Full-Time Employee Benefits in the US: Guide to Required Benefits by Federal Law

Building a distributed workforce in the U.S. allows global companies to source employees from a highly skilled and productive talent pool. It’s also beneficial for companies that want to grow their business into a global brand.

A critical part of attracting top talent in the U.S. is offering consistent, comprehensive employee benefits in any state. However, administering benefits nationwide while complying with federal and state-specific regulations is a major headache. 

Affordable, competitive, and compliant benefits administration in the U.S. doesn’t have to be overwhelming or risky. Read on to learn how to easily administer comprehensive benefits to a distributed workforce in the U.S.

Do you have to offer benefits to full-time U.S. employees?

Companies that hire full-time employees in the U.S. must provide federally mandated statutory benefits, including Social Security and Medicare, workers’ compensation, and unemployment insurance. 

Employers must also adhere to state-level requirements, which vary from one jurisdiction to the next. For instance, employers in 11 U.S. states, including Colorado and New York, must offer their employees paid leave, while employers in other states don’t have to.

Generally speaking, there are fewer statutory benefits in the U.S. than in many other countries. Take Germany, the Philippines, and the United Arab Emirates (UAE): Employers in these countries must provide health insurance and paid leave to their employees, both of which are optional at the federal level in the U.S. 

Nonetheless, many employers in the U.S. offer supplemental benefits to secure top talent and remain competitive in their industry.

* Applies only to qualifying employers

Legally required employee benefits in the U.S.

Federally-mandated benefits in the U.S. include Social Security, Medicare, unemployment insurance, and workers’ compensation. Other statutory benefits, such as family leave, medical leave, and health insurance, only apply to qualifying employers.

We discuss each of these benefits in detail below. 

Social Security and Medicare

Social Security taxes and contributions in the U.S. support the nation-backed retirement fund and Medicare—the public health insurance program for people over 65. 

Social Security also provides income support for individuals who can’t work due to a disability and survivor benefits for legal dependants of individuals who have passed away.

Employers and employees each pay 6.2%, calculated as a percentage of the employee's earnings up to a taxable maximum of $160,200, while self-employed individuals pay 12.4%.

Unemployment insurance

Unemployment insurance, otherwise known as the Federal Unemployment Tax Act (FUTA), provides income support for individuals who are unemployed or have lost their job but are willing and able to work. 

FUTA is an employer-only contribution of 6%, applied to the first $7,000 of an employee’s annual earnings. A similar program called the State Unemployment Tax Act (SUTA) exists at the state level, with tax and contribution rates varying between states. 

Workers’ compensation insurance

Workers' compensation insurance provides income support and covers medical expenses and rehabilitation costs for employees who can’t work due to a job-related injury or illness. 

Employers in most sectors in the U.S. only pay workers’ compensation tax to the state, not the federal government—and nearly every U.S. state mandates workers’ compensation insurance. Additionally, federal workers’ compensation programs exist for all federal employees and individuals working in the longshore, energy, and mining sectors.

Family and medical leave

The Family and Medical Leave Act (FMLA) guarantees qualifying employees up to 12 weeks of job-protected, unpaid annual leave for certain family and medical reasons, such as caring for a newborn, adopting a child, or taking care of an immediate family member.

Employees qualify for FMLA leave if they have worked for their employer for at least 1,250 hours over the past 12 months and if their employer has 50 or more employees within a 75-mile radius.

Health insurance

The Affordable Care Act (ACA) is a federal mandate that requires qualifying businesses to make affordable health insurance coverage available to their full-time employees.   

The key difference between the 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. 

According to the ACA terms, any employer with 50 or more full-time employees must make an affordable healthcare policy available to at least 95% of its full-time employees and their dependant children. The policy must cover 60% of healthcare costs, and the employee shouldn’t have to pay more than 9.86% of their household income.

Companies with fewer than 50 full-time employees don’t have to offer coverage. Learn more about providing comprehensive health insurance to U.S. employees in our guide to healthcare benefits in the U.S.

Common supplemental employee benefits in the U.S.

Providing comprehensive supplemental benefits to employees in the U.S. is especially important for talent retention since federal and most state regulations don’t require basic benefits, such as healthcare and paid leave.

