In the United States, employers--such as Fortune 500 companies, small businesses and government organizations--may offer employee benefits to attract, retain and reward talented individuals. In turn, employees can use benefits to protect and build health and wealth, while balancing work and life.
- Employee benefits date back to the 1870s, when mining and railroad companies began offering doctor services for employees, according to the Employee Benefit Research Institute. Still, in the early 1900s, few people had health benefits. That changed during World War II, when employers faced wage freezes and stiff competition for a shrinking labor pool. Employee benefits gave employers a powerful tool to attract and retain talent.
- Sometimes referred to as "a hidden paycheck," employee benefits can add tremendous value to what an employee receives from an employer in return for work performed.
First, there's the cost of benefits coverage. It's lower when purchased at group rates or when an employer assumes responsibility for all or part of the cost.
Second, there's the protection employee benefits afford. For example, consider health care coverage. Uninsured Americans are less likely to obtain care when needed, face higher mortality rates because care is not received until the later stages of an illness and have problems covering expenses due to high medical bills. - Federal, state and local laws mandate employers to offer certain types of employee benefits. Other types of benefits are optional.
Employee benefits required by law include unemployment insurance, workers compensation, disability insurance (in certain states), family and medical leave, temporary continuation of health coverage at group rates (called COBRA) and Social Security.
Optional employee benefits designed to protect and promote good health may include medical, dental, vision, hearing and/or prescription drug coverage.
Other optional benefits help employees protect and build wealth. Examples include offer disability insurance (other than what's state-mandated), life insurance, a pension plan, a 401(k), flexible spending accounts, health care accounts, stock options, bonus programs, discount stock purchase plans and financial education programs.
When it comes to work/life, optional employee benefits may include tuition reimbursement, adoption, day care, on-site fitness facilities, flexible work schedules, telecommuting options, carpooling/mass transit discounts, group legal services, relocation assistance, discount buying programs on everything from computers and cell phones to home and care insurance to tickets for special events and time off, such as holidays and vacations, jury duty, personal leave, sick leave and funeral/bereavement leave. - An employer may assume 100 percent of the cost of certain benefits, ask employees to share the cost of other benefits or require employees to pay the full cost at group rates.
Companies receive tax incentives to offer certain types of benefits. Similarly, employees may have the opportunity to pay for or contribute to certain benefit plans with before-tax dollars, reducing taxable income and possibly increasing take-home pay. - Under the Employee Retirement Income Security Act (ERISA), private sector employers who offer employee benefits are required to provide information about certain plans and advance notice of plan changes. To understand how plans work and to maximize benefits, an employee may request plan information from the employer.
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