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.
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%.
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.
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.
Some states and territories will require disability insurance coverage for non-work related injuries and illnesses. These states and territories are:
You can provide two types of qualified retirement plans: defined-benefit plans and defined-contribution plans.
Defined-benefit plans use formulas to determine what benefits an employee will receive, usually on a monthly basis, when they retire.
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).
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.
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.
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.