Government Mandated Benefits

Businesses use benefits to attract new employees and give current employees a greater sense of job satisfaction. The United States government has mandated certain benefits for employers to provide to their employees. In 1994, The United States Chamber of Commerce estimated that 40.7% of average payroll was used for total benefits payments.  Here is a small list of some government mandated benefits programs:

Workers’ Compensation

Job related illness, injuries, emotional impairment due to the job related injury, and job related emotional strain are covered under Workers’ Compensation laws. The compensation is provided by the employer through state insurance or a private carrier. The system allows quick payment of cash benefits, rehabilitation and medical care given to employees. Employers are protected from legal action by giving qualified workers the appropriate compensation.

Unemployment Compensation

These benefits are a part of the Social Security Act of 1935. According to Mandated Benefits: 1997 Compliance Guide “Both federal and state statutes exist to protect and preserve the income of individuals who lose their jobs” through no fault of their own. The claims are paid to employees by the employer through taxes and the employer’s experience rating. In most states, employees can receive up to 26 weeks of pay, though the maximum duration varies by state and some states pay for fewer weeks; benefits generally replace approximately 40% to 50% of prior wages, subject to a state maximum dollar amount. Terminated employees may not collect if they were discharged because of willful misconduct, labor stoppage such as strikes or have refused to accept suitable employment.  (Note:  As of 1/1/03 both employers and employees are required to pay unemployment compensation taxes.)

Social Security

Benefits provide income to employees after retirement or in the event of permanent disability. According to Personnel Policy Handbook, “The employee pays a percentage of income through payroll deductions for social security benefits up to a specified limit. The employer pays an equal percentage in all covered wages of employees.” The tax rate is 6.2% each for employee and employer, and the specified wage limit (the Social Security wage base) is $184,500 for 2026.

COBRA

The Consolidated Omnibus Budget Reconciliation Act of 1986 requires businesses with 20 or more employees to continue health care coverage to discharged employees. COBRA excludes employees of churches, the federal government, and those terminated because of gross misconduct. Individuals can have up to 18 months of medical coverage for the standard qualifying event (such as termination or reduced hours), extendable to up to 36 months for qualified beneficiaries if a second qualifying event occurs during that period — for example, the employee’s death, divorce or legal separation, Medicare entitlement, or a dependent child aging out of eligibility.

Family and Medical Leave

Employees who have worked for a private employer with 50 or more employees within a 75 mile radius for one year and 1250 hours of service may be eligible for a leave of absence under the Family and Medical Leave Act. Eligible employees may take up to 12 workweeks of unpaid, job-protected leave in a 12-month period for specified family and medical reasons.