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The benefit of benefits

4 May, 2016 - 17:38

Benefits can be required by government, offered willingly by employers, or arise from pressures within the company. In the US, the government requires that businesses deduct Federal Income Contribution Act (FICA) taxes from employee paychecks, which pay for Social Security and Medicare (Internal Revenue Service). Workers’ Compensation is paid to employees if they are injured while performing work necessary for their job function; this can include breaking a bone, getting into a car accident, or payments made to the family of someone killed on the job. Unemployment insurance provides wages to unemployed persons, generally only if they are registered as unemployed and actively seeking a job. In Australia, these benefits are paid through the income taxes, but payments are issued by Centrelink, a governmental office that seeks to support unemployed individuals and help them become self-supporting (Centrelink). The Family Medical Leave Act (FMLA) allows individuals to leave work for a semi-extended period of time in order to care for an ailing family member, new child, or personal illness. This leave is unpaid, but it guarantees that employees will not lose their jobs if they leave under these circumstances.

Employee benefits that are not required by law are often provided. These are attractive to businesses as well as employees because they provide both with some tax advantages. For example, if a company offers employees a flexible spending account, money that employees receive in this account may be deducted from total earnings on employees’ tax returns. Employees can “use pre-tax dollars to pay for eligible health care and dependent care expenses”, however any money that remains in the account at the end of the year will be forfeited (SHPS). This is a benefit to employees because individuals will receive a portion of their income tax-free. Employers also benefit from offering these types of programs because they also receive tax benefits and they retain happy employees by providing programs that meet their needs.

Benefits are also offered to employees as incentives. These are designed to attract, keep, and improve life for employees. They are not usually required by the government but companies may receive tax benefits for some types of these non-monetary payments. There are a plethora of services that can be offered, including complementary gym memberships, on-site daycare, company cars, and paid vacations. Companies offer such these benefits in order to create a culture for their employees, which have the ability to promote social interaction, make life easier for working parents, or improve employees’ quality of life. Depending on the industry, benefits may be more attractive than salary figures; this could allow companies to pay lower wages to employees, thus reducing the total amount spent in payroll. In situations like these, a company may want to be extremely creative in devising their benefit packages.