Small Business Employee Benefits – All You Need to Know
Last Updated on July 27, 2020 by VantagePoint
Common Challenges for a Small Business
It is a challenge to know which benefits plans are required for a small business and what benefits employees actually expect. Adding to the challenge, states have different requirements that are mandatory for employers of different sizes.
Small businesses should work with a professional organization that can help them navigate the legal landscape for the state and local area.
Required Employee Benefits for Small Businesses
There are very few required small business employee benefits necessary in the US. Companies are obliged to meet some minimum requirements:
Social security and Medicare
Both the employer and the employee will pay a portion of these taxes. The employer will withhold the employee portion and remit it as part of their tax payments to the government.
Unemployment insurance
Employers are responsible for this (see below).
Worker’s compensation
Protects earnings when an employee is sick or injured doing their job.
Disability insurance
This is state-specific. Some states require companies to provide wage replacement for non-work-related illnesses and injury.
Sick leave
More states and localities require employers to provide a minimum number of sick days to employees.
Health Insurance for Small Business
Small businesses are not required to offer health insurance to their employees, but it is something that employees use when they compare companies or think about changing their job. However, healthcare costs are increasing for everyone, including employers.
Small businesses do not have the bargaining power that large employers have with health insurance companies, so they need to find strategic ways to compete. A benefits administrator can help you find the most competitive health insurance rates for your business.
Another option is to offer a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA), also known as Small Business HRA, which allows employers to provide tax-free reimbursements to employees for their health-related expenses, including personal insurance premiums. The main benefit for employers is that there is less administrative work with this program.
Retirement Plans and Bonus Benefits for Small Businesses
Small business retirement plans are another value-add for employers. The federal government helps employers cover some of the set-up costs associated with setting up and administering retirement plans for employees.
There are several plan types for small employers to consider, including 401(k) plans for small businesses, IRAs, and SIMPLE plans. For companies looking to add retirement to their small business employee benefits, it is advised to seek the assistance of an expert in this area.
The Employee Retirement Income Security Act of 1974 (ERISA) governs the way most plans are set up and administered, which imposes requirements depending on the actual plan. The unique composition of each company’s workforce may impact which plans are viable solutions as well.
Workers’ Compensation for Small Businesses
Workers’ compensation is governed by state law, but it requires employers to provide insurance coverage to employees who become sick or injured on the job. Companies purchase workers’ compensation insurance in the same way that they purchase business liability insurance, often through a broker.
Workers’ compensation for small businesses is a required coverage in all states and employers who are found to be out of compliance can be fined by the state. The type of company and the work employees perform help determine the rate a company will pay.
Some jobs are inherently more dangerous, and companies will pay more to ensure they are properly covered. Employers must also inform employees of their rights under workers’ compensation programs.
Unemployment Insurance
Unemployment insurance is a benefit that is paid to employees who become unemployed through no fault of their own. This insurance provides financial assistance while the terminated employee looks for new work.
The federal government taxes employers, which is then allocated to the states to administer unemployment insurance programs.
In 2020, employers will pay a 6% tax on the first $7,000 paid to an employee. Many states also have their own unemployment tax that they collect from employers, which may vary depending on an employer’s usage rate.
Small businesses are wise to work with a payroll provider like VantagePoint that can help them navigate the complex landscape of state and federal unemployment taxes.
Family and Medical Leave for Small Businesses
The Family and Medical Leave Act (FMLA) is federal legislation that applies to employers with 50 or more employees within a 75-mile radius. There are also requirements related to employee eligibility.
However, some states have enacted leave policies that provide more generous provisions than FMLA, such as leave programs that cover pregnancy and baby-bonding leave. For example, Vermont’s law covers employers with 10 or more employees for parental leave and 15 or more employees for family and medical leave.
The federal law only applies to immediate family members (parents, spouse, children), but some states have expanded their definition of family to be more inclusive. For example, grandparents, parents-in-law, and domestic/civil partners are often included in more expansive legislation. Small businesses should take care to ensure their handbook policies match the requirements of the states and localities in which they operate.
HR Requirements for Small Businesses
There are many federal, state, and local laws that impact the way you do business, and these laws are frequently changing. How small businesses manage their HR requirements and benefits plans is important to the overall functioning of the business.
One area where there’s a rapid change in employment law is related to how companies manage their relationship with the workforce. California introduced strict legislation about employee classification in 2020, and other states are expected to follow suit. One thing is for sure: the changing economy is changing work relationships and employee expectations.
Employee Benefits – Key Part of Employee Retention for a Small Business
Small business employee benefits should be part of your overall HR strategy to recruit and, more importantly, retain employees to meet your business needs. There are some basic benefits that all employers must provide.
But employees, especially talented employees, are looking for more from companies. This includes financial security for employees through retirement, disability, and health plans.
The employee benefits landscape can be difficult to navigate through, especially if you are a small business and need to focus on multiple aspects at once. A benefits’ consultant can shed a light and offer expert guidance for these complicated issues, allowing you to achieve your business goals.
They can provide a strategic approach that manages the ever-increasing complexity of employee engagement, giving the management the tools and resources they want and employees, the answers they need. Get in touch with us!
Call us. We are here to help.
Monday – Friday: 8:30 am – 5:30 pm – (516) 599-2120 or Info@VantagePointBenefit.com
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