You are required by law to provide employees with several small business employee benefits. You must provide them to comply with the laws and regulations of the U.S. Department of Labor. Failure to do so could result in substantial fines and other penalties. If you are unsure of the benefit requirements for your particular business, don’t hesitate to consult an employment attorney.
Workers’ compensation is a type of insurance that protects employers and employees from lawsuits for work-related accidents and illnesses. Every state except Texas requires workers’ compensation to cover medical care, lost wages, rehabilitation care, disability expenses and funeral benefits for employees injured on the job.
Because workers’ compensation laws vary from state to state, it’s important to understand your state’s requirements. Remember that rates depend on the type of work your employees do, so if you are in an industry that requires a lot of office work, such as accounting, you will pay less than employers in high-risk industries, such as construction.
Unemployment insurance provides monetary compensation to workers who are terminated from work through no fault of their own. If an employee leaves your business and files a claim for unemployment compensation, you will be notified and funds will be deducted from your unemployment account. The amount you will pay will depend on your state and base salary guidelines multiplied by the tax rate.
Disability insurance is required if your small business is located in California, Hawaii, New Jersey, New York, Puerto Rico or Rhode Island. It is designed to cover employees who are unable to work due to a serious non-work-related injury or illness. Both short-term and long-term disabilities provide income to your employees when they are away from work. Short-term disability typically pays employees anywhere from two to six months and provides up to 70% of current earnings, while long-term disability typically pays 50% to 70% of their monthly earnings and can last for years or even decades, depending on Depends on plan.
Consolidated Omnibus Budget Reconciliation Act (COBRA)
If you have 20 or more employees and offer group health insurance, you should be concerned with COBRA. This is a federal law that requires you to continue to provide health coverage for former employees and their families for 18 months or, in some cases, 36 months. To take advantage of COBRA, laid-off employees must pay the full premium, including what you paid for them in the past.
Social Security and Medicare
Social Security and Medicare are federal programs that U.S. employees must pay through employer deductions while they are working. Social Security benefits will provide them with retirement or permanent disability income. Medicare, on the other hand, will provide health coverage for people after they turn 65 or are diagnosed with a certain disease or disability. Under the Federal Insurance Contribution Act (FICA), you and your employees are each required to contribute 6.2% of worker wages to Social Security and 1.45% to Medicare.
Family and Medical Leave
The Family and Medical Leave Act (FMLA) protects employees during certain life events, such as childbirth, adoption or raising a child, and caring for a sick relative. No matter which state you are in, if your business has 50 or more employees within 75 miles of your workplace, you are subject to FMLA. While FMLA won’t make you pay anything out of pocket, it will require you to provide up to 12 weeks of unpaid time off and health benefits to eligible employees.
Under the Affordable Care Act, your business must provide health insurance if you have 50 or more employees. Even if you have fewer than 50 employees, health insurance is a common benefit worth exploring. Fortunately, there are a variety of health insurance plans on the market, such as fully covered, partially self-financed, high deductible, preferred provider organization (PPO) plans, and health maintenance organization (HMO) plans, so you can choose for your unique situation.