Benefits Basics

Employee benefits are non-wage compensation provided to employees in addition to their salary or hourly pay. They are a vital part of a total compensation package, influencing employee satisfaction, loyalty, and recruitment. These benefits can significantly impact an employee's well-being and financial security. The most common benefits can be categorized into three core areas: healthcare, retirement, and paid time off.

Healthcare benefits help employees cover medical expenses. This typically includes medical, dental, and vision insurance. Different types of plans exist:

• Health Maintenance Organization (HMO): Generally has lower premiums but restricts employees to a specific network of doctors and hospitals. Employees usually need a primary care physician (PCP) to coordinate care.
• Preferred Provider Organization (PPO): Offers more flexibility in choosing doctors and specialists without needing a referral. Usually, it has a higher premium than HMO.
• High-Deductible Health Plan (HDHP): These plans have lower premiums and higher deductibles. They are often coupled with a Health Savings Account (HSA), which allows employees to save pre-tax money for healthcare expenses. Consider what is best for employee base based on company and needs.

Examples: Consider a company offering a PPO plan with a $500 deductible and an 80/20 co-insurance (the company pays 80% of costs after the deductible is met, and the employee pays 20%).

Retirement benefits help employees save for their financial future. Common types include:

• 401(k) Plan: A defined-contribution plan where employees contribute a portion of their salary, and employers may match those contributions (up to a certain percentage). Employees choose their investments from a range of options.
• Pension Plan (Defined-Benefit Plan): The employer guarantees a specific retirement income based on factors like salary and years of service. These are becoming less common.

Example: A company may offer a 401(k) with a 50% match on the first 6% of employee contributions. If an employee contributes 6% of their salary, the company will contribute 3%.

PTO provides employees with time away from work. This includes:

• Vacation Time: Paid time off for leisure and personal reasons.
• Sick Leave: Paid time off for illness or medical appointments.
• Holidays: Paid days off for national or religious holidays.
• Other Benefits: Other types of benefits that are often included are Life Insurance, Disability Insurance, Flexible Spending Accounts (FSAs), Employee Assistance Programs (EAPs), and wellness programs.

Example: A company might offer 10 vacation days, 5 sick days, and 8 paid holidays per year.

Numerous laws and regulations govern employee benefits. Some key examples include:

• The Affordable Care Act (ACA): Requires employers of a certain size to offer health insurance that meets minimum essential coverage standards.
• Family and Medical Leave Act (FMLA): Provides eligible employees with unpaid, job-protected leave for specified family and medical reasons.
• State and Local Laws: Many states and localities have laws regarding paid sick leave, parental leave, and other benefits.

Example: The ACA mandates that employers with 50 or more full-time employees offer health insurance to their employees. Failure to comply can result in significant penalties.