Legal Requirements for Employee Benefits Essay

As we discussed primarily in this chapter, some derives argon required by law. This requirework forcet adds to the court of compensating employees. Organizations looking for shipway to control staffing costs whitethorn look for ways to structure the workforce so as to minimize the expense of benefits. They whitethorn require overtime or else than adding new employee, hire part-time rather than full-time workers(beca hold part-time employees generally overhear much smaller benefits packages),and use independent contractors rather than hire employees.Some of these choices are restrict by legal equirements, however. For example ,the Fair Labor Standards Act requires overtime assume for nonexempt workers, as discussed in chapter 11. Also,the Internal Revenue Service stringently limits the definition of independent contractors, so that employees toilet non avoid legal obligations by classifying workers as self-employed when the organization receives the benefits of a permanent e mployee . Other legal indispensablenesss bring valuate treatment of benefits ,antidiscrimination laws, and accounting for benefits. Tax treatment of benefitsA modern, ductile benefit plan provides a number of potential tax advantages to employees and employers. Employees A flexible benefit plan allows employees to choose to swap some of their lively benefits or purchase benefits from a menu of options. Payments in excess of the employees consumption allowance are normally collected via a gross allowance adjustment. If employees exchange profit for tax exempt benefits ( subventions, life cover, childcare vouchers, wide awake phones, etc. ), they do not pay tax or interior(a) Insurance on the amount exchanged.This produces a basic rate tax payer earning less than the National Insurance (NI) Upper Earnings constrain (UEL) a saving of 33% opposed to receiving the money as salary. For example, an employee that exchanges ? 200 per calendar month of their salary for childcare v ouchers and additional indemnity payments go out save ? 792 in tax and NI compared to taking the money as salary. Even if the benefits are not tax exempt, employees can still exchange salary for employer provided benefits and, whilst they impart be charged income tax, they save NI as their salaries name been trim by the value of the benefit.This retorts employees earning downstairs 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 gift 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 adult female includes equal access to benefits, so the organization whitethorn not use t he employees gender as the basic for providing more limited benefits. That is the rationale for the Pregnancy Discrimination Act, which requires that employers treat pregnancy or childbirth, the employee necessitate time off for conditions related to pregnancy or childbirth, the employee would receive whatever disability benefits the organization offers to employees who take disability leave for some early(a) reasons. other area of concern in the treatment of male and female employees is pension benefits. On average, woman live longer 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 used this difference as a terms for requiring that female employees contribute more than male employees as a basis for requiring that female employees contribute more than male employees to defined benefit plans. The Supreme Court in 1978 determined that such a requ isite is illegal.According to the Supreme Court, the law is think to protect individuals, and when women are considered on an individual basis ( not as averages ), not every woman outlives every man. Age discrimination is also relevant to benefits policies. Two major issues have received attention under the Age Discrimination in Employment Act (ADEA) and amendments. First, employers must take care not to tell against workers over age 40 in providing pay or benefits. For example, employers may not set an age at which hideaway benefits stop suppuration as a way to pressure older workers to remove.Also, early retreat incentive programs need to come across certain standards. The programs may not pinch employees to retire, they must provide accurate certifyation about the options available, and they must give employees enough time to make a decision. In effect, employees must rightfully have a choice about whether they retire. When employers offer early retirement, they often times ask employees to sign waivers saying they will not pursue claims under the ADEA. The Older Workers Benefit Protection Act of 1990 set guidelines for using these waivers.The waivers must be voluntary and understandable 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 days before signing plus 7 days aft(prenominal)ward 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 terms and conditions of health insuran ce may be found on risk factors -as long as the employer does not use this basis as a way to escape offering health insurance to someone 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 policy after hiring a disabled employee. score Requirements Companies financial statement must diddle the many requirements of the Financial Accounting standards Board ( FASB) . These accounting requirements are intended to ensure that financial statements are a true picture of the associations 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 require 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 prox cost obligations. For companies with substantial retirement benefits, reporting those benefits as future cost obligations greatly lowers income each year. Along with rising benefits costs. This reporting requirement has encouraged many companies to scale benefits to retirees. Summarize the regulation affecting how employers approach pattern and administer benefits program. Employers must provide the benefits that are required by law, and they may not improperly classify employees as independent contractors to avoid nonrecreational benefits.Tax treatment of qualified plans is favorable, so organizations need to learn the requirements for place up benefits as qualified plans-for example, ensuring that pension plans do not single out in favor of the organizations highly compensated employees. Employers may not use employees gender as the basis for discriminating against anyone, as in pension benefits on the basis that women as a classify 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 limiting 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 expect to need for retirement benefits ahead of time, rather than funding the benefits on a pay-as-you-go basis