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Understanding Your Options: A Guide to Full-Time Employee Benefits in the USA

Full-time employment in the USA comes with a variety of benefits, but navigating these options can be confusing. This guide will break down federally mandated benefits like Social Security and Medicare, along with common employer-provided offerings such as health insurance and paid time off.
US EMPLOYEE BENEFITS

Leveraging a US-distributed workforce allows global companies to access a diverse pool of highly skilled and productive individuals. This strategy also empowers businesses aiming to expand their reach and establish themselves as a worldwide brand.

However, a significant challenge arises when attracting top US talent: offering consistent and comprehensive employee benefits across various states. Navigating the complexities of federal and state-specific regulations for nationwide benefits administration can be daunting.

Achieving compliant, cost-effective, and competitive benefits administration in the US is possible despite these challenges. Discover how to streamline the process of administering comprehensive benefits to your distributed workforce across the United States below.

Do you have to offer benefits to full-time US employees?

Companies that hire full-time employees in the US must provide federal statutory benefits. These include Social Security, Medicare, workers’ compensation, and federal unemployment insurance.

Beyond these requirements, employers must also comply with individual state regulations, which can differ significantly. For example, while employers in 11 states, like Colorado and New York, are obligated to offer paid leave, others have no such requirement. Each state has a mandatory unemployment fund employers must contribute to on top of federal insurance mentioned above.

Generally speaking, there are fewer statutory benefits in the US than in many other countries. In countries like Germany, the Philippines, and the United Arab Emirates, employers are legally required to provide health insurance and paid leave, benefits that are optional in the US except for employers with more than 50 employees. 

Despite this, many US employers offer additional benefits to attract top talent and maintain a competitive edge within their industries.

Federally Mandated US Employee Benefits

Common Supplemental US Employee Benefits

Social Security

Retirement contributions

Medicare

Private healthcare

Unemployment insurance

Salary replacement for involuntarily terminated employees

Workers’ compensation*

Paid time off

Unpaid family leave*

Paid sick leave

Unpaid medical leave*

Paid family leave

Healthcare through ACA*

Equity benefits

* Applies only to qualifying employers


Legally Required Employee Benefits in the United States

In the United States, unlike many other countries, there are fewer federally mandated employee benefits. However, certain programs are essential to ensure worker well-being and financial security. The section below will explore the key legally required benefits for employees in the US.

Social Security and Medicare

In the United States, payroll taxes fund Social Security, a national program that provides retirement income, and Medicare, the public health insurance program for seniors. This system is known as FICA (Federal Insurance Contributions Act).

Here’s how it works:

  • Employers and employees each contribute a combined rate of 7.65% of an employee’s earnings, capped at a maximum of $168,600 in 2024. This combined rate is broken down into:
    • 6.2% for Social Security
    • 1.45% for Medicare

  • Self-employed individuals are responsible for paying both the employer and employee portions, resulting in a higher overall contribution rate of 15.3%.

Unemployment Insurance

Unemployment insurance is a program that provides temporary financial assistance to qualified individuals who are unemployed through no fault of their own and are actively seeking work. Funded through federal and state taxes, each state administers its own unemployment program. The federal law behind unemployment tax is the Federal Unemployment Tax Act (FUTA), while state unemployment taxes are collected under the State Unemployment Tax Act (SUTA). Benefit amounts vary by state.

Employer Unemployment Taxes

  • Federal Unemployment Tax Act (FUTA): 6% on the first $7,000 of an employee’s yearly earnings. This is a flat tax that applies to all employers.

  • State Unemployment Tax Act (SUTA): Varies by state, typically ranging from 0.09% to 6.2% of an employee’s wages. Unlike FUTA, SUTA tax rates are often based on an employer’s experience rating, which takes into account factors like the number of unemployment claims filed by former employees. This means businesses with a history of layoffs may pay a higher SUTA tax rate.

Workers’ Compensation Insurance Explained

Workers’ compensation insurance supports employees who cannot work due to work-related injuries or illnesses. This support comes in two primary forms:

  • Income replacement: The insurance helps compensate for lost wages while the employee recovers.

  • Medical coverage: The insurance covers medical expenses associated with the work-related injury or illness, including rehabilitation costs.

In most US states, employers shoulder the sole responsibility of paying workers’ compensation taxes to the state, not the federal government. Additionally, nearly every state mandates that employers carry this insurance, with Texas being a notable exception. It’s important to note that separate federal workers’ compensation programs exist to cover specific groups, including all federal employees and individuals working in high-risk sectors like longshore, energy, and mining.

Family and Medical Leave Act (FMLA)

The Family and Medical Leave Act (FMLA) is a federal law that grants eligible employees up to 12 weeks of unpaid leave per year for specific qualifying reasons. These reasons include caring for a newborn child, a newly adopted child, or an immediate family member with a severe health condition. Additionally, employees can take FMLA leave for severe health conditions preventing them from performing their duties.

To qualify for FMLA leave, an employee must have worked for their employer for at least 1,250 hours over the past year, and the employer must have at least 50 employees within a 75-mile radius. It’s important to note that the leave is unpaid, but employees are guaranteed their jobs will be protected during their absence.

Health insurance

The key difference between the Affordable Care Act (ACA) and the health insurance requirements of many other countries is that the ACA only requires qualifying employers to make an affordable plan available but not to provide guaranteed coverage. 

This plan must meet specific criteria:

  • Affordability: Employees’ out-of-pocket costs shouldn’t exceed 9.86% of their household income.

  • Coverage: The plan must ‘minimum value’ which is defined as covering 60% of covered services.

It’s important to note that this requirement only applies to larger employers with 50 or more full-time employees. Under the ACA, businesses with fewer employees are not obligated to offer health insurance.

