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Can You Offer Employees Different Benefits?

For business leaders creating a benefits package, the question, “Can you offer employees different benefits?” often arises. You can offer employees different benefits. Federal law does not require employees to have the same coverage. However, you risk serious complications when you decide to offer employees different benefits. 

Essential benefits such as health insurance are under government scrutiny—meaning you’re legally required to comply with federal regulations. Speak with a benefits or legal expert before making any decisions about offering employees different benefits. Make sure your decisions are being made fairly and without any bias.

A group of coworkers gathers to discuss offering employee benefits

What Employee Benefits Can You Offer?

The law requires employers to provide employees with certain benefits. Employers must provide all employees time off to vote, to appear for jury duty, and to perform military service. They must comply with all workers’ compensation requirements and the Federal Family and Medical Leave (FMLA).

Employers legally must provide the following benefits: 

  • Contribution to state short-term disability programs in states where those programs exist.
  • Payment of state and federal unemployment taxes, rendering benefits for unemployed workers.
  • Withholding Federal Insurance Contributions Act (FICA) taxes from employees’ paychecks and pay your own segment of FICA taxes, which provides employees with disability and retirement benefits. 

Employers do not need to provide the following benefits:

  • Dental or vision plans
  • Retirement plans
  • Life insurance plans
  • Health plans (except in Hawaii)
  • Paid vacations, holidays, or sick leave

Most companies offer a portion or all of these added benefits to provide a competitive job offer package and help with employee retention. It’s common to see employers providing pay for major holidays like Memorial Day, Thanksgiving, and Christmas. Although many full-time employees expect one to two weeks of paid vacation per year, companies still need to explain their vacation policy to employees. This way employees understand how far in advance they need to request for their vacation time. 

How Can You Offer Employees Different Benefits? 

When you’re wondering, “Can You Offer Employees Different Benefits?”, you need to establish your company’s eligible classes. An eligible class is a segmentation of the workforce by legitimate job-based criteria. These classes provide employers legal protection against discriminatory accusations when they offer employees different benefits. 

For example, it may be legal to provide certain benefits to full-time employees but not to part-time employees. Once you establish your eligible classes, you can’t offer insurance to some members of the class while withholding it from others. For instance, if you offer life insurance to all full-time employees except those with disabilities, that would be a discriminatory act—a very serious offense. 

Eligible Classes of Employees

  1. Full-time employees. Companies have the option to define “full-time employment” as working 30 hours or more a week, or as working 40 hours or more a week. 
  2. Part-time employees. These employees work less than the defined amount of hours for full-time employment.
  3. Seasonal employees are hired into a position for a short period of time. 
  4. Temporary employees are employed by a staffing agency, but provide temporary services to companies. 
  5. Hourly employees are paid an hourly rate and can earn overtime.
  6. Salaried employees are paid annually and generally cannot receive overtime pay
  7. Employees covered under a collective bargaining agreement (CBA) are those that have entered into a written agreement between a business and their trade union on certain working conditions. 
  8. Employees in a waiting period for health benefits. Businesses can choose to impose a waiting period of up to 90 days. 
  9. Employees that work abroad.
  10. Employees who live outside the individual health insurance rating area of the business’s physical address. 
  11. Combination of two or more of the above classes. Companies can choose to create different classes by combining two or more of the mentioned classes. For example, a company may create a class of part-time employees who are in a waiting period for health benefits. 

Outsource Your Employee Benefits Administration to Canal HR

You don’t have to create your employee benefits package alone. At Canal HR, we work with you to equip your company with a benefits package that suits all of your employees. There are many intricate details that come with providing different employee benefits—and benefits in general. 

When you outsource your employee benefits administration to Canal HR, our team of professionals helps find and obtain lower rates for your company’s benefits package. We boast an on-staff attorney to consult you on employee benefits and any other HR topics. Don’t face the struggles of securing benefits for your employees without expert help from Canal HR. 

Can You Offer Employees Different Benefits: Get Your Free Consultation Today

If you’re ready to obtain employee benefits for your company without the hassle, contact us today to schedule a free consultation.