Employee Benefits: Does Your Business Legally Need To Provide Them?

Photo by Brooke Cagle on Unsplash

Employee benefits are categorized as additional perks that come outside of an employee’s salary. This can include any of the following:

  • Health insurance
  • A 401k
  • Workers’ comp
  • Paid leave

When you add these things on top of an employee’s salary, the cost of a single employee becomes rather large. It makes business owners wonder, do I legally need to provide benefits?

There are different rules around the world, but we’re going to look at what it means for a US company. If you run a business here, will you need to offer employee benefits?

Yes, employee benefits are legal requirements

In short, you will need to offer a range of benefits to your employees.

According to one article that looked at the benefits employers are legally required to provide, the Federal government demands the following perks are covered:

  • Medicare & social security contributions
  • Workers’ compensation insurance
  • Unemployment insurance
  • Health insurance
  • Family and medical leave

So, if you run a company in the US, all of your employees will need these perks.

Again, this can sound extremely expensive – and it will be. For most companies, the employees are the most expensive running cost. You have to weigh up whether or not the pros beat the cons. Will your business make more money with employees or without? In most cases, they’re an essential investment that helps you reach the next level.

It’s also worth noting that you can deduct employee benefits from your tax return. This makes them way more affordable as you’ll pay a much smaller tax bill than expected.

When don’t you need to provide employee benefits?

Don’t get this twisted, you will need to provide benefits for workers if they are contracted as permanent employees. They can work full or part-time, but they are contracted to work for your company as a permanent member of the staff.

On the other hand, you can avoid giving benefits like paid time off or any of the things mentioned above when you don’t hire permanent staff. For example, if you outsource and get freelance contractors to perform tasks for you, they’re not entitled to any benefits.

Why? Because they’re not technically a permanent employee working for your business. They’re a self-employed contractor working with you – and probably lots of other clients at the same time.

This is an important thing to keep in mind as it can help businesses save a lot of money. When you’re working on a tight budget, it’s useful to find ways to save cash without losing out on something.

Outsourcing work to agencies or individual freelancers will do just that. You still have talented people working for you and assisting with your tasks, but you don’t have to provide a salary or benefits. You pay them for the job, and that’s it.

The main takeaway from this post is that you must provide employee benefits if you have permanent staff. Those of you looking to save money or scale back on costs could look into outsourcing as an alternative to making permanent hires.

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