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Which Benefits Are Legally Required?


Unemployment insurance

Unemployment insurance benefits are provided through the Federal-State Unemployment Insurance Program, which delivers short-term benefit payments to employees who lose their jobs through no fault of their own. The program is funded via federal and state unemployment taxes.

Only the employer pays federal unemployment tax. Further, most states require only the employer to pay state unemployment tax. (A few states require both employers and employees to pay state unemployment tax.)

Workers' compensation

Workers' compensation insurance is a state-operated program that provides medical care and compensation for lost wages to employees who suffer work-related injuries or illnesses. In most states, as long as you have employees, you must carry workers' compensation. The inner workings of the program, however, vary from state to state.

Family and medical leave

The federal Family and Medical Leave Act gives eligible employees up to 12 weeks of unpaid, job-protected leave during a 12-month period for qualifying family and medical reasons. Also, a growing number of states are following suit by implementing their own family and medical leave laws — most of which expand on the amount of leave that can be taken or the classes of individuals to whom the leave applies.

Disability insurance

In states such as California, New York, New Jersey and Rhode Island, employers must provide temporary (or short-term) disability insurance to employees. The insurance partially replaces the wages of employees who are unable to work due to a nonwork-related illness or injury. Depending on the state, either the employer or the employee, or both, pay for state disability insurance.

Paid sick leave

According to the National Conference of State Legislatures, as of mid-2018, 10 states plus Washington, D.C., require employers to provide paid sick leave. The amount of paid sick time that should be granted varies by state.

School/parental leave

To help employees balance their work and home lives, a few states — including California, Illinois and North Carolina — require that employers provide employees with a limited number of hours to attend their children's school-related events.

Health insurance

This is one of those benefits that straddles the fence by being both legally required and voluntary. Per the Affordable Care Act, employers with more than 50 full-time and full-time equivalent employees must offer qualified health insurance. If employers choose not to provide health insurance, they may have to pay a penalty.

There's also the Consolidated Omnibus Budget Reconciliation Act, which says that employers with at least 20 employees must offer continued group health coverage to enrollees who lose their job or would otherwise lose health coverage. Many states have "mini COBRA" laws, which cover smaller employers or provide greater protection than COBRA.

Note that regulations — both federal and state — can change quickly, so check the details before changing a policy at your company.



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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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