7 Employee Benefits You’re Required to Give

Whether you are an established company or an entrepreneur, required employee benefits ensure that your team has access to time off and compensation when they need to take care of themselves and their families. In fact, 93% of workers consider their wellbeing at work to be equally important to their salary according to Wellhub’s Work-Life Wellness Report 2024. 

Employee benefits requirements are grounded in hard and fast rules that your company is legally required to follow. It’s important you understand and abide by these rules, both to stay compliant and to look after your employees’ wellbeing.

What are Employee Benefits?

Employee benefits are any form of compensation or perk that an employee receives on top of their base salary. Essentially any indirect form of payment to an employee can be classified as an employee benefit. That includes everything from insurance benefits and retirement benefits to paid time off, commuter perks, and childcare help. Benefits even include paid travel vouchers or a reserved parking spot. 

Benefits matter to employees. Sixty-eight percent of job hunters want to know what benefits a company offers before accepting an offer. Potential candidates for a position will use benefits packages to weigh multiple job offers—or to even consider applying to a particular company at all. 

So it’s well worth your time to fully understand benefits packages. Optimizing benefits can be a powerful tool to help your company stand out in the competitive job market. Employees want to work for organizations that take care of their employees. 

Seven Required Employee Benefits

There are two main types of employee benefits: required benefits and voluntary benefits. Voluntary benefits are any additional perks you give your employees on top of the ones you’re required by the government to include. Required benefits are anything the US Department of Labor mandates you provide. There are seven of these.

Discover what each of these required benefits are and how they work, so your HR department can ensure they’re offering necessary benefits. 

1. Family and Medical Leave

The Family and Medical Leave Act (FMLA) is a federal law that guarantees eligible employees the right to take up to 12 weeks of unpaid leave each year and still maintain their job and benefits. Employees can use this time off for:

• Personal health issues
• To care for a family member who’s injured or ill
• To care for a newborn baby, foster child, or newly adopted child
• To take care of an injured service member in the family

Your team members qualify for leave under FMLA if your company employs at least 50 full-time people. Any time spent on FMLA leave is unpaid. However, employees are still eligible for health insurance benefits during their leave, and their jobs are protected until they return. Also, if your workers are providing care to a service member, they’re entitled to take up to 26 weeks of unpaid leave in order to care for them.

2. Health Insurance Coverage

For companies with fifty or more employees, it's also required by law that these companies provide employees with affordable health insurance benefits that deliver minimum value. According to the Affordable Care Act (ACA), you could face penalties if your health insurance plan doesn’t meet these requirements.

To be in compliance, your health plan should also:

• Offer coverage to 95% of your full-time employees and their dependents
• Not require a waiting period of more than 90 days for employees to enroll

Any company with fifty or more full-time employees must follow the ACA’s employer mandates. You can report your own compliance with the employee healthcare mandate by submitting Forms 1094-C and 1095-C to the IRS.

3. Workers’ Compensation

In addition to required health benefits, employers must also provide workers’ compensation insurance to their employees. This is a type of insurance that covers the cost of medical care and lost wages associated with workplace injuries or illnesses. It’s required by state law in many cases, though some exceptions may apply. Companies can choose to self-insure or obtain workers compensation insurance through a state-run insurance fund or insurance company.

 Ensuring that your employees have access to workers' compensation is not only a legal requirement — it’s also a vital part of supporting your team. By providing this coverage, you're safeguarding your business against potential legal costs and demonstrating your commitment to your employees' welfare. It's beneficial to familiarize yourself with the applicable rules and requirements, so you can confidently fulfill your obligations and maintain a secure, compliant, and caring workplace environment.

4. Unemployment Insurance

Unemployment insurance is a type of compensation offered to workers who lose their jobs through no fault of their own. It’s required by law in almost every state for employers of all sizes, and is meant to help people get back on their feet while they search for new employment opportunities, generally after a company layoff. To be eligible for unemployment benefits, employees typically need to have worked at their jobs for at least a certain period of time and earned a minimum amount in wages.

In every state, employers are required to pay Federal Unemployment Tax Act (FUTA) taxes, but you might also have to pay taxes at the state level, too. 

The more claims that are approved, the higher your tax rate will likely increase. Make sure you’re approving and contesting former employees’ claims on time (usually within 10 days) and paying uninsurance taxes to avoid any penalties.

5. Disability Insurance

Depending on which state you operate in, you may have to provide employees with short-term or temporary disability insurance. This is a type of coverage that helps employees replace their income if they’re unable to work due to an illness or injury. It can be a big help for workers who are unable to work temporarily due to serious health issues.

