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Comprehensive Guide to Employee Benefits and Compensation in the USA

What are Employee Benefits?

Employee benefits are additional perks or benefits offered alongside the salaries. There are various employee benefits provided by the employer, including medical insurance, profit sharing, retirement benefits, and vacations, among other things. 

These benefits help the company gain the employees’ trust and retain talent. In addition, it makes employees believe that their employers are investing in their career growth and security. The following article will give detailed information on compensations and benefits policy in the USA. 

Compensation Laws in the USA

Compensation laws vary from state to state. However, some federal standards on compensation and benefits are applied countrywide. One of these is the Fair Labor Standards Act (FLSA). This law controls the minimum wages, equal pay, record-keeping, and overtime pay requirements. 

As per the FLSA law, the employers must abide by the following guidelines: 

  • All the employees must get a minimum wage of $7.25 per hour. However, the hourly wage is higher than this amount in many states. 
  • With a few exceptions, the employees must be entitled to be paid 150% of their regular pay for all the work hours in addition to their standard 40-hour workweek. 
  • Employers must maintain a record of the wage and hours filled by their employees. This also includes the regular hourly rate and the total wages per pay period.  

How to Design an Employee Benefits Program for Employees in the US?

Designing the employee benefits program is crucial for employers when retaining the best talent while meeting their employee’s needs. An efficient design also helps in reducing the cost spent on benefits and compensation for employees. 

Step 1: Decide on a clear goal & budget. 

The foremost step before drafting the employee benefits program is to set the plan’s objectives. Identifying them helps in focusing and keeping a realistic plan that benefits every sect of the employee. Some of the common objectives to keep in mind while creating an employee benefit program are: 

  • Must help attract and retain employees 
  • Must be unique to stand a class apart from competitors 
  • Must adhere to the state and national laws 
  • Must help boost the employee engagement rate 

Once you set the budget and your goals, you can analyze current and projected costs. This process will help create a budget sheet and outline the annual costs.  

Step 2: Analyze internally & externally. 

Once the objectives and budget are decided, you must conduct a needs assessment internally. From this survey, you will get a clear picture of: 

  • What do your employees think about the existing benefits? 
  • What benefits are essential for your employees? 

This survey will give a clear perspective on the current benefits and its effectiveness. The data collected will also help you understand what benefits your employees want and those missing from the current employee benefit plan. 

Once you have this data, you will also get the parameters to compare your company with the market. You will be required to do an external survey and understand what other companies are doing to attract the candidates. 

Step 3: Create a flexible and customizable employee benefits plan 

Once you have analyzed your existing benefits and figured out the gaps, you will now design a custom and flexible plan for the employees. This means that apart from the mandatory benefits, the employees can choose between the complimentary benefits from the offered package. 

This will ensure that each employee gets their relevant benefits while significantly reducing the cost of under-used benefits. 

Step 4: Communicate the benefits plan to the existing & potential employees. 

A well-planned benefits plan can go to waste if you fail to communicate it clearly to the potential and existing employees. 

For example, you collected employee feedback and incorporated it to improve the benefits plan but didn’t inform them. Naturally, they might feel that you don’t value their opinion, and eventually, they will lose trust. 

A well-thought communication strategy will evoke a sense of appreciation and security in the employees, making them feel safe and supported at the workplace. 

Step 5: Assess the effectiveness of benefits 

Evaluation is the most crucial step to understanding the effectiveness of your benefits plan. Therefore, you must assess the program regularly and check if it serves its purpose in fulfilling the objective. 

To stay compliant and competitive, ensure to monitor the economy, demographics, workforce, business climate, and employment laws. 

Types of Guaranteed Benefits in the USA

Below is the list of mandatory employee benefits in the USA which are provided for the safety and security of the employees. 

Social security

‍According to US law, the employees are eligible for retirement benefits and subsidized health insurance. These benefits are provided under the social security and medicare programs. These federal programs support the retirees, disabled, and children of deceased workers. In addition, social security also benefits old-age, disability insurance, and survivors.  

Healthcare & insurance

‍Employers must provide their employees with health insurance benefits. If an employee does not provide health insurance to full-time employees, they have to endure a penalty of $2,570 per full-time employee. The medical benefits for employees in the US are either provided under a negotiated collective bargaining agreement or as part of the employment contract.  

Holidays & annual leave

‍It is customary in the US for employers to provide employees a paid time-off to celebrate local and nationally recognized holidays. Similarly, the employers must provide paid vacation time for at least a week per year for the initial years. And at least three weeks of paid vacation for long-serving employees.  

Maternity & paternity leave

‍According to the Family and Medical Leave Act, employers with at least 50 employees living within the 75-mile radius must provide employees with 12 weeks of unpaid leave. Maternity benefits in the USA are offered within 12 months of the child’s placement or birth. 

Sickness & disability leave

‍As per the FMLA, the employees can get unpaid sick leave for at least 12 weeks in 12 months. In addition, if the employee is suffering from a severe health condition that may affect the performance in the job, they can avail of unpaid sick leave.   


‍Some American employees provide retirement benefit plans to their employees. This is majorly a part of the retirement savings plan, which is applicable under the section of the Internal Revenues Code as a “401k” plan.

Employee Benefits for Expatriates

In the United States, expats are not guaranteed any benefits. However, many companies provide benefit plans in the form of incentives. Some of the employee benefits in the USA for expatriates are: 

  • Paid vacation and sick leave 
  • Dental, vision, and medical insurance plan 
  • Retirement benefit plans like pension or the 401(k)

Some companies also provide additional benefits like relocation assistance and child care benefits.

How are Employee Benefits Taxed in the USA?

As an employer, you’re responsible for paying the following taxes levied on employee benefits in the USA: 

  • The social security tax is approximately 6.2% on the first USD 1,32,900 of the wages paid. 
  • The medicare rate is around 1.45% for the employees. There might also be an extra medicare tax of 0.9% on their salaries above $2,00,000 in a year.

Restrictions for the US Benefits and Compensation

The compensation law in the USA may vary between states. There are 50 states in the US, and each has its own set of regulations and restrictions related to employment. Thus, you must update yourself regarding the limits on benefits and compensations before hiring.

Supplemental Benefits for Employees in the US

In addition to the benefits mentioned above, there are some additional compensation and benefits in the USA, which selective employers typically provide. The supplemental benefits are: 

  • Disability insurance 
  • Life insurance 
  • Health insurance
  • Dental insurance 
  • Vision insurance 
  • Paid Parental Leave 
  • Commuting/Travel assistance

How Can Multiplier Help with Benefits Management in the USA?

The employer is responsible for managing and distributing the benefits adhering to the terms decided in the employment offer. However, managing employee benefits in the USA can be tedious and time-consuming. 

So, it’s wise to outsource the benefits management to a global employment solution provider such as Multiplier. Our experts remain updated about the employment laws 24×7. This guarantees that you can provide industry-standard benefits using our platform.

Frequently Asked Questions

The relocation benefits cover the expenses of initial move activities, including the visas, flights, hotels, residence, work permits, and a one-time lump sum to cover other pocket expenses.

The factors to consider are the cost of living in the host country, tax implications, health care, and dependent education.

According to the USA compensation law, the minimum wage of an individual is $7.25 per hour.

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