Part of the relationship between employers and employees is a package of employee benefits. Some benefits are mandated by law and others are employer-sponsored. In both cases, there are various requirements and regulations to uphold to ensure compliance. In this blog, we’ll review common benefit types, such as health insurance, retirement accounts, and paid time off, to ensure your restaurant maintains employee benefits compliance.
Each state may have differences in how the benefits must be applied. Review any additional relevant regulations to ensure compliance.
Upon hire, employees must typically be notified of all employee benefits to which they may be entitled and the enrollment procedures. Below is a variety of group plans that are either funded by the employer, the employee, or both.
Under the Affordable Care Act’s employer shared responsibility provisions, certain employers (called applicable large employers or ALEs) must either offer minimum essential coverage that is “affordable” and that provides “minimum value” to their full-time employees (and their dependents) or potentially make an employer shared responsibility payment to the IRS. Employers with 50 or more full-time workers (over 30 hours per week) are typically covered by this provision.
Employers are not obliged to offer plans, but they are common offerings and managed by the employer. The employer may pay none, some, or all the premium and withhold the employee’s portion from payroll. Typically, these plans are used as recruiting tools to create more attractive job offers than the competition and market forces drive the specific elements of these benefits. Common plans include:
These individual savings accounts are set up on a pre-tax basis to pay for qualified medical expenses that typically include copays, coinsurance, and out-of-pocket costs. Only employees with high deductible medical plans are eligible. The accounts are individually owned, and the funds may be carried over indefinitely (not required to be used annually). Some employers set them up for employees and may provide a portion of the annual funding.
For 2025, the maximum contribution/deductions are:
These accounts are established by employers for employees covered by employer-sponsored health plans to set aside funds for out-of-pocket medical expenses each year. Employers may provide the funds or allow employees to contribute pre-tax to the accounts. The maximum contribution for 2025 is $3,300. The funds typically must be used during the calendar year with some “grace period” allowed at the employer discretion.
The most common plan is the 401(k) plan that allows employees to contribute a portion of their wages to an individual account. There are several types of 401(k) plans with different contribution limits. The employee contributions are pre-tax as is any employer match. When an employee leaves a job, they are able to roll the 401(k) plan into another deferred retirement account.
Beyond insurance plans and retirement accounts, there are other benefits to which employees are commonly entitled. These take the form of paid time off, employee discounts, and employee stock purchase plans.
PTO plans come in a variety of forms and may include holidays, sick time, personal time, and vacation. If an employer is in a state that requires sick pay, the PTO plan must be at least as generous as the state- or city-mandated plan.
There are also specific rules that vary by state and city regarding what might be required to be paid at the time of termination. There is presently no federal requirement for any paid time off for part-time or full-time employees. Tracking PTO is typically done via HR or payroll applications.
Many employers allow for generous discounts, including free meals while working or during non-working hours. Some also allow for discounts to be extended to family members.
These plans allow employees to purchase and/or receive stock in the employer company. They are typically administered by third-party providers.
There are also benefits available to all workers in the United States as well as specific protections and benefits offered by state legislation. Common benefits include:
Unemployment insurance is a joint state-federal program that provides cash benefits to eligible
workers. Each state administers a separate UI program, but all states follow the same guidelines
established by federal law. The benefits are intended to provide temporary financial assistance to
employees while searching for a new position.
All employers except those in Texas are required to maintain workers’ compensation insurance to protect employees who are injured on the job or become ill preforming their job duties. The policies are generally purchased from independent insurance brokers and require annual reporting of employee job duties and wages paid.
Employers in certain states are required to provide temporary (short-term) disability insurance (STDI) to workers. STDI laws provide income protection to employees who cannot work due to a nonwork-related illness or injury (which may include pregnancy and organ donation). Employers and/or the employees pay the premiums via a payroll tax.
States with these requirements include:
Several states currently have or have future requirements for mandatory participation in retirement savings programs. Employees must be enrolled in the plans but may “opt out” of participation. The intent is to provide a simple way for employees to participate in retirement savings. Employers are not required to make contributions on behalf of the employees.
FMLA entitles eligible employees of covered employers to take unpaid, job-protected leave for specified family and medical reasons with continuation of group health insurance coverage under the same terms and conditions as if the employee had not taken leave.
Eligible employees are entitled to:
There is not presently any federal requirement for paid family leave. At time of writing, just over 25% of the states have mandated paid family leave for at least some of their employees. Employers and/or the employees pay the premiums via a payroll tax.
While no federal law requires paid sick leave in private employment, more than 10 states, the District of Columbia, and several municipalities require certain private employers to provide some form of paid sick leave to eligible employees. Tracking and accounting for the required sick leave can be very complex and varies by location.
The California Labor Commissioner’s Office (LCO) levied $1.1M in penalties against Food Source LLC for wage theft violations and non-compliance with paid sick leave requirements in the state. The investigation found $532,561 in citations for unpaid wages, failure to pay overtime, liquidated damages, and incomplete wage statements.
Beyond these penalties, the LCO also filed a lawsuit for another $575,803 to recoup unpaid wages, because the employer did not comply with paid sick leave laws. Infractions included failure to document sick leave availability on pay stubs, to inform workers of their legal rights, and to provide supplemental paid sick leave during the COVID-19 pandemic.
Employee benefits compliance is critical to avoid penalties, violations, and litigation. Beyond that, however, offering an attractive and compliant benefits package can be a significant differentiator in your recruiting strategy. Take time to develop the best benefits package you can and ensure that it is always properly administered.
But that’s just a sliver of an operator’s compliance obligations. Payroll, scheduling, and recruiting all have their own rules and regulations, and understanding these requirements is essential to maintaining the stability of your business. Learn more about your obligations in our ebook, The Definitive Guide to Compliance for Restaurants.
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