Employer Guide to Employee Benefits

Employee benefits are essential for attracting and retaining top talent. Job-seekers ask about wages and health benefits when applying for a new job. Large companies can afford to offer employee benefits like fitness club memberships and comprehensive insurance plans. These perks may be out of reach of smaller companies.

Federal and state laws require some benefits. Small-business owners should know what benefits they must provide. Some benefits are not cost-effective for small companies despite being desirable for workers.

For more related articles and resources, visit FindLaw's Wages and Benefits section.

Types of Employee Benefits

Regardless of size, all employers must provide their employees with workers' compensation, Social Security, and unemployment insurance. Most people don't consider these benefits, but they are payments into an insurance pool for the benefit of employees. Failing to provide these benefits can result in fines and penalties for the employer.

Employers with more than 50 employees must provide some benefits to qualified workers. State laws affect some businesses with fewer than 50 employees.

Independent contractors, part-time workers, and volunteers are generally not covered by any benefit plans.

Health Care Benefits

The Affordable Care Act, also known as "Obamacare," requires employers with over 50 employees to offer health insurance coverage to at least 95% of their eligible employees.

The ACA Small Business Health Options Program (SHOP) helps small-business owners find affordable health insurance plans. SHOP provides tax credits for paying insurance premiums. Businesses with fewer than 25 employees qualify for these tax credits.

The Family and Medical Leave Act (FMLA) also applies to employers with more than 50 employees. The FMLA gives eligible workers up to 12 weeks of unpaid leave to care for injured or ill family members, to recover from a personal medical emergency, or for maternity leave. The employee can add FMLA time to any paid sick days they already have.

Employers who do not have to provide insurance but want to offer benefits for their workers may consider a health savings account (HSA). These plans let workers deduct pre-tax sums from their paychecks and bank them against medical expenses. Business owners can ask their insurance companies about these programs.

Retirement Benefits

Federal law does not require retirement benefits and pension plans. However, about half the states have some form of mandated state-sponsored retirement plan. Employers must offer a 401(k) or similar retirement savings plan. Six states have penalties for employers who fail to provide employees with a retirement plan option.

The Employment Retirement Income Security Act (ERISA) "1,000-hour rule" allows all employees to participate in retirement plans. Part-time and seasonal workers who work 1,000 hours within 12 months must have the option to participate in the retirement plan.

Financial Benefits

Few things make a loyal employee happier than regular pay raises. A guaranteed pay increase of a certain percentage annually improves employee retention and morale. Workers appreciate annual bonuses, especially during the holidays. Paid time off (PTO) that accrues during the year may be part of a worker's benefits package.

Some states, like California, require disability insurance. Short-term disability insurance provides partial wages for employees unable to work due to non-work-related injuries. Long-term disability insurance takes over when workers' compensation benefits expire. It also covers extended care for injuries or illnesses.

Tuition reimbursement can be mutually beneficial to employers and workers. Employees can take courses that improve their work skills. Employers can assist them by offsetting some of the cost of college fees. The result is a worker with better job skills and less stress.

Mental Health Benefits

Employers and employees have acknowledged the need for work-life balance. Employees want to know they can spend time caring for their well-being. Employers realize that employee burnout is a major cause of turnover among workers. Some things you can offer workers as mental health incentives include:

• Flexible Work Schedules: The traditional 9-to-5 work schedule is long gone. Even an 8-to-5 or 7-to-5 schedule can be difficult for employees juggling childcare and second jobs. Consider these options if your workplace can accommodate split shifts or alternate days off. Happy employees make up for scheduling difficulties.
• Remote Work Options: Since the 2020 pandemic, more workers have found working from home appealing. Allowing workers to work from home during flu season or winter storms can be better for everyone.
• Wellness Programs: Employee wellness programs are popular among large companies. Small businesses can create them, too. Wellness programs can include gym memberships, walking clubs, and healthy food in the break room.

Alternative Employee Benefits

Small-business owners may not be able to offer an extensive employee benefit package. If your company has more than 50 people, meeting the federal requirements for health coverage and workers' compensation insurance can be difficult.

Nontraditional or fringe benefits may be an alternative to standard benefit programs. For instance, if you have a service business such as a health club, you can offer full-time employees a free membership at zero cost to the company. Small local businesses may consider trading services with other businesses to benefit their workers.

Getting Legal Help

If you have any questions or concerns about employee benefits, get legal advice from an employment lawyer in your area. Know the state and federal laws before offering an employee benefits package.