Common benefits aren't always required of an employer, but they do help attract and retain the best talent in the workplace.

Employee Benefit Basics

According to studies, employees are more productive when they think they're receiving good benefits from their employers. Federal law does mandate employers to give employees a minimum of benefits, including

  • time off for voting, jury duty, or completing military service

  • compliance with requirements for workers' compensation

  • withholding of FICA tax from pay as well as paying employer's FICA

  • benefits for disability and retirement

  • unemployment tax (including both federal and state)

  • if applicable in your state, participation in disability programs (short-term)

  • compliance with federal laws regarding the Family and Medical Leave Act

Some benefits, however, are optional and not required by the federal government. These include:

  • savings plans for retirement

  • health insurance (Hawaii is an exception)

  • vision and/or dental insurance

  • life insurance

  • paid time for vacation, sick leave, or holidays

 

While these common benefits aren't mandated, many companies still offer a variety of them to get the best candidates in the job market. For example, most people receive paid time off on holidays as well as vacation days (with or without pay). And while there's no legal requirement for funeral or bereavement leave, many employers allow their workers to take between and two and four days off when a family member passes away.

Employee Benefits Programs

A comprehensive program for employees' benefits is meant to offer a degree of protections for both employees and in some cases, their family members. This is especially true when hardships strike, like a death, disability, sickness, or even the loss of a job. Many robust benefit programs also paid time off and some type of retirement savings and potentially even employer contributions.

Administering and Selecting Employee Benefits Programs

The total cost of providing a strong benefits plan is considered part of an employee's total compensation package, which also includes your salary. For certain plans, an employee may be required to pay a small amount in the form of a copayment or premium to get better coverage, but this is still much less expensive than paying for everything on your own.

 

There are many reasons why employers provide their employees with benefits, including:

  • hiring the best talent and keeping them on board

  • staying competitive with other companies in the industry

  • increasing employee morale in the workplace

  • giving the chance for internal promotions when someone retires or resigns

 

Employers will never be able to satisfy each individual employee's total needs, but they can create a comprehensive benefits program that helps a broad range of issues while aligning with company objectives. Some benefits are mandatory while others are optional, but they're all important.

Mandated Benefits Programs

Any benefit required by the law is considered mandated. These can be either state or federal laws and the benefits are meant to help cover basic needs for employees and sometimes, their families. Some of the most important benefits that are mandated are Social Security, worker's comp, and unemployment insurance.

Mandated Benefits - Unemployment Insurance

An employee who lose their job may be able to take advantage of unemployment insurance. Unemployment benefits give short-term monetary assistance as long as the employee was terminated without fault and they meet any qualification requirements from the state.

Mandated Benefits - Workers Compensation Program

Employers must legally have insurance for worker's compensation in case an employee gets hurt on the job. This program helps the injured employee received financial assistance for medical bills and recovery time.

Mandated Benefits - Social Security Program

For older employees and disabled employees, Social Security helps provide extra income to supplement any other savings they may have to live off of.

Optional Benefits Programs

Once mandated benefits are implemented, employers can also add on optional benefits. They might provide employees with perks such as health, disability, or life insurance; pension and/or retirement plan; flex time; and paid time off.

 

Employee Benefits Statistics

A few years ago, the Department of Labor and the Bureau of Labor Statistics partnered together to study the state of employee benefits in the U.S. Here are some of the key findings from their report:

  • the most common benefit received by employees was paid leave

  • 77% of employees received paid holidays

  • 77% of employees also received paid vacation benefits

  • 70% of employees were offered some type of plan for medical care but only 51% used this benefit

  • employees who have families on average paid 32% of their health care premiums

  • single employees on average paid just 21% of these premiums

  • retirement plans were made available to 64% of employees, while 55% participated -- 97% enjoying take-up of the benefit

 

An earlier study in 2004 performed by the United States Office of Personnel Management (OPM) investigated employee attitudes towards benefits. The most valued benefits include:

  • a pension plan (91%)

  • a 401(k) or 403(b) retirement plan (89%)

  • healthcare (89%)

  • healthcare for retirees (87%)

  • life insurance (71%)

  • insurance for long-term care (63%)

  • programs for health and wellness (53%)

  • flexible spending account (45%)

  • options to telecommute (40%)

  • subsidies for child care (31%)

 

Clearly, the most popular benefits are those that can be enjoyed by anyone, like retirement plans. Child care, on the other hand, is only valuable to a portion of employees because not everyone has small children.

