Basics of Employee Benefits
In order to remain competitive, as well as attract and retain top employees, employers are faced with the task of creating a winning compensation strategy that will not only accomplish these objectives, but will also maintain corporate budgeting constraints. Employee compensation is much more than just a salary; it can encompass “perks,” such as vacation and sick time, company vehicles, corporate memberships, and a variety of benefits designed to help employees and their families. While employers are legally obligated to provide certain state and Federally-sponsored benefits, many employers also offer, and often contribute to, additional employee benefits.
State and Federally Mandated Benefits. Employers are required by law to participate in certain programs, either by paying taxes or making contributions. These include workers compensation coverage, unemployment insurance, Social Security, Medicare, state disability programs, where applicable, and, health insurance coverage as specified in the 2010 Affordable Care Act (ACA).
Group Benefits. Many employers offer a range of benefits to employees, which may include the following:
- Group Term Life Insurance—Group term life insurance is generally offered either as a fixed amount or based on a multiple of salary. For example, an employer might offer employees a fixed benefit of $50,000 or perhaps two times their annual salaries.
- Health Insurance—Employers with 50 or more employees will be required to offer qualified health coverage to all employees working 30 or more hours per week, or be faced with a penalty. Since more workers will be covered under the ACA, employers may need to reconsider the level of benefits to offer and the amount they expect to contribute to the cost of the plan. It is important to note that continuing to offer health insurance to employees may serve to attract and retain top performing employees.
- Disability Income Insurance—Disability income insurance replaces a percentage of an employee’s earnings, in the event that he or she becomes unable to perform the regular duties of his or her job. Typical benefits range from 50%–70%, up to a monthly maximum benefit. Some disability income plans pay benefits for a number of years or until age 65. Most plans offer additional provisions via policy riders designed to improve coverage, as well as encourage the employee to return to work as soon as he or she is able. Some of these policy riders include residual or partial disability payments and cost-of-living adjustments.
- Vision Insurance—Vision plans generally provide a benefit for the purchase of eyewear or contact lenses, and may also pay for eye exams.
Keeping employees satisfied is a challenge that affects all employers. Offering an attractive benefits package may help you retain key employees who can assist you in maintaining your competitive edge.
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