From vacation days and health insurance and long-term disability coverage to fitness memberships, happy hours and ‘summer Fridays,’ employers these days are going the extra mile with their employee benefits to keep their staff happy. If you’re a small business owner, you may be struggling to keep up with all of the benefits and knowing which ones you actually have to offer. In this post, we’ll go over the basics of employee benefits that are required by federal law. Of course, employers should also review their obligations under state and local laws to ensure they stay in compliance with all labor laws and regulations.
Are you struggling to keep up with all of the compliance laws? America’s Back Office can help. We have a team of dedicated and highly trained professionals ready to take the burden of HR administration and related tasks from small business owners so they can spend more time growing their business and caring for their customer’s needs. Download our whitepaper to learn more about how we can help you scale your business.
Mandatory Employee Benefits
Employee benefits generally fall into two categories:
- Benefits that are required by federal law
- Benefits than an employer chooses to offer voluntarily
According to the U.S. Bureau of Labor Statistics, legally required benefits are intended to:
- Give workers and their families retirement income and medical care
- Reduce economic hardships that result from the loss of work and disability
- Cover liabilities that result from workplace injuries and illnesses
Employee benefits that are federally mandated include:
Health Insurance
Under the Affordable Care Act (ACA), applicable large employers (more than 50 full-time employees) can land in hot water if they don’t offer adequate and affordable health coverage to their full-time employees. In order for health care to be “affordable,” it should not exceed 9.83 percent of an employee’s income in 2021 (the percentage is updated yearly for inflation).
To be considered “adequate,” the insurance coverage should provide access to a reasonable network of providers and specialists. It should also be designed to pay for at least 60 percent of the total cost of medical services a plan covers.
Workers’ Compensation Insurance
Worker’s compensation provides financial support to people who cannot work as a result of an injury or illness acquired on the job. If an employee gets hurt or sick on the job as a result of their primary work duties, states mandate that the employer is responsible for covering their medical bills and a limited amount of income while the employee recovers. There are waiting periods, limitations and varying amounts and kinds of coverage based on the employer’s state.
Don’t attempt to understand labor mandates and laws alone — it can be overwhelming! When you partner with a Professional Employer Organization (PEO) you are partnering with a team of HR experts who have the experience and expertise needed to handle all of your back-office functions. Learn more about how a PEO can help you today.
Social Security, Medicare and FICA
Medicare and Social Security fall under the category of statutory benefits, while FICA (Federal Insurance Contributions Act) is a federal employment tax that’s used to fund Social Security and Medicare. The law states that employees and employers are required to contribute to these programs at 6.2 percent of their gross compensation until the maximum of $142,800. Employers are required to withhold Medicare tax at 1.45 percent of gross compensation, plus an extra 0.9 percent of compensation based on the employee’s filing status if their compensation is more than $200,000. Employers are also required to match 6.2 percent for Social Security up to the wage base and 1.45 percent for Medicare.
Unemployment Insurance
Employers must contribute to unemployment insurance via state and federal payroll taxes to help workers who lose their jobs. Unemployment insurance is in place to protect full-time and part-time workers who meet certain criteria.
Family and Medical Leave Act Protections
The Family and Medical Leave Act (FMLA) grants eligible employees of covered employers to take unpaid days off for specific family and medical reasons. Covered employers are private-sector employers with 50+ employees. FMLA gives these employees up to 12 weeks of job-protected, unpaid leave during a 12-month period for qualifying reasons such as the birth or adoption of a child, dealing with personal or a loved one’s chronic or terminal illness or a loved one’s death.
How America’s Back Office Can Help
America’s Back Office is part of just four percent of PEOs that are IRS-certified. We protect small to mid-sized businesses from the massive amount of government regulations and the high cost of employee benefits. Contact us today to learn more about how we can help you.
