How Employee Benefits Work: PTO, Insurance, and More

How Employee Benefits Work: PTO, Insurance, and More

Though many companies list benefits in the job posting, most don’t include all of them. What you see (and discuss during the interview) is often only the tip of the iceberg when it comes to employee benefits.

There are many, many, many things that companies can and do offer as part of the benefits package. However, plenty of companies only offer the bare minimum of benefits. To help you know which benefits you’re legally entitled to and which ones you should ask about during your negotiations, here’s our guide to employee benefits.

What Are Employee Benefits?

The word “benefits” has multiple dictionary definitions. In terms of work, benefits mean everything outside of your salary. These are sometimes called perks, employee benefits, or fringe benefits.

Employers offer benefits packages to encourage you to do a good job and stay at the company for a long time. Many benefits packages are also designed to attract top talent to the company. Because there are few rules about what benefits companies can include as perks, benefits packages can vary widely from company to company and even position to position.

Does My Company Have to Offer Benefits? 

There are some legally required benefits that companies must offer to nearly every employee.

Health Insurance

The Affordable Care Act (ACA) made health insurance a mandatory benefit for most companies and employees.

Companies with at least 50 full-time employees must provide health insurance to all full-time workers. The Act defines “full-time” as working an average of 30 hours per week, more than 120 days per year. Employers do not have to provide health insurance to part-time employees.

Social Security, Medicare, and FICA

The Federal Insurance Contributions Act (FICA) is a payroll tax used to fund Social Security and Medicare. Social Security and Medicare are benefits that provide eligible workers with retirement and disability benefits.

Employers and employees must contribute equally to these funds. Specifically, you and your employer must each pay 6.2% of your gross compensation. The FICA deduction on your paycheck is your share of the tax, and your employer is responsible for ensuring the money is contributed on your behalf.

Unemployment Insurance

Employers are also required to contribute money to unemployment insurance funds. Part-time and full-time employees who meet certain requirements are eligible to receive compensation (a percentage of their overall salary for a limited time) if they lose their job.

Worker’s Compensation Insurance

If you can’t work because of a workplace injury or illness, you are eligible to receive financial support through worker’s compensation insurance. Though the amount your employer pays and the amount you receive varies from state to state, all employers are required to carry this insurance for the benefit of their employees.

Other Required Benefits

Though employers are not required to offer paid leave, there are rules regarding unpaid leave. And if your employer offers a retirement plan, there are eligibility rules that employers must follow.

Unpaid Leave

The Department of Labor (DOL) and Fair Labor Standards Act (FLSA) explicitly state that paid leave of any kind is an agreement between employer and employee. The following benefits are not mandatory:

However, the Family Medical Leave Act (FMLA) is a legally required benefit under certain circumstances. This is specific to unpaid leave, and employees must meet eligibility requirements.

While there are no federal rules regarding paid leave, some states require employers to provide paid time off to staff. For example, California employers must provide paid sick leave to all employees.

Retirement Plans

Your employer is not required to offer a retirement plan. However, if it does, there are rules regarding employee participation.

The Employee Retirement Income Security Act’s (ERISA) “1,000-hour rule” states that if an employer offers a retirement plan to full-time employees, any part-time employee that works 1,000 hours in a 12-month period for that employer is allowed to participate in said retirement plan.

Disability Insurance

As a rule, companies are not required to provide disability insurance beyond worker’s compensation. However, five states (and Puerto Rico) require employers to offer this insurance:

  • California
  • Hawaii
  • Rhode Island
  • New Jersey
  • New York

Benefits Employers Can Offer

Beyond the legally required benefits, employers can offer pretty much any benefit they want! And while some of the benefits may be standard for all employees (retirement match levels), others can be negotiated (remote work). Here is a partial list of fringe benefits that employers commonly offer:

  • Paid time off (including sick and vacation days)
  • Medical insurance (including dental and vision)
  • Retirement savings (with a match and different types of vesting)
  • Stock options
  • Profit-sharing
  • Life insurance
  • Paid parental/family leave
  • Disability insurance
  • Continuing education
  • Equity
  • Flexible hours
  • Working from home
  • Hybrid schedule
  • Tuition reimbursement
  • Student loan repayment
  • Gym membership 
  • Health savings accounts
  • Childcare (on-site or reimbursement)
  • Commuter and parking reimbursements
  • Relocation expenses

To see a complete list of fringe benefits (and how that could impact your taxes), read more on the IRS website.

Endless Options

Companies have nearly endless options when it comes to employee benefits packages. And though not all companies will offer every perk (employer-paid pet insurance isn’t that common), you can always ask about and even negotiate your benefits package before you accept a job offer.

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