Employee Benefits – What is Required?

Senate Passes Insurance Industry Aid Bill

This article discusses employee benefits for private employers, meaning companies that operate separately from the government, including privately owned and publicly traded companies.  Employees who work for  federal, state and local government are governed by a separate and sometimes differing set of workplace rules.

Are employers required to provide vacation days or paid time off?

Generally, no.  When employers provide vacation days or paid time off to employees, it is done by choice, to remain competitive, and because it is the custom to do so.  It doesn’t matter if you are a full time or part time employee, there is generally no law that requires it.  However, different rules apply for federal, state and local government employees who may be entitled to certain days off.  But for private employers, if the employer chooses to provide paid time off to some employees, it must provide the same benefit to all of the members of that group.  For example, if a private employer provides paid time off to one of its full time employees, it may not discriminate or selectively provide those benefits to only certain members of that group.

Are employers required to provide health benefits?

As of now, the only state that requires health benefits is the state of Hawaii.  Employees who work more than 20 hours in Hawaii are required to be offered health benefits.  Many employers choose to offer health benefits, however to attract and retain employees.

If health benefits are offered to employees, any employer with 20 or more employees is required to provide COBRA (Consolidated Omnibus Reconciliation Act) benefits to departing employees, so long as the departure was not due to gross misconduct.  COBRA benefits are required for up to 18 months after employee departure.  However, the cost of these benefits are usually passed on to the former employee.

Are employers required to withhold taxes?

Usually yes but it depends.  Federal income tax is due from everyone who earns over a certain threshold amount (the amount varies depending on filing status).  The threshold amount is very low and most people probably will not qualify for this.  For example in 2010, the threshold amount for a single taxpayer with no children was $9,350. Note that the amount changes every year, since the IRS raises the amount every year.

Payroll taxes are a “pay-as-you-go” tax, requiring employers to withhold certain taxes from the employee’s paycheck, including income tax, social security tax, and medicare tax.  The amount of taxes employees pay depends on the employee’s income level and the information provided on the employee’s W-4 (e.g., marital status, exemptions).   Being a student does not automatically exempt an employee from payroll taxes.  Also, the employee’s status as full-time or part-time does not matter.  If the employee is not an employee but in fact an independent contractor, different rules apply, since the employer will not withhold taxes for the employee but rather the employee must pay on their own.

Remember, employees will have the MOST money withheld from your paycheck if “0” allowances are claimed on the W-4.  The higher the number of exemptions claimed, the LESS the amount taken out for taxes now.  For specific guidance on your individual tax situation, please refer to a tax professional or attorney.

Image by Flickr User Mike Licht (Creative Commons)


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  1. Marcus says:

    Actually rare to find informed people about this issue, but you seem like you are aware of exactly what you are dealing with! With thanks

    1. smlbizlaw says:

      Appreciate it! We only blog about legal topics that we’re pretty informed about.

  2. Ryan says:

    Wonderful information, just the info I needed to know as I’m hiring new personnel.
    Keep up the good work.

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