Creating a competitive employee benefits package for your business can be difficult.
By law, you must provide certain benefits as an employer, such as :
- social security taxes,
- unemployment insurance,
- and worker’s compensation.
Here’s a guide on what you need to know about employee benefits packages.
What are Employee Benefits Packages?
Any non-wage gain linked with an employee’s job can get classified as an employee benefit. It is up to the employer to decide what they offer in a benefits package. It can even differ between individual employees depending on their job duties.
Offering the best employee benefits package has several advantages for small businesses.
Employees want benefits. They want to feel appreciated and get recognized for their efforts. Many of them even apply for jobs based on the perks and benefits provided by the company.
Employee benefits should not get viewed only as a supplement to an employee’s salary.
It can help in:
- improving recruitment and retention,
- increasing employee engagement,
- and making your company a happier place to work.
Types of Employee Benefits
Employee benefits packages mandated by law
Federal law requires employers to provide certain mandatory, statutory benefits. These benefits are the same in all states and industries, required for employers of any size.
The first few things you’ll want to include in your package are the benefits required by law. Failure to have them can result in significant penalties for the company.
Social Security and Medicare
All business employee benefits packages must include social security and Medicare contributions.
Employers must withhold 6.2 percent of gross compensation for Social Security tax. When you reach the max contributions on your wage base limit, the tariff does not get deducted from your pay.
But, it’s 1.45 percent of compensation for Medicare tax. There is also an extra 0.9 percent of payment if the employee exceeds $200,000 in compensation.
Employers must pay an extra 0.9 percent Medicare tax for employees earning more than $200k annually. This tax begins with the pay period in which wages exceed the $200,000 threshold. It then continues for the rest of the calendar year.
This tax helps workers who get laid off. Unemployment insurance protects not only your full-time employees but also your part-time employees.
Employees who get let go due to reasons without proof of cause can file an unemployment claim. This failsafe allows them to receive benefits while looking for a new job.
Unemployment insurance gets administered by individual states. The cost of this insurance and the amount required of each employer vary by state.
Workers Compensation Insurance
Worker’s compensation protects employees who get injured at work while performing work-related duties.
If an employee sustains an injury or illness, states make the employer cover medical bills. This help also includes supplemental income for the employee during the recovery period.
Employers can self-insure or get coverage from their state. The employer chooses to pay for any medical bills and ongoing income. If a workplace injury or illness occurs, they can show that they have the financial resources to cover it. For state-run insurance, the employer buys a policy from the state-run program.
Required Employee Benefits Package Depending on Company Size or Locality
The employee benefits below get mandated by law depending on locality or size.
But, even if your company is not required to provide them, it’s still a good idea to include them in your package. These benefits are the industry standard. You will lose talent if your company does not offer your competitors benefits.
This insurance helps workers if they miss time due to non-work-related health issues.
Though not required in all states, some companies choose to provide it anyway.
Employees who buy a policy pay this amount in full from their paycheck. The employer’s sole responsibility is to connect the employee with the benefits broker.
It safeguards both the employee and the employer against unforeseen circumstances.
Disability insurance gets classified into two types: short-term and long-term.
- Short-term disability covers things that can keep an employee out of work for a few weeks to a few months.
- Long-term disability insurance covers a time frame of three to six months. It gets reserved for more severe disabilities.
According to the Affordable Care Act:
Applicable large employers (ALEs) face a potential assessment if they do not provide:
- adequate and affordable health insurance coverage to their full-time employees and their dependents.
- and at least one full-time employee receives a premium tax credit.
ALEs are businesses that have 50 or more full-time employees, including full-time equivalents in the previous calendar year.
Choosing not to offer group health insurance results in a tax penalty from the federal government. Those penalties are not insignificant.
The three types of medical insurance are:
- Health insurance,
- vision insurance,
- and dental insurance.
These three services get bundled together in one employee health benefits package.
Medical insurance pays for:
- doctor and surgeon fees,
- hospital rooms,
- and prescription drugs.
Dental and optical care may get included as a comprehensive benefits package. It could get offered in separate pieces or not at all. Sometimes coverage extends to the employee’s family (dependents).
The FMLA allows:
“Any qualifying employee to take up to 12 weeks of unpaid leave during 12 months for any of the reasons below.”
- The birth or adoption of a child
- To look after a close family member who has a severe medical condition.
- To receive treatment for the employee’s serious medical condition.
The FMLA does not make employers pay employees during these 12 weeks. Although, many for-profit organizations provide at least partial pay.
Some employers provide six weeks of paid leave (either partial or complete). They then allow the employee to take the remaining six weeks unpaid if desired.
Other Employee Benefits Packages That are the Industry Standard
The following benefits do not get required by law. But, they’re still considered the standard across industries.
Most companies get expected to offer these benefits to a certain extent.
Retirement benefits can help employees feel better about their financial future.
That’s why some employers usually contribute to an employee’s retirement. These retirement benefits come in two forms—401(k) and pension plans.