Employee benefits from employers typically include wages plus benefit expenses and they fall into two categories. There are those benefits that employers may choose to offer to their workers voluntarily and those that are required by state, federal or local statute. Employees are entitled to most of these benefits which include health insurance, tuition reimbursement, long-term disability coverage, and retirement savings plans among others. In the U.S., before an employer can issue a paycheck, it is a legal requirement with few exceptions that he/she provides at least three major types of benefits to their workers (Bryant & Allen, 2013). Such legally required benefits provide workers and their families with medical care alongside retirement income, and often try to mitigate economic hardships which result from disability cases and loss of work while at the same time covering liabilities occasioned by sudden illnesses and workplace injuries. Thus, the core legally required benefits are Social Security, Medicare, worker’s compensation, and State and Federal unemployment insurance (Sengupta et al., 2012). To meet these factors, employers are supposed to incur the portion of the cost of these benefits through compulsory insurance premium or payroll tax.
Social Security
This kind of benefit is also known as Survivors, Old Age and Disability insurance cover and is the income meant for retirees, disabled workers, the dependents, and their families. The foundation of Social Security benefit is provided for in the Social Security Act of 1935. Payroll tax on worker’s wages is used to finance Social Security with a percentage of the tax paid by the employer and the other portion by the employee (Mamorsky, 2018). When workers work for specified number of hours, they are awarded social security credits which are cumulatively applied towards retirement benefits upon the lapse of the stipulated retirement period.
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Long-term and short-term disability insurance
In the United States, many employers do not provide short-term disability insurance (STD), but some states require employers to provide up to 26 weeks of STD insurance. Short-term disability insurance is designed to compensate employees for short-term income during the period of disability, usually about 60% of the employee's weekly salary. In this way, the employee's insurance compensation during the period of disability is close to the actual income lost due to injury.
The law does not require employers to purchase long-term disability insurance (LTD) for employees, but some companies do offer LTD insurance as one of the standard benefits for employees. Long-term disability insurance is a compensation for an employee’s loss of income due to long-term disability. The amount of compensation is also about 60% of the total employee income. Usually long-term disability insurance has a 30- to 180-day culling period before the insurance pension begins to calculate, which coincides with the end of short-term disability insurance (if provided). The benefit period for long-term disability insurance lasts for life, but most long-term disability insurance ends when the employee is 65 years old, because then the employee can benefit from social insurance. Many employers pay full premiums for long-term disability insurance for employees.
Pension related benefits
The company's pension ( pension ) plan not only benefits employees, but is also the best tax avoidance for both employer and company employees. Companies can use pension payments to reduce taxes, while for employees, pension payments can also be deferred.
There are two types of pension plans: fixed contribution pension plans and fixed income pension plans. A fixed income pension plan is a fixed-income plan, and the amount of contributions deposited by the company into the plan is based on the estimates of the actuary. Employees can know their pension amount and can plan accordingly. The income of an employee in a fixed contribution pension plan depends on the amount deposited into the retirement account. Such pension accounts include: profit sharing plan, cash purchase plan, target income plan, stock bonus plan, ESOP plan, thrift savings plan and 401(k) plan (Bryant & Allen, 2013). With the 401(k)-pension plan, employees can easily and easily save their retirement money by automatically deducting their pre-tax wages (Dan 2011). This money employee can't see it, so they won't be reluctant to do so. Adopting the 401(k) program can increase employee enthusiasm and help the company attract new employees. Funds deposited by employees and employers into pension accounts, as well as account income, are not taxable until the employee is retired from the account. Employees have complete control over the direction in which these funds are invested. When the employment relationship is suspended or the employee is experiencing financial difficulties, the employee can withdraw the funds in the pension account, but if the employee is under 59.5 years old, he must pay a 10% punitive tax. Many companies allow employees whose contracts have been suspended or have resigned to choose to keep their 401(k) retirement accounts, but the company no longer deposits money into them (Sengupta et al., 2012).
Health insurance
Employers are also expected to offer health insurance benefits. There are three main types of health insurance that employer can offer to employees: traditional insurance (medical expenses), HMO (health management organization) insurance plans, and PPO (priority providing organizations) insurance plans (Bryant & Allen, 2013). It is through the payroll tax on covered earnings from both the employer and the employee that health insurance gets funded. Also related to health are benefits such as sick leave benefits, maternity leave benefits and life insurance benefits (Heather 2013).
However, not all these plans are applicable to all organizations such as retirement benefits, health plans, life insurance plans or sick leaves and paid vacations. Some organization, however, advocate for these benefits to remain competitive among other firms that don’t value such aspects (Bryant & Allen, 2013). Notably, there are no federal laws requiring plans to provide equal benefit coverage to such as Family and Medical leave to all employees. For instance, the Patient Protection and Affordable Care Act requires that only employers with fifty or more staffs offer them with coverage or pay some charges towards the plan, but there are no provisions by law to apply the same to part-time workers (Mamorsky, 2018). On the other hand, retirement plans are not subject to most companies because employees should learn the need to save earlier in life. This is because workers are supposed to open up Individual Retirement Accounts (IRAs) which is a saving plan available to all workers. The advantage of the plan is that, it is a tax-deferred plan, hence, this saves the organization of a lot of funds channeled to retirement benefits if individuals can begin saving for their future.
References
Bryant, P. C., & Allen, D. G. (2013). Compensation, benefits and employee turnover: HR strategies for retaining top talent. Compensation & Benefits Review , 45 (3), 171-175.
Dan W. (2011). Caregiving Costs U.S. Economy $25.2 Billion in Lost Productivity. Gallup . Retrieved from: http://www.gallup.com/poll/148670/caregiving-costs-economy-billion-lost-productivity.aspx
Heather H. (2013). Paid Sick Leave and Job Stability. Work and Occupations 40(2): 143-173.
Mamorsky, J. D. (2018). Employee Benefits Law: ERISA and Beyond . Law Journal Press.
Sengupta, I., Reno, V. P., Burton Jr, J. F., & Baldwin, M. L. (2012). Workers’ compensation: Benefits, coverage, and costs, 2010.
