What Employee Benefits Are Mandatory?

By Dan Darabaris

Offering a great benefits plan is key to attracting and retaining workers. Today’s talent is not just looking at compensation, but considering the whole package you offer before they even apply! To remain competitive when it comes to recruitment, you’ll want to go above and beyond mandated benefits. Hopefully, you know what those are so you are compliant, but if you’re unsure, we’re going to break them down for you.

Benefits Required by Law

As you’re putting together your benefits program, it’s important to note just what benefits you must provide. Some benefits are state regulated, while others are required by federal law. Generally, there are three types of employee benefits that all employers must provide regardless of where the business is located. These are standard in every state, across all industries. 

Social Security and Medicare

Social Security and Medicare are actually considered statutory benefits that are partly funded by the employer and the employee through taxes mandated under the Federal Insurance Contributions Act (FICA).  Both of these benefits are not accessible until later in life. Social Security is available to those that have worked for a minimum of 10 years and have paid Social Security taxes. If you are disabled under the age of 65, you can also receive these benefits. Employers and employees each pay 6.2% of wages up to the taxable maximum of $160,200 (in 2023). Medicare is available to those over 65 who have paid Medicare taxes for at least 10 years. The current Medicare tax rate is 1.45% of gross wages for the employer and 1.45% for the employee, for a combined total of 2.9%.

Unemployment Insurance

Employers are also mandated to contribute to unemployment insurance at both the federal and state levels. This is a benefit employees may receive as a result of layoffs or wrongful termination. Although contribution to unemployment is required at both the federal and state level, the benefit is administered at the state level, so the amount that each employer is required to pay varies from state to state. Regardless of the amount, every state must provide this benefit for both part-time and full-time workers.

Workers Compensation Insurance

As of June 2023, all states but Texas require that employers carry workers compensation insurance. This benefit covers those employees who are unable to work because of a workplace injury or illness. If the employee becomes injured or ill as a result of their regular job duties, the employer is required to pay for their medical bills and a certain amount of income while they recover. Employers typically have the option of obtaining private workers compensation insurance or purchasing a policy from a state run program.

Additional Mandated Benefits for Employers with 50 or More Full-Time Employees

In addition to the above, organizations employing 50 or more full-time workers must also provide two additional mandated benefits.

Health Insurance

These larger employers must provide health insurance to their workforce with employee contributions for individual health coverage not exceeding a specific percentage of their income. For 2023, that percentage is capped at 9.12% 

Family and Medical Leave

Workers at larger companies also benefit from the Family and Medical Leave Act (FMLA), which requires companies with 50 or more employees to provide up to 12 weeks of unpaid leave with protected job security during a 12 month period for qualifying family and medical reasons, such as the birth of a child, a serious or chronic illness, or caring for a family member with a serious or chronic illness.

State Mandated Benefits

Disability Benefits

A few states also require employers to provide for disability benefits. This benefit applies to workers who miss more than a week of work due to illness or disability. As of June 2023, the following requires employers to provide disability benefits:

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

Paid Sick Leave

More and more states are requiring employers to provide paid sick leave. Although long-term medical leave is provided for under the FMLA as mentioned above, there is no federal law requiring employers to provide for paid leave for short-term illness. So, states and local governments are starting to lead the way, with some expanding the coverage to include the employee’s child, spouse, registered domestic partner, parent, parent-in-law, sibling, grandparent, grandchild, or any person whose relationship with the employee is the equivalent of a family relationship. It’s important to know what your state and local governments require.

As an HR professional with years of experience, I recommend to my clients to think of the above benefits as the bare minimum. If you want to attract and retain a qualified workforce, your benefits package needs to be much more robust. Think seriously about also offering paid vacation time, retirement plan contributions, employee wellness programs, employee development programs, tuition reimbursement, pet insurance, gym memberships, or unique onsite amenities.

Hopefully this list helps clarify what employee benefits are mandatory. If you’re still confused, we can help you identify the right benefits to offer your workers.

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