Employers provide most benefits, bu

Employers provide most benefits, but the law requires others. These legally required benefits currently account for about 10 percent of total compensation cost. They include Social Security, unemployment insurance, and workers’ compensation.
Social Security
The Social Security Act of 1935 created a system of requirement benefits. It also established the Social Security Administration. Subsequent amendments to the act added other forms of protection, such as disability insurance, survivors’ benefits, and Medicare.
Disability insurance protects employee against loss of earning resulting from total incapacity. Survivors’ benefits are provided to certain members of an employee’s family when the employee dies. These benefits are paid to the widow or widower and unmarried children. Unmarried children may be eligibility until they are 19. Medicare provides hospital and medical insurance protection for individual 65 years of age and older and for those who have become disabled.
Although employees must pay a portion of the cost of Social Security coverage, the employer makes a contribution and considers this cost to be benefit. The present employer tax rate is 6.2 percent for the Social Security portion and 1.45 percent for Medicare. The Social Security rate is applied to a maximum taxable wage of $106,800. The rate for Medicare applies to all earnings. Approximately 95 percent of the workers in this country pay into and may draw Social Security benefits. The Social Security program currently is running a surplus, but the retirement of the 77-million-member baby-boom generation has begun. Unless Congress makes changes by 2041, the program will have used up its surplus and will no longer be able to pay full benefits.
The retirement age today is 66. It will increase gradually until in 2027, it reaches age 67. These changes will not affect Medicare, with full eligibility under this program holding at age 65.
Unemployment Compensation
Unemployment compensation provides workers whose jobs have been terminated through no fault of their own monetary payments for up to 26 weeks or until they find a new job. The basic program is state-run with oversight from the U.S. Department of Labor. States pay the benefits; the federal government pays the states for administrative costs. Employers pay the Federal Unemployment Tax at rate of 6.2 percent on the first $7,000 each employee earns. If they pay it on time, the percent is offset by 5.8 percent so the actual rate is .8 percent. The permanent Extended Benefits Program provides an additional 13 or 20 weeks of compensation to workers who exhaust basic benefits in states where unemployment has worsened.
The intent of unemployment payments is to provide an unemployed worker time to find a new job equivalent to the one lost without suffering financial distress. Without this benefit, workers might have to take jobs for which they are overqualified or end up on welfare. Unemployment compensation also serves to sustain consumer spending during periods of economic adjustment. In the United States, unemployment insurance is based on both federal and state statutes and, although the federal government provides guidelines, the programs are administered by the states and therefore benefits very by state. A payroll tax paid solely by employers funds the unemployment compensation program. Unemployment rates from 3.4 percent in North Dakota to 13.0 percent in Nevada. The construction industry and hospitality business have been hit the hardest.
Workers’ Compensation
Workers’ compensation provides a degree of financial protection for employees who incur expenses resulting from job-relates accident or illnesses. As with unemployment compensation, the various states administer individual programs, which are subject to federal regulation. Employers pay the entire cost of workers’ compensation insurance, and their past experience with job-related accidents and illnesses largely determines their premium expense. These circumstances should provide further encouragement to employers to be proactive with health and safety programs.