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Providing Employee Benefits

Before you hire your first employee, make sure you understand what benefits you are required to provide and take some time to consider what benefits you can offer to your employees, as an incentive.

Required Benefits

Federal law requires you to provide some benefits to your employees, including social security taxes, unemployment insurance, workers’ compensation, disability insurance, and Family and Medical Leave.

Social Security Taxes

The Social Security Administration (SSA) provides several services to help your employees and their families, including retirement benefits, disability programs, and supplemental security income. Because of this, you pay social security taxes at the same rate as your employees. The current social security tax rate is 6.2%.

Unemployment Insurance

You may also be required to pay unemployment insurance taxes, depending on your state’s laws. As the employer, you’ll pay unemployment insurance taxes, but your employees will not pay unemployment insurance taxes.

The Unemployment Insurance Program allows eligible, unemployed workers to receive temporary financial assistance, if they meet your state’s eligibility requirements.

Workers’ Compensation

You’re required to carry workers’ compensation insurance, once you hire employees. You can be covered through a commercial carrier, on a self-insured basis, or through your state’s workers’ compensation insurance program.

Workers’ compensation insurance is important because it provides benefits to your employees if they are injured on the job or contract an occupational disease.

Disability Insurance

Some states and territories will require disability insurance coverage for non-work related injuries and illnesses. These states and territories are:

Family and Medical Leave

The Family and Medical Leave Act (FMLA) provides eligible employees with 12 weeks of job-protected leave over a 12-month period for:

  • The birth of a child and to care for a newborn;
  • The placement of a child for adoption or foster care and to care for that child, within one year of placement;
  • The care of a spouse, child, or parent who has a serious health condition; and
  • A serious health condition that makes your employee unable to perform their job.

Optional Benefits

The optional benefits  you choose to provide for your employees can greatly enhance their lives and can be the deciding factor when making the decision to work for you.

Personal Time

Many employers provide paid vacation and personal time because employees come back recharged and ready to tackle new challenges.

You can also provide paid sick leave and bereavement leave. You can choose to give your employees paid time off for holidays, like Fourth of July, Thanksgiving, and Christmas.

Health Insurance

Under the Affordable Care Act (ACA), you are not required to provide health insurance if you have fewer than 50 full-time employees. If you choose to provide health insurance, however, you can purchase it through the Small Business Health Options Program (SHOP).

Retirement Plans and Pensions

If you choose to provide your employees with a retirement or pension plan, it must comply with the governing laws of the Employee Retirement Income Security Act (ERISA), the Pension Protection Act, and the Economic Growth and Tax Relief Reconciliation Act.

You can provide two types of qualified retirement plans: defined-benefit plans and defined-contribution plans.

Defined-Benefit Plans

Defined-benefit plans use formulas to determine what benefits an employee will receive, usually on a monthly basis, when they retire.

Defined-Contribution Plans

In defined-contribution plans, a retired employee receives benefits based on how much they and their employer contributed to the plan and how much interest is earned. Examples of defined-contribution plans include 401(k)s, 403(b)s, profit sharing, and employee stock ownership plans (ESOPs).

Incentive Programs

Finally, you can offer incentive programs. Incentive programs motivate your employees, which can lead to higher rates of productivity. Because of this, many employers choose to offer incentive programs.

Flex Time

Not every employee is the most productive between the hours of 8am and 5pm, so you have the option of providing your employees with flexible hours. This allows them to choose their own hours. You can also offer flex time in conjunction with allowing your employees to telecommute.

Family Events

Family events are an easy and cost-effective incentive for your employees. They’re also a great way to gain support from their families. Let your imagination run wild when planning family events, like bring your child to work days, movie nights, and picnics.

Project Completion Incentives

If you offer incentives for successfully completing a project, you can build an engaged team, which is actively supporting your business plan and objectives. You can bring in a catered lunch or give your employees an afternoon off.

Workplace Wellness Programs

Offering a workplace wellness program provides your employees with healthier lifestyles and lower medical costs, while giving you more productive employees. Wellness programs are easy to set up because a small committee can run them. The committee can survey your employees to determine what aspects of their health your employees are most interested in – weight loss, getting in shape, quitting smoking, etc.

Use that information to form a program that your employees want to participate in. For example, set up a weight loss challenge because your employees are trying to lose weight.

These optional benefits are just the beginning; when creating your benefits package, consider what options are most important to you and your potential employees. Other options to consider for your benefits package include life insurance, stock options, employer-paid day care centers, education assistance – the list goes on and on.