Mandatory Benefits: What Benefits Do Employers Have to Offer?

Employee benefits beef up your compensation package. They can make or break your ability to hire and retain employees. For the most part, you can choose what to offer employees. But, there are several mandatory benefits you can’t afford to ignore.

You not only need to stay competitive but also compliant. Read on to learn about employee benefits, mandatory benefits you may need to offer, and whether you need to offer them to part-time employees. 

Employee benefits overview

Employee benefits are additional perks or non-wage compensation employers offer employees in addition to their regular wages. 

Why are employee benefits important? Employers use benefits to attract and retain employees. Offering benefits can even boost loyalty, productivity, and attendance.

Examples of common benefits include: 

  • Health insurance
  • Retirement plans
  • Paid time off
  • Disability insurance
  • Educational assistance

Many employers offer common benefits like access to medical care (available to 70% of workers) and retirement plans (69% of workers have access). But, the costs associated with benefits are too much for some employers, especially small businesses. 

Benefits account for 29.5% of total private industry employer compensation costs, according to the BLS. Keep in mind that some mandatory benefits do not cost employers money (i.e., you’re simply responsible for withholding the money from employee wages). 

Mandatory benefits you may need to offer 

In some cases, offering benefits isn’t a choice. Mandatory benefits for employees may depend on factors like your state and employee count. 

Take a look at the following mandatory employee benefits for some employers. 

Mandatory benefits: Employers must offer employees certain benefits. Mandatory benefits may depend on factors like state and employee count. 

Examples of mandatory benefits include workers' comp, disability insurance, retirement plans, paid family leave, and time off to vote.

1. Health insurance

Health insurance is a benefit you may need to offer under the Affordable Care Act (ACA)—depending on how many employees you have.

Under the ACA, employers with 50 or more full-time equivalent (FTE) employees must provide health insurance to full-time employees. Otherwise, you will receive a penalty. 

If you have fewer than 50 FTEs, the ACA won’t penalize you for not offering health insurance. But, you may be eligible to enroll in the Small Business Health Options Program (SHOP). And, some small employers can also receive health insurance tax credits. 

2. Workers’ compensation insurance

Workers’ compensation provides medical benefits and wage replacement to employees who suffer a job-related illness or injury. 

In most cases, workers’ compensation is mandated by the state. And in some states (North Dakota, Ohio, Washington, and Wyoming), you must purchase coverage directly from your state. Employers in other states can obtain coverage from private insurance companies.

Check with your state for specific rules on workers’ comp. 

3. Disability insurance 

State disability insurance partially replaces an employee’s wages if they can’t work due to injury, illness, or a similar condition. Unlike workers’ compensation insurance, state disability insurance does not apply to job-related illnesses or injuries. 

There are five states that require employers to provide short-term disability insurance to employees:

  1. California
  2. Hawaii
  3. New York
  4. New Jersey
  5. Rhode Island

Check with your state to learn specific plan requirements.

4. Unemployment insurance

When you have employees, there are certain taxes you have to pay, regardless of what state you’re in. Unemployment insurance is one of those taxes.

Employers are responsible for both federal unemployment (FUTA) and state unemployment (SUTA) taxes. These taxes fund unemployment insurance benefits for eligible unemployed workers. 

5. Retirement plan options

Offering retirement plans became even more attractive thanks to the SECURE Act 2.0. Eligible small employers can now enjoy increased tax credits for offering retirement plans. But, it’s not required.

However, there are state-mandated retirement plans. States with mandatory retirement plans require employers to enroll employees in the state-sponsored program or offer a qualifying retirement plan alternative. 

States that require retirement plan enrollment include California, Connecticut, and Illinois. Make sure to check with your state to learn more.  

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6. FMLA leave

You must provide unpaid family and medical leave depending on how many employees you have. Under the Family and Medical Leave Act (FMLA), employees receive up to 12 weeks of unpaid, protected leave for qualifying family and medical situations.

Employers with 50 or more employees are required to provide FMLA leave. 

7. Paid sick leave

There isn’t a federal law requiring that employers provide paid time off to employees who are sick. But, several states—including Arizona, California, Vermont, and Washington—have paid sick leave laws that apply to some or all employers.

