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11. Employee Benefits

Social Security

United States law provides for retirement benefits and subsidised health insurance under federal Social Security and Medicare programs. Employers are required to contribute 6.2% of each employee’s salary (in 2023, on the first $160,200 of an employee’s gross wages) to Social Security, as well as 1.45% of each employee’s salary (without any limit on the wage base) to Medicare. Equal contributions are deducted from each employee’s wages and act as an “employee contribution.” These federal programs provide benefits for retirees, the disabled, and children of deceased workers. Social Security benefits include old-age, survivors and disability insurance. Medicare provides hospital insurance benefits.

Healthcare and Insurances

Under the Patient Protection and Affordable Care Act, certain large employers who do not offer affordable health insurance that provides minimum essential coverage to 95% of their full-time employees and their dependents may be subject to significant penalties. Specifically, covered employers will be subject to an annualised employer shared responsibility (ESR) payment of $2,970 (indexed) in 2024 per full-time employee (less the first 30 full-time employees). Employers may also be required to provide employees with health insurance benefits pursuant to a negotiated collective bargaining agreement or employment contract.

Required Leave

Holidays and Annual Leave

Although the United States government recognises several “national holidays,” no federal law requires employers to provide employees with time off for a holiday. However, it is customary for employers to provide employees with paid time-off to observe nationally and locally recognised holidays.

For example, the public holidays widely observed by employers in private industry are: New Year’s Day, Memorial Day (in late May), Independence Day (4th of July), Labour Day (early September), Thanksgiving Day (third Thursday in November), and Christmas Day. Some states require that employees working on enumerated holidays be paid at a higher rate of pay.

Similarly, no federal law requires employers to provide employees with paid vacation time. In practice, all employers provide employees with paid vacation time. It may range from one week per year during the first few years to three weeks or more for long-serving employees. Employees who are represented by a labour union may receive more generous vacation time.

Maternity and Parental Leave

The Family and Medical Leave Act (”FMLA”) requires employers with fifty (50) or more employees within a seventy-five (75) mile radius to provide covered employees with twelve (12) weeks’ unpaid leave in a 12-month period for the birth or placement of a child.

Some state laws provide for maternity leave for employees who are not covered under the FMLA. In addition, several states provide workers with partial pay during parental leave and in general, it seems there is a trend toward state family leave laws.

Sickness Leave

Employees may be entitled to unpaid sick leave under the FMLA, which allows eligible employees to take up to twelve (12) weeks’ unpaid medical leave in a 12-month period for a serious health condition that prevents the employee from performing the functions of his or her job. A serious health condition covers a range of illnesses, though colds, headaches, and routine medical care is typically not covered.

Though there is no national law guaranteeing paid sick leave, a number of states, counties, and cities require employers doing business within their boundaries to offer paid sick leave. The laws vary considerably in such details as defining who is a covered employer, who qualifies as an eligible employee, how much sick leave is available, how it is accrued and when it can be taken.

Further, On 30 September 2016, the Department of Labour published a final rule to implement Executive Order 13706, Establishing Paid Sick Leave for Federal Contractors. Executive Order 13706 was signed by President Barack Obama on 7 September 2015, and requires parties that enter into covered contracts with the Federal Government to provide covered employees with up to 7 days of paid sick leave annually, including paid leave allowing for family care.

Disability Leave

A disabled employee may be entitled to unpaid leave under the FMLA as discussed above. In addition, workers’ compensation insurance administered at the state level may provide for paid leave. Finally, while the Americans with Disabilities Act (“ADA”) does not expressly provide for disability leave, employers are required to make reasonable accommodations for qualified employees with disabilities, which could include leave, so long as doing so does not pose an undue burden on the employer.

Pensions: Mandatory and Typically Provided

Unless otherwise provided for pursuant to a collective bargaining agreement or an employment contract, employers are not required to provide employee pensions or any retirement benefits. Many American employers do provide some retirement benefit to their employees, increasingly in the form of a retirement savings plan, which is a defined contribution plan and commonly named after the applicable section of the Internal Revenues Code as a “401k” plan.

Any Other Required or Typically Provided Benefits

Depending on the size and industry of the employer, additional benefits, while not required, are typically provided. Popular employee benefits in the U.S. include: long term/short term disability insurance, health insurance, life insurance, dental insurance, vision insurance, paid parental leave, commuting/travel assistance and  gym/wellness benefits.

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