Currently, five states and one U.S. territory require companies to provide short-term disability insurance for their employees: California, Hawaii, New Jersey, New York, Rhode Island, and Puerto Rico. Employers in other states sometimes offer disability insurance as a voluntary benefit.

6. Social Security and Medicare Benefits

Both employers and employees are required to pay Social Security and Medicare taxes through payroll deductions. Social security provides retirement income and benefits to retired adults starting at age 62 and to people with disabilities regardless of age. Spouses, children, and survivors may also qualify for benefits under the program. 

Medicare provides health insurance coverage generally starting at age 65, although some recipients can qualify at a younger age if they have certain medical conditions or disabilities. 

7. Paid Sick Leave

It’s important for your team to be able to take time off when they’re ill without worrying about their paychecks. A few states and even some cities have introduced their own laws requiring paid sick leave, so you’ll have to pay attention to local legislation to make sure you’re in compliance. If you operate as a remote-first company, you’ll have to follow the laws for the states where your employees live and work.

According to Paycor, these states and districts all require some form of paid sick leave benefits for employees:

• Arizona
• California
• Colorado
• Connecticut
• Maryland
• Massachusetts
• Michigan
• New Jersey
• New Mexico
• New York
• Oregon
• Rhode Island
• Vermont
• Washington
• Washington, D.C.

As of the time of writing in November 2023, the federal government doesn’t require paid sick leave, but a bill called the Healthy Families Act has been drawn up. If it passes, this law would require business owners to provide up to seven days of paid sick leave per year.

Are Mandatory Benefits Enough to Support Total Employee Wellness?

When it comes to required employee benefits, many companies assume that providing healthcare, workers’ compensation, unemployment insurance, and disability insurance is enough to create a truly healthy and supportive work environment.

But any worthwhile employee benefits strategy addresses holistic wellbeing, including the physical, mental, emotional and social wellness, and of employee. And workers want to take advantage of such benefits: 77% percent of workers report that they engage with their employer’s wellbeing benefits.

Talk to a Wellbeing Specialist to see how you can go the extra mile to keep your team healthy and happy.

References

• Paid Sick Leave Laws By State for 2022. (2022). Paycor. Retrieved December 16, 2022 from https://www.paycor.com/resource-center/articles/paid-sick-leave-laws-by-state/ 
• Family and Medical Leave Act. U.S. Department of Labor. Retrieved December 16, 2022 from https://www.dol.gov/agencies/whd/fmla 
• The Healthy Families Act Fact Sheet. (November 2022). National Partnership for Women & Families. Retrieved December 16, 2022 from https://www.nationalpartnership.org/our-work/resources/economic-justice/paid-sick-days/the-healthy-families-act-fact-sheet.pdf 
• Employer Shared Responsibility Provisions. Internal Revenue Service. Retrieved December 16, 2022 from https://www.irs.gov/affordable-care-act/employers/employer-shared-responsibility-provisions 
• Employer Mandate. Cigna. Retrieved December 16, 2022 from https://www.cigna.com/employers/insights/informed-on-reform/employer-mandate 
• Smith, Gabrielle. (November 2, 2022). IRS increases employer mandate penalties for 2023. PeopleKeep. Retrieved December 16, 2022 from https://www.peoplekeep.com/blog/irs-increases-employer-mandate-penalties 
• What is workers’ compensation? Nationwide. Retrieved December 16, 2022 from https://www.nationwide.com/lc/resources/small-business/articles/what-is-workers-compensation-insurance 
• Kagan, Julia. (December 8, 2022). Unemployment Insurance (UI): How It Works, Requirements, and Funding. Investopedia. Retrieved December 16, 2022 from https://www.investopedia.com/terms/u/unemployment-insurance.asp 
• Rosenberg, Rebecca. (October 22, 2021). U.S. Chamber of Commerce. Retrieved December 16, 2022 from https://www.uschamber.com/co/run/human-resources/employers-guide-to-unemployment-benefits 
• Sigel, Zack. Suh, Elissa. (June 8, 2022). What is short-term disability insurance? Policygenius. Retrieved December 16, 2022 from https://www.policygenius.com/disability-insurance/what-is-short-term-disability-insurance/ 
• Complying with the New York Disability Benefits Law. (March 2, 2018). Parker, Smith & Feek. Retrieved December 16, 2022 from https://www.psfinc.com/articles/complying-new-york-disability-benefits-law/ 
• Disability Benefits. New York State. Retrieved December 16, 2022 from http://www.wcb.ny.gov/content/main/DisabilityBenefits/employee-disability-benefits.jsp
• Social Security (Old-Age, Survivors, and Disability Insurance) Program Description and Legislative History. Social Security Office of Retirement and Disability Policy. 2023 August 2. https://www.ssa.gov/policy/docs/statcomps/supplement/2020/oasdi.html