Mandatory Employee Benefits and the Laws Governing Them


Businesses provide various benefits to employees including medical coverage, social insurance, family and medical leave, retirement benefits, holidays, and vacation. The benefits are termed mandatory benefits that a company should provide to its employees. Organizations must have a good understanding of mandatory compensation to enable them in drafting compensation policies. Employees as well need to be conversant with these Federal laws to ensure that their rights are not violated in their workplaces. This paper will evaluate various mandatory employee benefits and the laws governing them. Organizations and employee unions must review their responsibilities in employee compensation as stated by Federal laws.

Social Security and Medicare Contributions

Social security benefits and Medicare Contributions are listed among the statutory benefits by Federal law including the Federal Insurance Contributions Act (FICA). FICA is a state government tax that offers financial coverage on social security and Medicare packages. These contributions are meant to benefit retired employees, employees with disabilities, as well as, their children. Federal law requires that employees and employers should both pay the federal employment tax. Businesses are mandated to withhold approximately 6.2 percent of their employee’s gross salary to cover the social security contribution (Paychex 2021). Employers are required to deduct about 1.45 percent of an employee’s gross salary to contribute toward Medicare. According to Paychex (2021), workers who earn over 200,000USD should pay an additional 0.9 percent for the Medicare tax. The Federal Law does not provide a specific wage limit for Medicare contributions. Markedly, employers are also required to pay 6.2% to cover social insurance (Paychex 2021). However, Paychex stresses that the law does not mandate them to pay an additional 1.45 percent for Medicare contributions (2021).

Healthcare Benefits

Health insurance is listed on the Affordable Care Act, which mandates applicable large employers (ALEs) to provide sufficient and affordable medical insurance to their full-time workers and their children. Failure to do this puts them at risk of being assessed by the government. Applicable large employers include any organization with up to or over fifty full-time workers. The starting point for affordable health insurance is reviewed every year to cover economic inflation, although the cut-off for personal health insurance should not be more than 9.83 percent of an employee’s income as of 2021 (Paychex 2021). Employers are required to have a policy that offers access to medical facilities including medical doctors and specialists for their employees.

Retirement Compensation

Pension plans are employee compensation plans created by their employer and offer retirement earning. There are several forms of retirement plans including the forty thousand plan as well as the conventional pension plan that is referred to as a defined benefit plan. Employee Retirement Income Security Act (ERISA) is a law that offers protection for the beneficiaries listed in the employee’s retirement plan. They include availing plan information to the stated beneficiaries in the worker’s retirement plans. Additionally, there is a Pension Benefit Guaranty Corporation that responds to employees’ inquiries regarding the conventional retirement plan. Defined benefit plans guarantee employees a specified amount of monthly income after they have retired.

Family Medical Leave

Notably, the Family and Medical Leave Act (FMLA) mandates qualified workers of certain employment unions to have free, job-secured leave for particular family medical causes. The act guides that the stated employees be given a maximum of 12 weeks leave during every year of working for particular medical and family reasons. The free leaves should guarantee job security for the employee. Moreover, FMLA provides a maximum of 26 weeks of unpaid and job-secured employee leave in a single working year (12 months) for the Military Caregiver Leave (Paychex 2021). Some of the practical reasons for employee leave include childbirth when an employee is facing a serious personal health crisis such as a chronic disease or when they are taking care of a first-class family member in a serious medical condition.

Holidays, Vacation Time, and Overtime Pay

Different Federal laws have different policies for employee holidays and vacations. some apply the Service Contract Act (SCA) which requires employers to provide holiday and vacation compensation of over 2500USD while others apply FLSA (U.S. Department of Labor (n.d.)). Even though employers are mandated to provide holidays and vacation time for their employees, the Fair Labor Standards Act does not order them to pay for vacations, leaves, or holidays. FLSA states the basic overtime pay requirements for all employees working extra hours. The Wage and Hour Division ensures that FLSA is adhered to in the private sector. On the other hand, some government organizations comply with the Davis-Bacon and Related Acts that require specified employees to have paid holidays and vacations.


Federal law requires employers to provide a certain degree of support to their employees as they further their studies. They are also required to provide direct training to their employees. Training programs should be fair and the training time should also be paid. The Government Employees Training Act (GETA) commissions state organizations with overall employee training. The Federal Workforce Innovation and Opportunity Act (WIOA) provide financial support for several skill advancement programs.


Organizations are mandated by various federal laws to provide certain compensation to their employees. All employers should strive to comprehend the laws governing employee compensation to aid them in setting their employment policies. Certain compensation benefits are not mandated by law that unions provide to their employees. Although the mandated compensation such as paid leave and health benefits are greatly valued, employers should also offer basic compensation since they are valuable to workers.


Paychex. (2021). Mandatory benefits a company must legally provide full-time employees. Web.

U.S. Department of Labor. (n.d.). Handy reference guide to the Fair Labor Standards Act. Web.

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BusinessEssay. "Mandatory Employee Benefits and the Laws Governing Them." December 15, 2022.