legal issues if not provided. Some mandatory benefits apply to all firms, while others apply to particular company size in a specific location or state.
It's important to note that these benefits protect employees' well-being, income, and health. They provide families with medical care and a cushion against financial hardships after losing work, workplace injuries, disabilities, and illnesses. The benefits include:
Social Security and Medicare
Employers are mandated to contribute to Social Security and Medicare through payroll deductions. The Federal Insurance Contributions Act (FICA), a federal employment tax, funds the two. Employers and employees contribute to the funds.
In 2022, social security taxes will increase by 2.9%.
The Medicare tax is 2.9%, where the employer and employee split the cost. There's no income limit for the contribution, unlike in social security taxes. From January 2013, the Affordable Care Act added extra Medicare tax to those who earn more than $200,000 or couples who file jointly and make more than $250,000. They pay an additional 0.9% tax.
It means that they pay the standard 1.45% tax on the $200,000, and anything above that is subject to 0.9% tax. The added tax is the employees' responsibility, and it's not splittable.
Unemployment Insurance (UI) assists workers who lose their job. It's also known as unemployment benefits, and it's payable every week after losing a job. However, employees have to meet the eligibility criteria.
You cannot get the benefits when you quit your job or get justly fired
You only get the benefits when you lose your job under circumstances beyond your control
UI is a federal law though each state may have its unique rules
There's a maximum number of weeks you can get the benefits. The federal government states 26 weeks. However, this may vary in each state.
To qualify for UI, you have to be in a full-time job, and your wages have to be under a certain threshold of income for the year.
Workers' Compensation Insurance
Workers compensation insurance is aform of insurance that protects employees who are injured or suffer ill-health due to the nature of their work. The insurance helps cover medical expenses, part of lost salary, and compensation for pain and suffering.
Workers' compensation insurance varies from state to state, but it generally cushions the employer from lawsuits from workers who have been injured while on duty. At the same time, it protects the employee. The federal government sets minimum standards for the benefit though each state may apply its own rules.
Employers with more than two employees are required by law to pay into a state's compensation plan. In some states, insurance is optional if you're a sole proprietor or in a partnership. You only buy it when you start employing several people in your business.
Family and Medicare Leave
Those who work at private firms that employ more than 50 employees and all public employees are eligible for 12 weeks of unpaid family leave annually. The leave is to cater to any medical and family-related issues. They also qualify for a maximum of 26 weeks of unpaid leave annually. The requirements may vary in each state.
Disability Insurance provides an income for those unable to work due to an illness or accident that occurs off the job that causes disability. It helps bridge the income gap for those not working due to disability.
The insured employee pays into it as part of their payroll deductions, and employers also sometimes make contributions towards it. Disability insurance is only mandated in some states.
Health insurance is a mandate for businesses with more than 50 FTE. Employers should offer affordable health insurance not costing more than 9.83% of the household income. It covers the employee family, including children not older than 26 years.
Benefits on a State Level
Every state has its version of laws governing mandatory employee benefits. Note that the version most beneficial to an employee is the legally required one. For instance, California's FMLA laws are more comprehensive than the federal requirements. California's Family Rights Act (CFRA) covers more family members and applies to smaller employers, unlike the FMLA laws.
Employers should understand the benefits required by law in their state. They should also bear in mind the importance of a legally compliant workforce to safeguard them from lawsuits and penalties for noncompliance.
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Tom DiSilva has been providing professional human resource services for over 30 years. As the CEO of Navigate PEO, he actively partners with organizations of all sizes in the Greater New England area and across the country to help their businesses grow. He has expertise in HR and Labor Management, offering guidance and support for key areas of business such as negotiations, operations management, employee coaching, and employee benefits design.