What are Employee Benefits?
This might seem like a juvenile question with a straight-forward answer, but the answer is less clear than you may think. Depending on who you ask, you might get a different answer. Hey, even we debated what defines an employee benefit — and we're in the business!
At a basic level, employee benefits are anything outside of earned wages that provide, or intend to provide, a benefit to the employee. When most people think of employee benefits, they think of health insurance, retirement funds, and paid time off. Employee benefits are these things, but they are also so much more.
Is health insurance an employee benefit?
We say yes. Is it a required benefit? Technically, no. There is no law that requires employers to provide health insurance to employees. However, the Affordable Care Act (ACA) can penalize employers that fail to provide health insurance. Under the ACA, employers with more than 50 full-time employees must offer health insurance to their full-time employees. If this is not offered, the employer faces penalties of several thousand dollars per employee. You can read more about this topic and other benefits you should probably offer here.
What about unemployment insurance, is that an employee benefit?
This is one we debated. While no one enjoys the challenges of unemployment, it is a reality that employers and employees need to contend with. Legally, all employers are required to have unemployment insurance to protect employees in the event that the employee is unable to work through no fault of their own.
As an employer, you have to pay a calculated sum to the state to help fund your state's unemployment fund. If your employees ever need to receive unemployment, they will receive partial compensation for their lost wages through the state fund. So, while this is not a benefit that you, the employer, directly provide to the employee, unemployment insurance is something that employees benefit from. And at the end of the day, it is a benefit that the employer pays for. So while it doesn't look like a traditional benefit offered on the private market, it is a benefit received through the government.
Before you hire any new employees and have to answer the "What benefits do you provide?" question, take some time to learn more about employee benefits. On the surface, we know it may not sound exciting, but there are many options when it comes to employee benefits. You may even be surprised to discover what you are required to provide versus what is nice to offer.
To get started, we recommend reading these blogs:
- Required Employee Benefits for Start-ups
- The Employee Benefits Your Start-up Probably Needs
- The Employee Benefits Your Start-up Should Offer