It’s a common question among business owners. “Do I have to offer employee benefits?” Which is usually followed up with “And what benefits am I legally required to offer, versus which ones are optional?” These are important questions you should be asking, not only to ensure your business is fulfilling all of its legal obligations to its employees, but also because you want to be sure your employees feel properly cared for and committed to their jobs.
There are a number of employee benefits you as the employer can provide, including: paid vacation days, health insurance, long-term disability coverage, workers compensation coverage and retirement savings plans. For the most part, employee benefits fall into one of two categories – those that are required by law and those that are optional. Next, we’re going to take a look at these two categories to provide an understanding of what employee benefits you have to offer, and which ones are your choice.
Legally Required Employee Benefits
- Unemployment Insurance – This type of insurance assists workers who lose their jobs through layoffs or termination without cause. This is a vast topic all on its own, but what’s most important to remember is that you are required to carry unemployment insurance, even if you only have one employee.
- Workers’ Compensation Insurance – This type of insurance provides financial support to employees who are unable to work as a result of a workplace injury or illness. Most businesses make the mistake of thinking job-related injuries or illness only occur at high-risk job sites, like construction. But so many injuries are the result of everyday office tasks or running business-related errands.
- Health Insurance – Under the Affordable Care Act, businesses with 50 or more full-time employees, including full-time equivalent employees must offer health insurance, or risk a penalty.
- Social Security, Medicare, and Federal Insurance Contributions FICA are also required to be withheld from an employee’s paycheck by the employer, who is then responsible for paying these taxes.
- Family/Medical Leave – If your business is a private firm with 50 or more employees, and all public employees, you are required to offer up to 12 weeks of job-protected, unpaid leave during a 12-month period for qualifying family and medical reasons.
Optional Employee Benefits
Now that you understand the various types of employee benefits that you must legally provide, it’s important to also note the optional employee benefits you may choose to provide. As an employer, offering benefits, like supplemental health insurance, doesn’t mean you are responsible for paying for it in full. You can choose to cover all, part or none of the premium, but the real benefit is unlocking the option for your employees to receive this coverage, should they wish to do so. For many types of insurance, individual policies are not an option, so it takes an employer or “group” to be able to provide this benefit.
Here are some of the most common type of optional employee benefits businesses will choose to provide:
- Supplemental Health Insurance – This is additional insurance that supplements your primary health insurance, paying for things like out of pocket expenses or co-pays.
- Cancer Insurance – Especially useful for those with a family health history or cancer, this additional insurance policy provides money to cover expenses of treatment that are not often covered, in part or in full, by primary health insurance.
- Group Health Insurance – Typically group health insurance is better and cheaper than individual plans because the insurer’s risk is spread across a group of people.
- Life Insurance – Offering the option of additional life insurance to your employees gives them, and their family, peace of mind and security should the worst happen.
- Disability Insurance – This type of insurance provides coverage for non-work related injuries that cause an employee to experience full or partial loss of wages.
Why Provide Employee Benefits?
When you are determining which employee benefits your business will offer, consider this very important question. How much do you value your employees’ talents, happiness and commitment to the job? Your answer should be “A lot!” If this is true, you should want to provide all reasonable employee benefits that stand to keep your employees satisfied in their job – not just those that are legally required.
Many small businesses make the mistake of thinking they are saving money by cutting corners on employee benefits. Unfortunately, most will learn the hard lesson that a few dollars saved in the short-term can result in more money, headache and turnover in the long-term. Take for example workers compensation coverage. For just $5-10 per week per employee you can off this benefit that will be hugely important should an employee be hurt on the job. It’s a small investment that shows employees you care about their health, safety and their ability to care for their family when they cannot work.
The Bottom Line
When it comes to employee benefits, first and foremost you must abide by the law. Keep in mind that there are federal laws that are required of everyone, as well as state laws that vary state to state. As a business owner, it can be overwhelming to navigate the various types of employee benefits, understanding what’s required, what’s optional and what are the best options for your type and size of business. The best thing you can do to avoid headache and costly mistakes is to speak with an experienced business payroll specialist as well as a trusted insurance agent to determine the right benefits you should offer to your employees.
Do you have a question or need more information? Talk to the Downey Insurance Agency today!