Employee benefits are perks that you provide in addition to paying wages. This can include retirement benefits, paid time off, parental leave, health insurance, and virtually any other offerings you want to provide to incentivize employees. While providing employee benefits requires a bit of an investment, it can also benefit your business when it comes to recruitment and employee retention. If you don’t already offer benefits, it’s in your best interest to consider implementing a benefits package as soon as possible.
Before you decide to offer employee benefits, read through this guide to familiarize yourself with the laws and best practices you’re expected to follow. You can also use the links below to navigate directly to a specific section.
- What are employee benefits?
- Why should you offer employee benefits?
- Employee benefits laws and updates
- Types of employee benefits
- Most popular employee benefits
- What employee benefits are best for your business?
- How to implement employee benefits
Employee benefits are forms of compensation that go above and beyond standard hourly or salary pay. Some of the most common employee benefits include paid time off (PTO), medical coverage, and 401(k) plans. However, employee benefits come in many forms—your creativity is the limit.
While some employee benefits may be required by law—like sick time in some states—others are optional for employers. The employee benefits you’re required to provide can vary depending on which state you operate in.
Even though you’re not required to provide most employee benefits, it may be in your best interest to do so. Many employers choose to offer robust employee benefit packages to:
- Help recruit top talent
- Increase employee retention
- Improve overall employee satisfaction
- Compensate for average wage offerings
- Create a better company culture
By offering employee benefits, you show your employees that you value their efforts in helping your company achieve its goals.
There are quite a few laws that apply to employee benefits. Not only are there a lot of legal stipulations regarding benefits, but they are continuously evolving. As an employer, it’s your responsibility to comply with employee benefits laws and ensure you remain abreast of any updates. Here are some of the most prominent laws you should know about when it comes to establishing and implementing your employee benefits program:
- Affordable Care Act (ACA): Requires you to start providing healthcare coverage once your business has 50 or more employees.
Disability Insurance laws: In some cases, requires employers to offer short-term and long-term disability insurance. Legislation such as the Family and Medical Leave Act (FMLA), the Americans with Disabilities Act (ADA), and state laws dictate parameters around disability leave.
- For example, California, Hawaii, New Jersey, New York, Rhode Island, and Puerto Rico currently require employers to have disability insurance.
- Employee Retirement Income Security Act (ERISA): Applies to pension plans or welfare benefit plans. ERISA protects funds that employees have placed in their retirement plans. This law doesn’t require employers to provide retirement plans, but instead establishes standards for businesses who do offer these plans.
- Equal Employment Opportunity Commission (EEOC): Prohibits employers from offering benefits that discriminate against certain employees. Section 3 of the EEOC Compliance Manual of Employee Benefits provides guidance that helps employers ensure their benefit plans are nondiscriminatory.
- Family Medical Leave Act (FMLA): Protects employees’ rights to unpaid leave for up to 12 weeks and preserves their employee benefits during that period.
- Federal Insurance Contributions Act (FICA): Requires employers to contribute to Social Security and Medicare programs on behalf of employees via payroll taxes.
Office of Workers’ Compensation Programs (OWCP): Requires most employers to have workers’ compensation insurance. With the exception of Texas—which doesn’t require workers’ comp insurance—states have their own stipulations dictating coverage requirements. Check your state’s labor codes to find the workers’ compensation requirements that pertain to your business.
- For example, California’s Labor Code Section 3700 requires all California employers with one or more employees to provide workers’ compensation benefits.
- Paid sick leave laws: These laws vary by state, so check your state’s legislation to determine whether you’re required to provide paid sick leave.
If you’re concerned about violating employee benefits laws, you may want to consult an HR professional. If you’re enrolled in QuickBooks HR services, you can talk to an HR advisor who can provide guidance regarding employee benefits requirements.
There are many types of employee benefits. However, they generally fall into two broad categories: required and optional.
Benefits required by law:
- Health insurance: As mentioned, the ACA stipulates when employers must provide medical insurance.
- Paid sick leave: Paid sick leave is required in 13 states and Washington, D.C.
- Workers’ compensation: If employees are injured on the job, they’re entitled to workers’ compensation.
- Family or medical leave: Employees are entitled to 12 weeks of unpaid leave if the reasoning falls under the FMLA requirements.
- Social Security and Medicare contributions: Employers are required to match Social Security and Medicare taxes.
- Disability insurance: In some cases, disability insurance may be required, replacing a portion of the employee’s monthly income.
According to the U.S. Bureau of Labor Statistics, paid sick leave was available to 75% of private industry workers.
Optional employee benefits:
- PTO: There is no federal law requiring paid time off for vacation, bereavement, or holidays. Additionally, employers can generally dictate how and when PTO can be used.
- 401(k) matching: Employers can choose to match employees’ 401(k) contributions to help bolster their retirement savings.
- Remote work opportunities: Letting employees work from home as they please or a few days per month can attract applicants who want more freedom.
- Student loan assistance: With the student debt crisis looming over many younger workers, student loan assistance is an attractive benefit.
- Wellness programs or stipends: Providing gym membership stipends, rewarding employees for making healthy choices, and having an on-site wellness program are all potential benefits you can offer.
