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The Basics of Employee Benefits

Benefits are any perks offered to employees in addition to salary. The most common benefits are medical, disability, and life insurance; retirement benefits; paid time off; and fringe benefits. Benefits can be quite valuable. Medical insurance alone can cost several hundred dollars a month.

Benefits are any perks offered to employees in addition to salary. The most common benefits are medical, disability, and life insurance; retirement benefits; paid time off; and fringe benefits. Benefits can be quite valuable. That's why it's important to consider benefits as part of your total compensation. Make sure you understand which ones you will receive.

Once you have great employees on board, how do you keep them from jumping ship? One way is by offering a good benefits package.

Many small-business owners mistakenly believe they cannot afford to offer Employee benefits . But while going without benefits may boost your bottom line in the short run, than penny-wise philosophy could strangle your business's chances for long-term prosperity. "There are certain benefits good employees feel they must have," says Ray Silverstein, founder of PRO, President's Resource Organization, a small-business advisory network.

Heading the list of must-have benefits is medical , but many job applicants also demand a retirement plan, disability insurance and more. Tell these applicants no benefits are offered, and often top-flight candidates will head for the door.

The positive side to this coin: Offer the right benefit, and your business may just jump-start its growth. "Give employees the benefits they value, and they'll be more satisfied, miss fewer workdays, be less likely to quit, and have higher commitment to meeting the company's goals," says Joe Lineberry, a senior vice president at Aon Consulting, a human resources consulting firm. "The research shows that when employees feel their benefits needs are satisfied, they're more productive."

The law requires employers to provide employees with certain benefits. You must:

Give employees time off to vote, serve on a jury and perform military service.

Comply with all workers' compensation requirements.

Withhold FICA taxes from employees' paychecks and pay your own portion of FICA taxes, providing employees with retirement and disability benefits.

Pay state and federal unemployment taxes, thus providing benefits for unemployed workers.

Contribute to state short-term disability programs in states where such programs exist.

Comply with the Federal Family and Medical Leave (FMLA).

Most full-time employees will expect one to two weeks paid vacation time per year. In explaining your vacation policy to employees, specify how far in advance requests for vacation time should be made, and whether in writing or verbally. There are no laws that require employers to provide funeral leave, but most do allow two to four days' leave for deaths of close family members.

The federal Family and Medical Leave Act (FMLA) requires employers to give workers up to 12 weeks off to attend to the birth or adoption of a baby, or the serious health condition of the employee or an immediate family member. After 12 weeks of unpaid leave, you must reinstate the employee in the same job or an equivalent one. The 12 weeks of leave does not have to be taken all at once; in some cases, employees can take it a day at a time.

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