If you’re subject to a paid sick leave law, you must follow your state’s accrual rate, cap, carryover, and usage rules. For example, Arizona paid sick leave requires that all employers provide one hour of sick time for every 30 hours worked. 

8. Paid family leave

Although there’s a federal law requiring unpaid family leave (aka the FMLA), there isn’t a federal law requiring paid family leave (PFL). That’s where the states come in. 

Several states, such as California and Washington, require employers to provide paid family leave to employees—through a state program, that is. 

Here’s how it works: Depending on your state law, your employees, you, or both you and your employees contribute to your state’s PFL program. When employees need leave, they receive PFL benefits from the state. States determine things like contribution amounts and who pays.

Check with your state to find out if you’re subject to a paid family leave law.

9. Time off to vote 

Voting is a patriotic duty. Is giving employees time off to vote a patriotic duty? And beyond that, is it legally required?

There isn’t a federal law that requires employers to give employees time off to vote. But, the majority of states require that employers give employees paid or unpaid time off. 

Check with your state for specifics, such as:

  • Whether time off is paid or unpaid
  • How much time employees get to vote
  • Whether employees must provide advance notice
  • Whether employees must provide proof of voting 

10. Jury duty leave 

Once again, there isn’t a federal law requiring employers to offer paid jury duty leave. But, several states, including Alabama and Connecticut, require jury duty leave pay.

Consult your state for specifics on your jury duty leave responsibilities. You may need to provide regular pay to employees, partial wages, or the difference between regular pay and jury service compensation. And, your state might have rules on how long you need to give paid leave (e.g., three days).

11. Military leave

All employers must follow the Uniformed Services Employment and Reemployment Rights Act (USERRA). 

USERRA lets employees take up to five years of job-protected military leave. Although the leave is unpaid, you must give employees the option to maintain their health coverage. 

Make sure to learn the ins and outs of military leave, including what you need to do while employees are on leave, leave of absence notices, and more. 

Employee benefits not required by law

The list of mandatory benefits might be long, but it isn’t all-encompassing. Many mandatory benefits hinge on factors like your state or how many employees you have. 

There are countless benefits you can choose to offer but aren’t obligated to do so. Voluntary benefits include paid time off, life insurance plans, educational assistance, remote work, and flexible work arrangements.

Stay up-to-date on your state laws. That way, you can know what benefits you have to offer employees and which you can choose to offer. 

Do you have to give part-time employees benefits?

 OK, so now you know about the mandatory employee benefits you may need to offer. But, which employees do you need to offer them to? 

You may be able to exclude part-time employees from certain benefits or modify benefits based on the number of hours they work. 

So, who is a part-time employee? There isn’t a standard definition of a part-time employee. For the purpose of the Affordable Care Act (ACA), a full-time employee can be anyone who works an average of at least 30 hours per week. But, the BLS defines part-time employees as those who work 34 hours or fewer. And sometimes, the definition of a part-time employee might depend on your business policy. 

Whether you need to offer benefits to part-time employees depends on the benefit and your business. For example, says employers do not need to offer health insurance to part-time employees. 

But, state rules on state-mandated benefits may permit part-time employees to get in on the action. Make sure to check with your state for specifics.

And last but not least, don’t forget about your business policy. Specify what benefits part-time employees can enjoy. 

How to make employee benefits management easier 

Determining what benefits you want and need to offer is just step one of the equation. Next, you need to administer them. 

Be sure to:

  • Add benefits information to your employee handbook
  • Distribute benefit plan information to employees
  • Withhold benefits from employee wages when running payroll
  • Manage contributions and remit (e.g., send retirement contributions to your plan provider)

Consider using online payroll software to make withholding deductions easier. And, look for a system with seamless 401(k) integration to streamline retirement plan benefits. To streamline the process of managing files and documents online, consider signing up for HR software. You 

Withholding benefits shouldn’t consume your day. Patriot’s payroll software makes it easy to set up benefit contributions and deductions for payroll. And, try our HR software add-on to manage paperless files and documents online, generate HR reports, and more!

This is not intended as legal advice; for more information, please click here.

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