{"id":4779,"date":"2016-04-04T10:47:45","date_gmt":"2016-04-04T15:47:45","guid":{"rendered":"https:\/\/ability-fl-prod.internetbrands.com\/ability-law\/smallbusiness\/employment-law-and-human-resources\/wages-and-benefits-overview.html"},"modified":"2026-08-31T10:34:02","modified_gmt":"2026-08-31T15:34:02","slug":"wages-and-benefits-overview","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/smallbusiness\/employment-law-and-human-resources\/wages-and-benefits-overview.html","title":{"rendered":"What Wage and Benefit Laws Must Small Business Employers Follow?"},"content":{"rendered":"\n
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What Wage and Benefit Laws Must Small Business Employers Follow?<\/h1>\n\n
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\n By Catherine Hodder, Esq.<\/a> | Legally reviewed by Laura Temme, Esq.<\/a>\n | Last updated\n
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Editorial Note: We earn a commission from affiliate partner links on FindLaw. Commissions do not affect the editorial integrity of our legal content.<\/p>\n\n <\/div>\n \n

\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n\n\n

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Key Takeaways<\/h2>\n

To attract and retain skilled, talented employees, employers need to offer a mix of competitive wages and desirable benefits. While this adds to a business\u2019s bottom line, the returns from engaged workers are worth the added expense. Knowing how to structure salaries and which benefits are most attractive can make it easier to retain a skilled labor force.<\/p>\n\n <\/div>\n <\/div>\n<\/div>\n\n

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Good wages and a strong employee <\/span>benefits<\/span> package<\/span> help attract and keep top talent<\/span> for your business. Wages are an employee’s salary or hourly pay. Benefits include health <\/span>insurance<\/span> coverage<\/span>, retirement plans<\/span>, and other worker incentives<\/span>.<\/p>\n

Some of these benefits are mandatory, such as Social Security<\/span>, Medicare<\/span>, and workers’ compensation<\/span> insurance<\/a>. Others are voluntary benefits<\/span>, like retirement <\/span>savings<\/span> plans<\/span>. Some states require particular benefits. For instance, California requires employers to offer disability insurance<\/span>, while other states leave it optional.<\/p>\n

Small business<\/span> employee benefits<\/span> can be costly, but it may be an expense worth bearing, as retention<\/span> is always an issue for small business<\/span> owners<\/span>. When reviewing your compensation package, weigh the cost of\u00a0benefit plans<\/span>\u00a0against the constant hiring and retraining of new workers.<\/p>\n

Get more information at FindLaw’s section on <\/strong>Wages and Benefits<\/a>.<\/strong><\/p>\n

Federal and State Wage Laws<\/h2>\n

The federal\u00a0Fair Labor Standards Act<\/a>\u00a0(FLSA) sets wages and hours. This includes the national minimum wage, maximum work hours per week for full-time employees<\/span>, and overtime pay for hourly workers. Salaried (“exempt”) employees aren’t entitled to overtime pay.<\/p>\n

Federal law<\/span> also regulates pay for tipped employees. Employers may take a “tip credit,” which allows them to pay their workers less than the federal minimum wage as long as the employee’s total tips plus wages equal the federal wage. Many states have abolished the tip credit, requiring employers to pay employees a flat wage and allow them to keep 100% of their tips.<\/p>\n

State Wage Laws<\/h3>\n

Under the FLSA, states may set their own minimum wage<\/a> as long as it isn’t less than the federal wage. In many states, it’s now much higher. Some states require paid lunch and break periods. These are requirements, not perks<\/span> or benefits.<\/p>\n

Workers’ Compensation<\/span> Insurance<\/h3>\n

Every state except Texas requires employers to carry workers’ compensation<\/span> coverage for their employees. In some states, there is no minimum number of employees for coverage. Workers’ compensation<\/span> pays the medical expenses<\/span> for workers injured on the job. It’s not considered a health <\/span>insurance<\/span> plan<\/span>.<\/p>\n

Workers’ compensation<\/span> is not considered part of an employee’s pay. It is part of the employer’s responsibility to their workers.<\/p>\n

Employee Benefits<\/span><\/h2>\n

Most people think of healthcare<\/span> when thinking of employee benefits<\/span>. Health benefits<\/span> are probably the number one thing employees ask about when they’re hired. Because of the demand, states and some cities now require employers to offer health insurance<\/span>. The Affordable Care Act<\/span><\/a> (ACA) has made small business<\/span> compliance possible.<\/p>\n

Fringe benefits<\/span>, like life insurance<\/span>, retirement plans<\/span>, and paid <\/span>time<\/span> off<\/span>, help attract and keep employees. In a few states, benefits programs<\/span> are becoming requirements.<\/p>\n

Health <\/span>Insurance<\/span> Plans<\/span><\/h3>\n

Under the ACA<\/a>, businesses with 50 or more employees must provide affordable health insurance<\/span> for at least 95% of their full-time employees<\/span>. Other provisions of the ACA include:<\/p>\n