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 annual 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. 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%.
- 6.2% for Social Security
- 1.45% for Medicare
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 benefits.
For more information, 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 benefits 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. To understand the specifics 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 benefits, 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 benefits, and flexible work arrangements.
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FAQ’s
Get answers to all your questions and take the first step towards a US business expansion.
In the United States, employers typically offer a range of benefits to attract and retain top talent. The most common employee benefits include health insurance, which often covers medical, dental, and vision care. Retirement plans, such as 401(k)s, are widespread, allowing employees to save for their future with potential employer-matching contributions. Paid time off (PTO) is another standard benefit, encompassing vacation days, sick leave, and personal days. Life insurance and disability insurance are frequently provided to offer financial protection for employees and their families. Additionally, many companies offer wellness programs, employee assistance programs, and professional development opportunities. At Foothold America, we understand the importance of comprehensive benefits packages and can guide businesses expanding to the USA in designing attractive offerings that comply with local regulations and meet employee expectations.
Employee benefits in the United States have some distinct characteristics compared to those in other countries. One significant difference is the emphasis on employer-provided health insurance, as the USA lacks a universal public healthcare system. Retirement savings in the US often rely heavily on individual and employer contributions through 401(k)s plans, whereas other countries may have more robust public pension systems. The USA generally offers fewer mandated paid leave days compared to many European countries, although some companies choose to provide more generous time off policies. Another unique aspect of US benefits is the prevalence of employer-sponsored wellness programs and flexible spending accounts for healthcare and dependent care expenses. Foothold America specializes in helping international companies navigate these differences, ensuring they can offer competitive benefits packages that align with US norms while maintaining their global corporate culture.
Employee benefits are crucial in attracting and retaining talent in the highly competitive US job market. A comprehensive benefits package can significantly enhance an employer’s value proposition, often being a deciding factor for job seekers choosing between multiple offers. Benefits demonstrate an employer’s commitment to their employees’ well-being, financial security, and work-life balance, which can foster loyalty and reduce turnover rates. Moreover, attractive benefits can help companies stand out in industries where base salaries are relatively similar. They also contribute to employee satisfaction and engagement, boosting productivity and overall company performance. Foothold America recognizes the strategic importance of well-designed benefits packages and assists companies in creating offerings that resonate with the US workforce while aligning with their organizational goals and budget constraints.
The top five employee benefits in the United States, highly valued by workers and commonly offered by competitive employers, are:
- Health Insurance: Comprehensive medical coverage, often including dental coverage and vision insurance, is the most sought-after benefit due to the high healthcare costs in the US.
- Retirement Plans: 401(k) plans with employer-matching contributions are popular. These plans help employees save for their future while providing tax advantages.
- Paid Time Off: A generous PTO policy, including vacation days, sick leave, and personal days, is crucial for maintaining work-life balance and employee well-being.
- Flexible Work Arrangements: Remote work or flexible hours are becoming increasingly popular, especially post-pandemic, and are highly valued by employees seeking better work-life integration.
- Professional Development Opportunities: Programs supporting continued education, skill development, and career advancement demonstrate an employer’s investment in their workforce’s growth.
Foothold America assists companies in designing and implementing these top benefits and others, ensuring they create attractive packages that comply with US regulations and meet the expectations of the American workforce. Our expertise helps businesses expanding to the USA to establish themselves as employers of choice in their respective industries.
According to the Bureau of Labor Statistics, the average American worker receives ten paid vacation days after one year of service. However, this can vary widely based on industry and company policies. Some employers offer generous vacation time as part of a comprehensive benefits plan to attract top talent. Read more about Paid Time Off Trends in the USA here. Foothold America can help international companies understand and implement competitive vacation policies that align with US norms and employee expectations.
Under the Affordable Care Act, large employers (with 50 or more full-time employees) face significant penalties if they don’t offer health insurance coverage that meets specific standards. These penalties can be substantial, potentially costing thousands of dollars per employee annually. Foothold America guides businesses through the complexities of US health insurance requirements, helping them avoid penalties while providing valuable coverage to their workforce.
Social Security taxes are mandatory payroll taxes that fund the federal Old Age, Survivors, and Disability Insurance (OASDI) program. Both employers and employees contribute to this tax. While not a direct benefit, Social Security provides a foundation for retirement income and disability benefits. Employers must accurately calculate and withhold these taxes. Foothold America helps international companies understand and comply with all US payroll tax requirements, including Social Security taxes.
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