 

Here is a list of the most commonly offered benefits by employers today:

  • family leave - unpaid (80%)

  • paid vacation (77%)

  • paid holidays (77%)

  • health care (70%)

  • prescription drugs (68%)

  • jury duty - paid (62%)

  • sick leave - paid (61%)

  • funeral leave - paid (60%)

  • retirement plan with defined contributions (59%)

  • life insurance (57%)

  • employee assistance (48%)

  • dental insurance (45%)

  • paid bonuses (40%)

  • disability - short-term (40%

  • personal leave - paid (38%)

  • reimbursement account for healthcare (37%)

  • wellness programs (35%)

  • reimbursement account for dependent care (35%)

  • disability - long-term (33%)

  • military leave - paid (32%)

  • HSA (20%)

  • retirement plan - defined benefits (19%)

  • financial planning (19%)

  • insurance for long-term care (16%)

  • family leave - paid (12%)

  • childcare (10%)

  • commuting subsidies (6%)

  • workplace flexibility (6%)

  • IRA with payroll deduction (5%)

  • stock options (2%)

 

The most popular benefits are those fulfilling financial and health needs of employees, along with paid time off in various forms. Less necessary benefits like stocks or commuting subsidies are far less common in the U.S.

Legal matters relative to employee benefits

It's important for employers to be careful as the offer and expand their benefits programs. The government pays close attention to make sure all legal needs are met and it can be difficult to prevent mistakes. IRS audits help to find when compliance isn't met with federal regulations. The U.S. Department of Labor also participates in audits to ensure compliance.

 

It can be extremely expensive if you don't comply with employee benefit laws. You can have tax benefits stripped away, which can even be applied retroactively. You may also be forced to pay financial penalties. The most common error is leaving an employee out a plan and this is a major violation. The mistake might come about by neglecting to add eligible part-time employees or staff falling in clerical or custodial categories. Basically, if a single employee received some type of benefit that is tax-advantaged, then everyone must receive the same benefit. Some exclusions can apply, but you should consider talking to a labor or benefits expert before implementing and decisions. It can certainly add up to a costly mistake.

 

Start by doing some early research on your own before you start offering benefits, then talk to a consultant whose expertise is in benefits, or even a lawyer. Even if you spend $1,000 at the beginning, that's much less than the cost of being penalized by the IRS or Labor Department.

Expensive errors relative to employee benefits

The cost of providing benefits while complying with federal and state law can be expensive. In fact, offering benefits can add up to 30% or even 40% of each employee's pay. So, it's important to hire the best people and expect them to be productive. If you're a small business, you're more likely to take the wrong approach concerning benefits, which can lead to mistake and potentially even financial problems.

 

Some of the most frequent errors by employers include paying for all the benefits; providing coverage to non-employees; making mistakes on paperwork; not discussing the cost of benefits with employees; and providing benefits that aren't actually used by employees.

Expensive errors relative to employee benefits - absorbing the entire cost of employee benefits

Most companies today don't pay for the entirety of benefits. Contributions from employees can range from a couple of dollars from each paycheck or even hundreds each month.

Expensive errors relative to employee benefits - covering non-employers

For large claims, an insurer could decide to investigate and that could eventually lead to cancelling the entire policy. Be truthful about the insurer with your plans to prevent an extremely costly mistake.

Expensive errors relative to employee benefits - sloppy paperwork

The administration of benefits through a small business is usually performed to a worker with many other responsibilities. That person might not actually have expertise in executing a company's benefits plan.

 

One common mistake is failing to enroll new workers while the enrollment period is open. There's usually a fixed period for open enrollment so if an employee is added in later, you might need to provide proof that they can be insured. This alone could lead to a costly legal battle. Always stress the importance of paperwork to anyone involved in your company's benefits administration.

Expensive errors relative to employee benefits - non-disclosure of benefits cost to employees

Help uplift employee appreciation by explaining exactly how much their benefits cost you. A good idea is to send out a benefits statement each year, listing out what the benefits are and how much they cost. You can even tailor this to each individual employee.

Expensive errors relative to employee benefits - giving unwanted benefits

To avoid providing unwanted benefits, send out a survey to all your employees. You can have them rank benefits to determine which ones are actually the most important in your specific workplace. Any type of financial or medical benefit will likely be the most popular among the widest range of individuals. If the results are mixed, you can offer an a la carte plan where employees get to pick and choose which benefits they want if they stick to a certain budget.

Common Benefits - Child and Elder Care Benefits

Both child and elder are gaining greater popularity as part of employers' benefits. If you need help in one of these areas, talk about it with your employer. Even if they don't offer benefits, they may have some type of referral or other flex policy for you.

Common Benefits - Compensation Time

Nonprofit employers typically don't provide overtime pay when it comes to exempt staff, but they may provide comp time. This allows you to take an hour off for every hour you work extra. Many companies require this time be tracked formally through specific documentation. There could also be a maximum amount of comp time you can use in each period.


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