Employee Benefits : The Basics

By: Lynn Zimmers

What are employee benefits? What do you do once you have hired the right employee? How can you retain them? Read on to help clarify some of these questions.

What are employee benefits?

Lets define the term “Employee Benefits”…

Employee benefits are any kind of tangible or intangible compensation given to employees apart from base wages or base salaries, according to Websters Dictionary.

This employee benefits definition points to examples of job benefits such as insurance (including medical, dental, life), stock options and cell phone plans. But, employee benefits can be much more than basic, from training opportunities to student debt relief.

Why do employers offer employee benefits?

The numbers speak for themselves about the importance of employee benefits. Extensive research by the Society of Human Resource Management (SHRM) indicates that 92% of employees consider employment benefits as important for their overall job satisfaction. Almost one third of employees also cited work benefits as the top reason of looking for a job outside their organization; and for choosing to stay at their job, too. Employee benefits are basic employee engagement and retention strategies.

They support talent attraction as well. 63% of job seekers surveyed say they pay attention to what benefits a company offers. This means that offering benefits, and mentioning them in your job ads and careers page, is a great way to attract top candidates.

Benefit Basics

The law requires employers to provide employees with certain benefits. You must:

  • Give employees time off to vote, serve on a jury and perform military service.
  • Comply with all workers’ compensation requirements.
  • Withhold FICA taxes from employees’ paychecks and pay your own portion of FICA taxes, providing employees with retirement and disability benefits.
  • Pay state and federal unemployment taxes, thus providing benefits for unemployed workers.
  • Contribute to state short-term disability programs in states where such programs exist.
  • Comply with the Federal Family and Medical Leave (FMLA).

You are not required to provide:

  • Retirement plans
  • Health plans (except in Hawaii)
  • Dental or vision plans
  • Life insurance plans
  • Paid vacations, holidays or sick leave

In reality, however, most companies offer some or all of these benefits to stay competitive.

Most employers provide paid holidays for New Year’s, Memorial Day, Independence Day, Labor Day and Thanksgiving day and Christmas day. Many employers also either allow their employees to take time off without pay or let them use vacation days for religious holidays. Basically, any kind of non-wage gain attached to an employee’s position can be classified as an employee benefit, be it mandatory or voluntarily given by an employer.

Many small-business owners mistakenly believe they cannot afford to offer benefits.

Help Navigating the Cost of Healthcare

The rising costs of health insurance have forced some small businesses to cut back on the benefits they offer. Carriers that write policies for small businesses tend to charge very high premiums. Often, small groups may have access to partially self funded plans but they may demand extensive medical information about each employee. If anyone in the group has a pre-existing condition, the carrier may refuse to write a policy. Or, if someone in the company becomes seriously ill, the carrier may cancel the policy the next time it comes up for renewal.

How to protect yourself from a scam? Here are some tips:

  • Compare prices. If it sounds too good to be true, it probably is. Ask for references from other companies that have bought from the plan. How quick was the insurer in paying claims? How long has the reference dealt with the insurer? If it’s less than a few months, that’s not a good sign.
  • Make sure the company follows state regulations. Does the company claim it’s exempt? Check with your state’s insurance department .
  • Ask the agent or administrator to show you what his or her commission, advance or administrative cost structure is. Overly generous commissions can be a tip-off; some scam operations pay agents up to 500 percent commission.
  • Get help. Ask other business owners if they’ve dealt with the company. Contact the Better Business Bureau to see if there are any outstanding complaints. If you think you’re dealing with a questionable company, contact your state insurance department or your nearest Labor Department Office of Investigations.

If you have any questions contact us. We have a dedicated service team read to help you navigate any questions you may have.

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