For more information on providing health insurance to US employees, refer to our guide on healthcare benefits in the US.

Beyond the Basics: Common Supplemental Benefits in the US

Offering diverse complementary benefits to US employees is crucial for attracting and retaining top talent. Unlike many other countries, federal and most state regulations in the US don’t mandate essential benefits like healthcare and paid leave. Therefore, businesses must go above and beyond to attract valuable employees.

Here are some of the most commonly offered supplementary benefits by global companies for their US employees:

Retirement Plans:

Due to limitations in Social Security coverage and the high cost of living in the US, employees value enhanced retirement plans. These often include employer matching contributions, allowing employees to save more for future financial security.

Private Healthcare:

While the Affordable Care Act (ACA) provides health insurance options, many companies in the US go beyond the minimum by offering private health insurance plans to their employees. This ensures their employees have access to more comprehensive coverage, potentially enhancing their quality of life.

Vision and Dental Insurance:

Most health insurance plans don’t cover vision and dental services for adults, with some exceptions mandated for children. To ensure a comprehensive benefits package, consider offering vision and dental insurance to your employees. These plans typically cover essential services like annual check-ups and exams, and may also provide access to more affordable care for additional needs.

Paid Time Off:

In the United States, unlike many other countries, paid time off (PTO) isn’t a legal requirement. However, it’s become a crucial perk for attracting and retaining top talent.  PTO allows employees to recharge and maintain a healthy work-life balance, ultimately boosting their well-being and potentially increasing productivity. The average American worker receives around 11 days of paid vacation per year, though this can vary significantly depending on factors like experience and industry.

Want to know more? Read: PTO Trends Across US Sectors

Paid Sick Leave:

Unlike many developed nations, the United States does not have a federal mandate for paid sick leave. This means businesses are not legally required to offer it to their employees. However, the picture isn’t entirely bleak. Many states and even some cities have taken the initiative and passed their own paid sick leave laws. These laws typically dictate how much paid sick leave employees accrue (often based on hours worked), maximum yearly allowances, and qualifying reasons for using sick leave. For instance, some states might require employers to provide one hour of paid sick leave for every 30 hours worked, with a yearly cap of 40 hours. The reasons for using sick leave can extend beyond the employee’s own illness to caring for sick family members or attending medical appointments. To understand the specifics of paid sick leave in your area, you can check your state’s labor department website or consult with Foothold America.

Paid Family Leave:

Many employees are parents, and even those who aren’t may become so. Family-focused benefits like paid parental leave are essential to a company’s reputation as a desirable employer.

In addition to attracting and retaining top talent, paid parental leave offers a multitude of benefits to both employees and employers. For employees, paid parental leave provides valuable time to bond with a new child or care for an ailing family member. This can lead to increased employee morale, productivity, and loyalty. For employers, paid parental leave can help to reduce absenteeism and turnover, and improve overall employee satisfaction.

Equity Benefits:

These are non-cash compensation options like stock options, restricted stock units (RSUs), and performance shares. Their value fluctuates with company performance, motivating employees and promoting long-term engagement with the company. Offering equity compensation is increasingly common in the US, especially among startups and publicly traded companies. While there’s no single definitive statistic, studies suggest it’s prevalent across various industries.

A 2023 survey by the National Bureau of Economic Research found that 83% of public US companies offer some form of equity compensation to their employees [source: National Bureau of Economic Research]. While becoming more widespread, equity compensation is still more prevalent in certain sectors such as Technology, Life Science and Finance.

Challenges of Administering Benefits for US Employees

In the United States, offering a competitive benefits package is crucial for attracting and retaining top talent. However, efficiently administering these benefits can be a complex task for employers. The section below explores the key challenges faced by organizations in managing and administering employee benefits in the USA

Research

Compliance and Affordability: Ensuring nationwide compliance and sourcing affordable, comprehensive coverage across different states requires extensive research, especially for companies unfamiliar with individual state regulations and leading insurance carriers.

Affordability

Hiring talent across multiple states can lead to increased costs due to the need to purchase various benefit packages in different jurisdictions, potentially exceeding budget limitations.

Administration

While administering benefits for centralized teams requires a dedicated HR team, managing geographically dispersed employees across different states demands additional resources. This includes acquiring experienced HR personnel with specialized knowledge in handling diverse state regulations and potentially seeking legal counsel to avoid compliance issues.

Comprehensive Coverage

While providing only the minimum statutory benefits might initially reduce total employee cost, it can negatively impact employee satisfaction and lead to higher turnover. Comprehensive benefits, including health insurance, retirement plans, paid leave, and additional options like dental/vision coverage and equity, are crucial for building a strong, unified team and retaining top talent.

Compliance

Maintaining a distributed workforce while attracting new talent nationwide requires companies to offer compliant benefits and adhere to specific state-level requirements for each employee’s location.

Attraction

To stand out from competitors and attract the best talent, benefits need to be tailored to resonate with different employee demographics. This goes beyond just location. For example, senior employees may prioritize retirement savings plans and health insurance options, while younger employees might value student loan repayment assistance, wellness programs, and flexible work arrangements.

Effortless US Expansion: Employ Top Talent, Simplified

Focus on growth, not paperwork. Foothold America streamlines your US hiring needs with comprehensive and compliant solutions. We handle the HR complexities, including onboarding, payroll, compliance, and benefits administration, so you can hire efficiently and focus on what matters most—your business.

Ready to unlock seamless US expansion? Contact Foothold America today.

How to Hire in the USA with an EOR Service [eBook]

Are you planning to hire in the USA but feeling overwhelmed by the complexities of US employment law and regulations? Look no further! We have the perfect solution to simplify this process for you. Introducing our new ebook: ‘How to Hire in the USA with an EOR Service’.

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