Legal Requirements for Employee Benefits Essay

As we discussed earlier in this chapter, nearly avails ar traind by law. This emergency adds to the equal of compensating employees. Organizations looking for ship muckleal to see to it staffing costs whitethorn look for moods to structure the workforce so as to minimize the expense of gathers. They may require everyplace meter preferably than adding new employee, accept part-time rather than full-time workers(beca function part-time employees generally vex much smaller benefits packages),and expend autarkical contractors rather than let outcome away employees.Some of these pickaxes are limited by legal equire manpowerts, however. For example ,the Fair pains Standards Act requires overtime gestate for taskable workers, as discussed in chapter 11. Also,the Internal revenue Service strictly limits the definition of independent contractors, so that employees can non overturn legal obligations by classifying workers as self-employed when the organization receiv es the benefits of a permanent employee . Other legal wants involve tax treatment of benefits ,antidiscrimination laws, and accounting for benefits. task treatment of benefitsA modern, flexible benefit devise provides a number of capability tax advantages to employees and employers. Employees A flexible benefit plan allows employees to choose to swap rough of their existing benefits or purchase benefits from a menu of options. Payments in excess of the employees expense allowance are normally collected via a gross salary adjustment. If employees throw salary for tax exculpate benefits ( bountys, bread and butter cover, childcare vouchers, mobile phones, etc. ), they do not pay tax or National damages on the cadence exchanged.This utilises a primary rate tax payer earning less than the National Insurance (NI) Upper Earnings Limit (UEL) a saving of 33% compared to receiving the money as salary. For example, an employee that exchanges ? 200 per month of their salary fo r childcare vouchers and additional pension payments depart economise ? 792 in tax and NI compared to fetching the money as salary. Even if the benefits are not tax exempt, employees can salve exchange salary for employer provided benefits and, whilst they will be charged income tax, they save NI as their salaries have been reduced by the harbor of the benefit.This gives employees earning under the UEL an 11% saving. Employers Employers participating in a flexible benefit plan do not pay employers NI on payments on payments to exempt benefits. If these payments have been exchanged from salary by employees then the employer will save 12. 8% employers NI on the amounts. For example, an employee that exchanges ? 200 per month of their salary for childcare vouchers and additional pension payments will deliver an annual NI saving to the employer of ? 307.Antidiscrimination LawsLegal treatment of men and cleaning woman includes fitted access to benefits, so the organization may not use the employees gender as the basic for providing more(prenominal) limited benefits. That is the rationale for the m otherliness Discrimination Act, which requires that employers treat pregnancy or childbirth, the employee needs time off for conditions cogitate to pregnancy or childbirth, the employee would receive some(prenominal) deadening benefits the organization offers to employees who take disability leave for other reasons.Another country of concern in the treatment of young-begetting(prenominal) and effeminate employees is pension benefits. On average, woman live foresighteder than men, so on average, pension benefits for female employees are more expensive (because the organization pays the pension longer), other things being equal. Some organizations have employ this difference as a seat for requiring that female employees contribute more than male employees as a primer for requiring that female employees contribute more than male employees to define bene fit plans. The Supreme Court in 1978 determined that such a extremity is illegal.According to the Supreme Court, the law is think to protect item-by-items, and when women are considered on an individual basis ( not as averages ), not every woman outlives every man. fester discrimination is also relevant to benefits policies. two major issues have received fear under the Age Discrimination in Employment Act (ADEA) and amendments. First, employers essential take care not to eliminate against workers over age 40 in providing pay or benefits. For example, employers may not pock an age at which hideaway benefits break out growing as a way to pressure older workers to retire.Also, early retirement incentive programs need to attain sealed standards. The programs may not coerce employees to retire, they essential provide accurate information round the options available, and they essential give employees enough time to commit a decision. In effect, employees must(prenomin al) really have a choice about whether they retire. When employers offer early retirement, they much ask employees to sign waivers saying they will not pursue claims under the ADEA. The aged Workers Benefit resistance Act of 1990 effect guidelines for using these waivers.The waivers must be willing and go throughable to the employee and employer , and they must spell out the employees rights under the ADEA. Also , in exchange for signing the waiver, the employee must receive compensation that is , greater benefits than he or she would otherwise receive upon retirement. The employer inform employee that they may consult a lawyer in advance signing, and employee must have time to make a decision about signing-21 geezerhood before signing plus 7 days laterward in which they can revoke the agreement. The Americans with Disabilities Act imposes requirements related to health redress.Under the ADA, employees with disabilities must have equal access to whatever health insurance coverage the employer provides other employees. Even so, the legal injury and conditions of health insurance may be based on risk factors -as long as the employer does not use this basis as a way to dodging offering health insurance to psyche with a disability. From the standpoint of avoiding legal challenges, an employer who has risk-based insurance and then hires an employee with a disability is in a stronger position than an employer who switches to a risk-based insurance policy after hiring a disabled employee. write up Requirements Companies monetary statement must meet the many requirements of the Financial Accounting standards bill of fare ( FASB) . These accounting requirements are intended to ascertain that financial statements are a full-strength picture of the companys financial status and that outsiders, including potential lenders and investors , can understand and compare financial statements . Under FASB standards, employers must set aside the funds they hav e a bun in the oven to need for benefits to be paid after retirement, rather than funding those benefits on a pay-as-you-go basis.On financial statement, those funds must appear as future cost obligations. For companies with substantial retirement benefits, reporting those benefits as future cost obligations greatly lowers income each(prenominal) year. Along with rising benefits costs. This reporting requirement has encouraged many companies to scale benefits to retirees. total the regulation affecting how employers design and circularise benefits program. Employers must provide the benefits that are undeniable by law, and they may not improperly classify employees as independent contractors to avoid paying benefits.Tax treatment of suffice plans is favorable, so organizations need to learn the requirements for telescope up benefits as qualified plans-for example, ensuring that pension plans do not discriminate in favor of the organizations super compensated employees. Employ ers may not use employees gender as the basis for sagacious against anyone, as in pension benefits on the basis that women as a multitude may live longer. Nor may employers discriminate against workers over age 40 in providing pay or benefits, such as pressuring older workers to retire by limit retirement benefitsWhen employers offer early retirement, they must meet the requirements of the Older Workers Benefit Protection Act of 1990. Under the Americans with Disabilities Act, employers must give disabled employees equal access to health insurance. To meet the requirements of the Financial Accounting Standards Board, employers must set aside the funds they endure to need for retirement benefits ahead of time, rather than funding the benefits on a pay-as-you-go basis