Hiring quality employees during the current economic period in the U.S. can be difficult. COVID-19 completely changed the way we work, forced many businesses to close entirely, and allowed many people to live comfortably on government subsidies when they couldn’t be at work somewhere.
If you want good workers, you need to be prepared to offer competitive pay and benefits. In this post, we’ll focus on what benefits employers are legally required to provide. To begin, let’s look at the most common benefits offered to employees.
What Are the Most Common Benefits Offered To Employees?
A survey done by Glassdoor a few years ago found that 60% of job prospects at that time chose to accept offers based on the benefits package. 80% said they would choose better benefits over a pay raise.
When it comes to attracting and retaining top talent, you may be asking yourself “what are the most common benefits offered to employees?” If you want to provide benefits that make people want to work for you over someone else, it’s a good idea to know.
Indeed.com posted a list of “25 Types of Employee Benefits” recently. Here are a few of the most common perks:
- Medical Coverage
- Dental/Vision Insurance
- Life Insurance
- Retirement Planning
- Paid Time Off
- Sick Leave/Family Leave
- Worker’s Compensation
There are things that many employers provide beyond the basics. (For example, Google provides yoga classes, professional chefs, and haircuts.) According to a study done by Harvard Business Review on “The Most Desirable Employee Benefits”, most employees wish their companies would offer:
- Better insurance
- Flexible hours
- More vacation time
- Options to work from home
During the height of the COVID-19 pandemic when many offices were closed and people were forced to figure out ways to do their jobs from home, many employees discovered that they actually prefer it! Glassdoor’s Workplace Trends Report for 2021 backs that up.
They found that 40% of Americans were doing their jobs from home during 2020, and an internal survey of their own employees found that over 70% wanted some kind of home/in-office hybrid arrangement going forward.
Even though the last couple of years have brought new approaches to work and compensation packages, health insurance and time off still lead the pack in preferred benefits…which leads to our next question.
Are Employers Required To Provide Health Insurance?
Is health insurance a “right” or a “privilege?” If you are an employer, do you need to plan on automatically providing something that can be a rather expensive benefit, or is it optional?
According to Nolo, a company that has published do-it-yourself legal guides since 1971, the answer is “maybe.” If you are a small business with only a few employees, you are not required to provide health insurance.
In fact, there is no actual law that mandates providing any such benefit to your employees. However, the Affordable Care Act passed in 2010, imposes fairly severe penalties on companies with 50 or more full-time employees who do not offer at least 95% of them some kind of health insurance option. (As of 2020, the fine was over $3,800 per employee per year!)
Healthcare.gov has more information in their article on “How the Affordable Healthcare Act Affects Small Businesses.”
Can An Employer Offer Health Insurance To Only Some Employees?
Nolo posted a good response to the question “Can Employers Offer Health Insurance Only to Certain Employees” on their site. According to them, “In general, employers are free to offer health insurance to some groups of employees and not others, as long as those decisions are not made on a discriminatory basis.”
It is important to define what “discriminatory” means here. They are referring to characteristics that are protected by federal and state laws such as race, color, national origin, sex, religion, disability, genetic information, citizenship status, and age.
Employers can discriminate based on full-time or part-time status or certain positions. Health insurance (or other benefits) must be offered equally to all employees who fall into those categories, though.
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What Are Statutory Benefits?
There are benefits that employers are required to provide to everyone on their payroll, however. These are called “statutory benefits.” Everything else is voluntary.
Benefits Employers Are Legally Required to Provide
By law, every person on your payroll must receive the benefit of the following things:
- Social Security and Medicare contributions
- Unemployment Insurance
- Worker’s Compensation Insurance
- Family and Medical Leave (depending on local laws)
Social Security and Medicare are required under the Federal Insurance Contributions Act (FICA). Employers must pay 6.2% of an employee’s gross compensation for Social Security and 1.45% for Medicare.
Unemployment insurance costs vary from state to state. However, all 50 states require employer participation at least at a minimum level.
When it comes to Worker’s Compensation, employers have a couple of options. They can choose to self-insure, meaning that they will personally pay all qualifying medical expenses and income related to workplace injuries and illness. They can also purchase insurance through state-run programs.
The Family and Medical Leave Act (FMLA) provides up to 12 weeks of unpaid time away from work for situations such as the birth of a child, a serious illness, or caring for a family member.
When Must An Employer Provide Benefits?
Social Security and Medicare contributions begin on an employee’s first day. Other benefits can be delayed.
If an employer is large enough to be required to provide health insurance under the Affordable Care Act, they have up to 90 days to enroll a new employee. This allows for the possibility that a new hire may not work out as part of your team. It could be an expensive hassle to unenroll someone, so the law allows you to wait until you’re sure they’re going likely to be around a while.
Voluntary benefits are things that are available at the discretion of the employer. Things like catered meals, work-from-home options, gym membership reimbursement, and on-site daycare are just a few of the creative things employers can provide whenever they want to in order to attract and keep quality employees.
We Can Guide You Through Legally Required Benefits
We get it! Making sure you stay on top of required benefits can be a lot of work!
At CRS CPA, we regularly tell our clients (and those who are just learning about us) to “expect more from your CPA.” Did you know we have a team that can help you with HR & Payroll Services?
If sorting through what benefits employers are legally required to provide seems overwhelming, schedule a call and let us help guide you through it.