Employee Benefits

Employee Benefits Mandated by Law

As an employer, you are required by law to provide the following benefits/pay the following taxes for your employees:

Social Security. You are required by Federal law to pay FICA Social Security taxes at the same rate paid by your employees (the rate is set by the Federal government, and currently is 6.2 percent for employer and employee, adding up to a total of 12.4 percent. An additional 1.45 percent must be paid for Medicare by the employer and the employee. These are commonly called "payroll taxes." Having your employees complete Form W-4 from the Internal Revenue Service will determine how much payroll tax will be withheld from each individual's paycheck.

Unemployment Insurance. Laws regarding unemployment insurance are different in each state. Check with your state government offices or state Department of Insurance to find out if you are required to pay unemployment insurance.

Workers' Compensation Insurance. As an employer, you must carry workers' compensation insurance, either through a commercial carrier, through the state, or on a self-insured basis.

Disability Insurance. Disability coverage replaces part of a worker's wages in case of illness or injury that isn't work related. Disability insurance is optional in most states, but if your business operates in any of the following states, you are required to purchase it: California, Hawaii, New Jersey, New York, Puerto Rico, Rhode Island.

Family and Medical Leave. If you employ 50 or more people, you must provide 12 weeks of unpaid leave during any 12-month period to employees under the Family and Medical Leave Act (FMLA). An employee might require Family and Medical Leave after the birth of a child, during the illness of a family member, or in the event he or she becomes sick or injured.

COBRA. If you have more than 20 employees, the Consolidated Omnibus Budget Reconciliation Act (COBRA) requires you to provide continuation of healthcare and dental insurance benefits at the group rate for former employees and retirees, as well as their spouses, former spouses, and dependent children. In most cases, COBRA goes into effect when an employee leaves his or her job or retires. Also, many states have enacted COBRA laws for groups of two or more.

Health insurance. As of January 1, 2014, businesses with 50 or more employees are required to provide healthcare benefits under the Affordable Care Act. The Affordable Care Act also provides for tax credits for some employers and an exchange program called Small Business Health Options Program (SHOP) to provide more financial, coverage, and premium choices for business owners. You can get more information about the Affordable Care Act and how it affects your business at www.healthcare.gov.

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