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Employee Benefits Required By Law. Essay

3231 words - 13 pages

The legally required employee benefits constitute nearly a quarter of the benefits package that employers provide.These benefits include employer contributions to Social Security, unemploymentinsurance, and workers' compensation insurance. Altogether such benefitsrepresent about twenty-one and half percent of payroll costs.Social Security.Social Security is the federally administered insurance system. Under current federal laws, both employer and employee must pay into the system, and a certain percentage of the employee's salary is paid up to a maximum limit. Social Security is mandatoryfor employees and employers. The most noteworthy exceptions are state andlocal government employees.The Social Security Act was passed in 1935. It provides an insurance plan designed to indemnify covered individuals against loss of earnings resulting from various causes. This loss of earnings may result from retirement, unemployment, disability, or the case of dependents, the death of the person supporting them. Social Security does not pay offexcept in the case where a loss of income through loss of employment actuallyis incurred. In order to be eligible for old age and survivors insurance(OASI) as well as disability and unemployment insurance under the SocialSecurity Act, an individual must have been engaged in employment coveredby the Act. Most employment in private enterprise, most types of self-employment,active military service after 1956 and employment in certain non-profitorganizations and governmental agencies are subject to coverage under the Act. Railroad workers and United States civil service employees who arecovered by their own systems and some occupational groups, under certainconditions, are exempted form the Act. The Social Security Programis supported by means of a tax levied against an employee's earnings whichmust be matched buy the employer. Self-employed persons are required topay a tax on their earnings at a rate, which is higher than that paid byemployees but less than the combined rates paid by employees and theiremployers.In order to receive old age insurance benefits, a person must have reached retirement age and be fully insured.A fully-insured person is one who must have earned at least $50 in a quarterfor a period of 40 quarters. It is possible for an individual who diesor becomes totally disabled at an early age to be classified as fully insuredwith less than 40 quarters. To receive old age insurance benefits, coveredindividuals must also meet the test of retirement. To meet this test, personsunder 70 cannot be earning more than an established amount through gainfulemployment. This limitation of earnings does not include income from sourcesother than gainful employment such as investments or pensions. Social securityretirement benefits consist of those benefits which individuals are entitledto receive in their own behalf, called the primary insurance amount, plussupplemental benefits for eligible dependents. These benefits can be...

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