Below, we list some of the most common supplemental benefits global employers offer their U.S. employees:

• Retirement plan benefits. Due to limited social security coverage in the U.S. and the high cost of living, employees in the U.S. value supplementary retirement plans like contribution-matching policies that enable them to make greater contributions to their retirement savings and secure long-term financial security.
• Private healthcare. Robust healthcare is fundamental to an employee’s quality of life. Many companies offer private health insurance to their employees in the U.S., regardless of whether or not they qualify for ACA, to ensure their employees have the coverage they need. 
• Vision and dental insurance. If vision and dental coverage aren’t included in your employee healthcare plan, consider offering additional, separate policies that cover important things like annual cleanings and eye exams, plus access to lower-cost care for additional services like orthodontics. 
• Paid time off. Paid time off helps employees establish a healthy work-life balance, dramatically improving their well-being. As paid time off is not a federally mandated benefit in the U.S., it plays a fundamental role in a comprehensive benefits plan. 
• Paid sick leave. In addition to allowing employees to take rest when they’re sick, paid sick leave also allows them to recover from a cold or flu at home, reducing the risk of contagion and creating a healthier workplace for other employees. 
• Paid family leave. Parents comprise most of the U.S. workforce, and many employees who aren’t parents yet may become parents in the future. Family-friendly benefits, such as paid parental leave, are essential to a company’s employee value proposition.
• Equity benefits. Equity benefits include non-cash payments, such as stock options, restricted stock, and performance shares. Because their value fluctuates in line with company performance, these benefits boost employee retention and engagement.

The challenges of providing benefits to U.S. employees

Companies that hire employees in the U.S. face unique challenges when administering benefits to their distributed workforce across the country.

Because the U.S. has so few statutory benefits, global employers must offer more robust supplementary benefits to their U.S. employees than they generally would for employees in other countries.

Also, administering benefits to multiple employees across different states entails additional challenges related to compliance, administration, and affordability. 

Below, we outline the main challenges companies face when administering benefits to their U.S. employees.  

Research

You want to allow your employees to work from any state, but you aren’t familiar with each state’s regulations or top carriers. You have to perform time-consuming research to ensure compliance and source affordable, comprehensive coverage nationwide.

Affordability

You want to hire talent in multiple states, but purchasing numerous policies in many jurisdictions results in mounting costs that exceed your budget. 

Administration

Administering benefits for employees located within one jurisdiction requires a robust, experienced, in-house HR team. But, administering benefits for a distributed workforce across multiple states requires even more resources, including additional HR staff with the necessary experience and proper legal counsel to avoid fines and other noncompliance penalties. 

Comprehensive coverage

Providing your U.S. employees with only the statutory minimums reduces total employee cost in the short term but leads to decreased employee satisfaction and higher turnover in the long run. 

To build a strong, unified team and retain top talent, employers must offer comprehensive benefits that account for all of their employees’ needs. This includes basic benefits like healthcare, retirement plans, and paid leave, as well as additional benefits like dental and vision coverage and equity benefits. 

Compliance

You want to attract talent nationwide or keep an employee who is moving to another state. To keep your mobile workforce intact while recruiting new teammates from across the country, you have to offer compliant benefits nationwide, adhering to state-level requirements in each jurisdiction where your employees reside.

Attraction

You want to stand out among other employers in your industry and secure top-tier talent. To entice the highest-impact candidates into joining your team, you need to provide competitive, locally-tailored benefits that set your company apart from the competition, which requires thorough knowledge of the local market.

Simplify benefits administration for U.S. employees with Velocity Global

Don’t let the complexities of administering benefits to employees throughout the U.S. prevent you from building your dream distributed team in the country. Simplify benefits administration nationwide and secure top-tier talent by partnering with Velocity Global. 

With our integrated Global Benefits solution, we make it easy for companies of any size to engage U.S.-based talent and administer consistent, compliant, and competitive benefits throughout the U.S. and in more than 185 countries without undergoing entity establishment.

We partner with a network of renowned brokerage firms across the U.S. to source the best-in-class benefits plans in each state. We’re also able to offer scalable coverage at low rates that are usually only available to large companies.

Plus, our world-class support team is there for you at every step of the way should you have any questions or concerns.

Give your employees in the U.S. and beyond the coverage they need and lean on us to handle the heavy lifting. Contact Velocity Global today to get started.