Legally Required and Optional Benefits

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Employee Benefits


Interestingly enough, it has only been since the mid-point of the last century that employee benefits have become a significant part of the employees' compensation plan. Today, according to a U.S. Chamber of Commerce survey, they comprise approximately 42% of total payroll costs (Thompson, 2006). The fringe-benefit packages of most full-time municipal employees typically cost somewhere between 25 and 45% of the regular salary, according to another source (National Fire Academy, 2006).

Legally Required Benefits

Legally required benefits required of almost all employers include Social Security (including Medicare), unemployment insurance, and workers' compensation insurance.

Funded jointly by the employee's contribution (based on earnings) and a matching amount paid by the employer under the Social Security Act of 1935(as amended), retired employees age 62 and older, disabled workers, and their eligible spouses and dependents receive monthly benefits based upon the employee's earnings. It is Social Security that also provides for Medicare health insurance coverage for anyone reaching their 65th birthday. Medicare is funded by a tax paid by both the employee and the employer equivalent to 2.9% of the employee's earnings. (While this is the primary target group, there are other specifically identified eligibles).

Be advised that employees covered under some public sector defined benefit pension plans are not required to contribute to Social Security; neither are their employers.

Unemployment insurance provides income for those who lose a job due to no fault of their own such as layoff, the reallocation of funds, business closure etc. Eligible workers receive a weekly income based upon their earnings during the previous year for a period of up to 26 weeks.

In certain circumstances the time frame may be extended. Workers may be disqualified if they quit their job without good cause, were let go because of misconduct, or refuse suitable work while unemployed (Thompson, 2006).

All 50 states have workers' compensation insurance laws designed to provide financial assistance to those who are injured or become ill for job-related reasons for medical expenses and lost wages until they return to work and for dismemberment or permanent disability resulting from job related injuries. The percentage benefit varies from state to state. In the event of death, the benefit is paid to the family. Workers' compensation is funded by employer contribution (Thompson, 2006).

A couple of other pieces of legislation requiring your awareness include FMLA and COBRA.

Family and Medical Leave Act (1993)

The Consolidated Omnibus Budget Reconciliation Act (COBRA)

The Family Medical Leave Act requires that employers with more than 50 employees and all public sector employers provide up to twelve weeks of unpaid leave associated with a variety of family circumstances. The qualifying events include the birth or adoption of a new child; the provision of care for a seriously ill child, spouse, or parent; and the employee's own serious illness. There are additional requirements for eligibility and some exceptions to the Act as well.

While the qualified individuals are usually required to pay the premiums for the continued coverage, this act allows workers and their families who lose health benefits due to job loss, reduction in hours , transition between jobs, or other life events to continue their health insurance with the group health plan provided by their employer or former employer for a specified period of time.

Optional Benefits Not Required of Employers

While not required by federal law, most organizations provide an array of optional benefits.

Optional benefits often include: health insurance (sometimes including dental and vision coverage as well as drug benefits), wellness programs, employee assistance programs, pension plans, long-term disability (LTD) insurance, and a life insurance plan.

Optional Benefits Sometimes Offered by Employers

Health Insurance		Health care benefits can be one of the more important parts of a person's indirect financial compensation and are certainly the most expensive items in an employer's indirect financial compensation (Mondy & Noe, 2005). While some health insurance covers only basic medical expenses or a portion thereof, others include major medical benefits, dental and vision benefits, and perhaps prescription drug components.
Pensions		Pensions may be the largest single benefit most employees receive (Thompson, 2006). Pension costs for police officers and firefighters are significantly higher than for general employees. Public safety personnel often retire at an earlier age due to the physical and mental stress associated with their jobs. States have universally developed some form of pension and disability laws for members of the fire service. When allowed by statute, pensions are vested rights of the intended recipients.
Life Insurance		Many employers will provide a minimum amount of life insurance for each employee, often in the amount comparable to the employee's annual salary. Quite often, the employee can purchase additional life insurance through the employer at a very reasonable cost.
Leave		Various kinds of paid leaves (paid time not worked) are commonly offered. Among the more common are sick leave, annual leave (vacation), holiday leave, personal leave, and of course, FMLA. Other types of leaves include civil leave (includes such things as voting time, jury duty and court appearances to testify, etc.), bereavement leave, maternity / paternity leave, emergency leave, and shared leave. Most organizations have also developed criteria allowing for leave without pay.

References

Mondy, W. & Noe, R. Human Resource Management. 9th Edition. Upper Saddle River: Pearson, 2005.

Thompson, G. Employee Benefits: Historical Overview, Legally Required Benefits. 2006. http://www.referenceforbusiness.com/management/Em-Exp/Employee-Benefits.html

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