Business owners are always looking for ways to cut down on costs, and one of the ways that you might be considering to keep company expenses down is by picking which benefits to offer your employees.
Let’s get one thing out of the way first: there are benefits that you are legally required to offer all your regular employees as well as others that are completely up to your discretion. According to U.S. Federal Law, these mandatory benefits are those that “benefits provide workers and their families with a retirement income and medical care, mitigate economic hardship resulting from loss of work and disability, and cover liabilities resulting from workplace injuries and illnesses.” If you do not offer these benefits, you can be charged with a federal crime.
Mandatory Employee Benefits
Here are the basic mandatory employee benefits that you should offer your employees:
- Just and Fair Compensation – employers are legally required to offer an hourly rate that is at least equal to the federal minimum wage.
- Civic Duties – if your employee is called away from work due to civic duties such as serving on duty or being called as a witness in court, you are not allowed to dock their pay for time lost.
- Unemployment Insurance – should your employee lost their job due to factors outside of their control such as downsizing or company restructuring, they may apply for unemployment insurance. This means that you will be required to pay up to twenty-six weeks of around half their regular salary.
- Worker’s Compensation – this benefit requires employers to protect their employees from financial losses due to injuries or illnesses that the worker incurred while on the job. It also covers any medical expenses. However, employers are NOT required to provide health insurance.
- Family and Medical Leave – for large companies (with 50 employees or more), employers are required to offer up to twelve weeks of job-protected, unpaid leave for significant medical or family care reasons.
The Special Case of Disability Leave
When it comes to disability leave, you can consider it as a special case because it is required as a mandatory employee benefit, but only in specific states. Only five states (Hawaii, New Jersey, New York, California, and Rhode Island) and one U.S. territory (Puerto Rico) legally require employers to offer disability leave for their employees. This covers loss of wages due to illnesses or injuries that are not incurred on the job but prevents the employee from fulfilling their duties. However, disability leave only requires partial wage replacement.
Every other benefit that is not covered by those mentioned above is basically at the discretion of the employer. You are not legally required to offer benefits such as dental plans, life insurance plans, paid vacation leave, or retirement plans.
Why Should I Offer Benefits that Aren’t Mandatory?
Here’s the thing: while you are not legally obliged to offer benefits beyond those that are required by law, there’s a huge case in favor of offering these benefits to your employees. You need to think about these benefits as a long-term investment, rather than looking at their short-run bottom line cost.
Studies have shown that companies who do offer multiple and comprehensive benefits packages are able to keep employees for longer, have higher productivity, and have higher office morale. This translates to a better working environment for everyone, and no employee would want to leave a company environment where they feel that they are being valued! Offering a comprehensive benefits package also translates to a lower turnover rate in your employees, which means that you won’t need to spend money to keep hiring and training new personnel.
Of course, there is no “one magic formula” when it comes to deciding which additional benefits to offer your employees. It all boils down to your goals as an employer with regards to the company culture you want to cultivate. It also depends on the number of employees you have and whether you can afford it.
Once you have decided what additional benefits to offer your employees, you can then decide whether you want to create and implement the benefits package yourself, or if you should hire an employee benefits administration service to take care of all the little details for you.
In the end, you just want to make sure that you offer a benefits package that both complies with federal law, as well as works positively for both you and your employees.
Check out my guide on how to start your business right with tons of useful tips I learned by successfully starting, building, and selling multiple companies.