Did you know that 60% of people report that work employee benefits are a huge factor in deciding whether to accept a job offer? The truth of the matter is your current (and potential) employees want benefits.
They see it as a concrete sign of whether you’ll invest in their well-being and their financial stability or you’ll decide to cut corners. When you’re running a small business, you’re already worried about your budget constraints.
Yet, if you’re aiming for long-term financial prosperity, then offering benefits is a must. Keep on reading for our full breakdown of employee benefits. We’ll look into the benefits that you’ll need to provide as required by law, as well as the most common benefits offered by employers.
What Are Required of Employee Benefits Insurance?
There’s no use in starting a list of employee benefits that you’d like to offer without ensuring the availability of the benefits mandated by federal and state law.
Here are the employee benefits that you must provide.
Social Security Taxes
Your business is obligated to pay social security and Medicare taxes just as your employees do, down to the same percentage rate. Also, company tax payments are considered a business expense. You’ll be required to withhold your employees’ share of tax payments from their gross pay.
If you’re using a reputable payroll service, then you won’t have to worry about manually overseeing the process. Regardless, you’ll need to take a close look at the IRS’ social security and Medicare withholding rates to get an idea of what rates you’ll need to calculate into your budget.
As it stands, unemployment insurance works by paying a benefit to employees in case they’re laid off. You’ll find that there is a plethora of different unemployment programs offered by the federal government as well as on the state level.
These programs are mainly funded via taxes collected from businesses. To set up your unemployment insurance, you’ll have to check out your state’s requirements.
It’ll show you how much you need to pay for unemployment insurance taxes. Depending on your state, you might not need to pay anything at all. However, if you’re required to do so, you can register with your state’s department of revenue or its workforce agency.
Similar to unemployment insurance for its variety according to your state’s regulations, disability insurance might require your business to provide partial wage replacement insurance.
This insurance, also known as short-term disability plans, is meant for eligible employees who suffered from a non-work-related injury or illness.
The Family and Medical Leave Act
Furthermore, you’ll need to keep the Family and Medical Leave Act (FMLA) in mind. In short, it’s a federal act that gives your employees up to twelve weeks of unpaid and “job-protected” leave each year.
This act comes into play when one of the following conditions are met:
- An employee needs to care for an immediate family member with a serious medical condition
- The employee is either giving birth or caring for their child or needs time for placement of adoption or foster care
- An employee needs time to care for a serious health condition of their own
Once any of these conditions are met, your employee can tap into the federal act’s 12 weeks of unpaid leave.
What Are the Most Common Types of Employee Benefits Insurance?
Now that we covered the bare-bones benefits that are required by law, it’s time to look into what are considered to be “standard” benefits.
Considering the hugely positive effects of benefits, especially when it comes to your employee’s sense of well-being, it’s time to explore the most common employee benefits you can on offer.
Medical and Health Employee Benefits Insurance
The behemoth of all employee benefits would be—unsurprisingly—medical insurance. It’s considered to be one of the most expensive benefits, and it’s matched by its sheer importance to your employees.
The way medical insurance usually works is having the employer pay a specific percentage of the charged premium per employee. Then, the remaining cost is paid by the employee via their paycheck.
As an added incentive and benefit, some employers decide to pay the entire health insurance premium per employee. This translates into free health insurance for the employee.
Furthermore, there is a multitude of insurance providers and coverage options available to employers. Some of the factors that can influence your selection would be your business location, regional and state considerations, as well as the number of full-time employees.
Flexible Spending Accounts (FSA)
An additional perk that employees tend to expect is the ability to contribute pre-tax dollars every pay period to a Flexible Spending Account. The way an FSA works is by giving access to the employee’s pre-tax money via a credit or debit card. The account holder usually issues this type of card.
Moreover, there are four different types of Flexible Spending Accounts that you can offer to your employees.
1. Medical Expense Account
The money deposited into this account can be used to cover the costs of medical expenses that aren’t already covered by the employee’s health insurance.
For instance, prescription costs, copayments for office visits, or even procedures don’t tend to be covered under health insurance plans. It’s quite versatile as well, as it can be used for almost any healthcare expense under the sun, including vision and dental costs.
2. Dependent Care
A dependent care account can take up to $5,000 per family in pre-tax contributions each year.
Traditionally, these funds will be used to pay for family expenses related to the care of young children. Examples would be paying for daycare or elementary school expenses.
3. Health Premiums
This type of account comes into play only when an employer decides not to offer health insurance.
A health premium FSA allows your employees to contribute pre-tax dollars that can be later applied towards health insurance premiums. In a way, these premiums will be paid fully by the employees.
4. Adoption Assistance
The overarching costs of the adoption process can be quite astronomical. Therefore, this FSA account allows employees to make use of their pre-tax money for adoption purposes.
Retirement Savings Plan and Employee Benefits Insurance
Similar to the popularity of medical and health insurance plans, employers offering retirement savings plans give them a competitive edge, especially when recruiting new employees.
If you’re a small business, it’s a misconception to think that you won’t be able to offer a decent retirement savings plan to your employees. One of the most common plans would be the 401(k).
Essentially, a 401(k) allows your employees to contribute a chunk of their pre-tax pay into an investment account. The investment account tends to be managed by a third-party investment company, like Merrill Lynch or Vanguard. Also, 401(k)s come with their own constraints.
For instance, your employees won’t be eligible to withdraw their money until they reach a specific age. In cases where employees take money out of their 401(k) early, they might have to contend with income taxes and even penalties.
Besides, you’ll find that many employers offer “matching” retirement savings plans to their employees. In summary, whatever amount the employees contribute out of their annual salary, their employer will “match” either all or a part of that investment amount.
In the case of paid leave, the scope of this benefit tends to vary widely depending on the employer. Yet, most employers will offer paid leave benefits in one form or another, like vacation time, personal days, and national holidays.
Generally, employers will allow their employees to accrue vacation time and sick days. Then, they can decide when they’d like to cash them in.
Nothing shows how much an employer cares about their employees’ personal development more than tuition reimbursement incentives. Increased focus and productivity are some of the great benefits of providing tuition reimbursement.
It also boosts your employees’ overarching happiness and work satisfaction. Additionally, you’ll find that some employers choose to place restrictions on tuition reimbursements.
For example, only reimbursing tuition for coursework that’s directly related to the employee’s job. Other employers are much more open with their eligibility and requirements.
Transportation and Parking Benefits
Your business might be located in a major city with a good public transport system. Or you might not be able to provide access to complementary employee parking. This is when transportation and parking benefits come in.
You can institute a reimbursement program. Or you can team up with your city’s public transport office for employee discounts and passes.
Untangling Employee Benefits Insurance
There is no reason for employee benefits to be as complex as they seem to be, especially for small businesses. By mixing mandatory benefits with other perks, your business will actively invest in its employees. Also, it’ll secure its long-term health and growth.
Thankfully, now you know which ones to pick and what your options are for employee benefits. However, when it comes to employee benefits and business insurance, we’ve barely covered the tip of the iceberg.
Make sure to check out our blog for additional business tips and advice. Or, if you’re ready to discuss your business funding options, contact us today.