Fringe benefits in another term for employee benefits that fall outside of wage-related compensation. Other fringe benefits you could provide include perks like employee meals, on-site childcare, flexible hours, tuition reimbursement, and commuter benefits.
As the employer, you have the freedom—for the most part—to decide which benefits you want to offer. While this freedom allows you to customize your employee benefits, it can leave you feeling overwhelmed as to where to get started. The best plan of action is to start with popular benefits and go from there.
Some of the most common employee benefits include:
- Healthcare coverage: In addition to general health insurance, vision and dental coverage are usually standard. Employers may pay all or a portion of the monthly premium.
- PTO: Vacation, paid holidays, and sick time are generally included in PTO offerings. According to Zenefits, the average PTO in the U.S. is 10 days per year. Some employers incrementally increase PTO accrual over time for long-term employees.
- 401(k) plans: Offering a retirement plan that employees can enroll in and contribute to is a staple when it comes to employee benefits. If you want to go above and beyond, consider offering 401(k) matching.
- Life insurance: Many employers offer life insurance coverage, often covering a portion of the premium. This benefit shows that you understand your employees’ values—ensuring their family is financially secure.
These benefits are a good starting point when creating your benefits package, allowing you to meet the basic priorities of job searchers. That said, employees expect these benefits when they’re looking for jobs. In a Justworks survey, 88% of employees said PTO and quality options for health benefits were important when deciding whether to accept a job offer. Providing just these benefits may put you at a disadvantage.
So, how do you choose the best benefits to offer for your business? Consider starting with the most common benefits listed above as a baseline to help you remain competitive in the job market. Here are some factors to keep in mind when putting together a competitive benefits package:
- Your core employee base. Depending on the demographic of your employees, certain benefits may be more appealing. For example, popular benefits that target millennials include remote work opportunities, increased PTO, and tuition assistance.
- The type of company culture you want to have. Many employers take into account their company culture when deciding on benefits. For example, those who want to provide the best possible work-life balance often offer unlimited vacation time. Or, benefits like catered lunches and gym membership subsidies may be well-suited for companies who want to put health front and center.
- Consider what you can realistically afford. Benefits can add up, especially if you have a lot of employees. If you’re just starting out with your small business, you don’t want to take up benefit-related costs that are too high to sustain. Remember, you can always build up your benefits package as you grow.
Deciding to offer employee benefits and getting employees enrolled doesn’t happen in a day. You need to plan ahead and ensure you have all your bases covered. If you’re ready to move forward and implement an employee benefits program for your small business, there are a few key steps to follow:
- Figure out which benefits you want to offer. This may require some negotiation with other business partners.
- Discuss your benefits package proposal with an advisor. Speak with an HR advisor to determine if your benefits proposal is going to violate any laws. You may also want to consult an employment law attorney.
- Find benefits providers. This applies to medical, dental, and vision, as well as 401(k) plans. QuickBooks has partnered with SimplyInsured to offer medical, dental, and vision insurance. We’ve also partnered with Guideline to provide 401(k) plans.
- Set a date to open enrollment for employee benefits. Plan ahead for when you’ll roll out benefits to ensure you’re able to answer employee questions and get everything set up smoothly.
- Provide employees with documentation and instructions regarding benefits. Enrolling in 401(k) plans and other benefits may require special instructions for logging in and setting up an account. Make sure to provide employees with any information they may need to sign up.
- Review employee benefits offerings over time. You shouldn’t set and forget your employee benefits package. To remain competitive you should consider what others in the industry are offering and what benefits seem to be the most popular. You may also be able to find new providers that provide benefits management at a lower cost.
Let’s apply these steps to a real-world example. Say your small business has decided to offer the basic popular benefits—health insurance, 401(k), PTO, and life insurance. You’ll need to review the laws regarding these benefits; at this point you’d reach out to your HR advisor. Once you have a solid foundation for your benefits package, you need to find providers. Usually, 401(k) benefits, medical, and life insurance are all managed by different entities.
Now that you have your providers established, create a plan for roll out—during this time you’ll draft instructions and prepare administrative personnel. Once you open enrollment, make sure your employees have access to resources if they need help or have questions about their benefits. After employees have enrolled, it’s usually smooth sailing until it’s time to re-enroll, which gives employees the opportunity to adjust their plans. That’s really all there is to it.
While you might be eager to start offering benefits, following these basic steps can cut out a lot of headaches down the line.
Establish a competitive employee benefits program
Now that you know which benefits are required and which are optional, you’re on the right foot to creating a solid benefits package. Take the time to consider what’s most important to you and your employees to provide benefits that add value to your company. With QuickBooks HR services and a knowledgeable HR advisor, we’re confident you’ll put together a benefits offering that both you and your employees are happy with.
This content is for information purposes only and should not be considered legal, accounting or tax advice, or a substitute for obtaining such advice specific to your business. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Intuit Inc. does not have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. Intuit Inc. does not warrant that the material contained herein will continue to be accurate nor that it is completely free of errors when published. Readers should verify statements before relying on them.
We provide third-party links as a convenience and for informational purposes only. Intuit does not endorse or approve these products and services, or the opinions of these corporations or organizations or individuals. Intuit accepts no responsibility for the accuracy, legality, or content on these sites.