In today's globalized world, businesses often face challenges when it comes to accessing and managing talent across borders. RemoFirst aims to empower employers by eliminating geographical boundaries and offering comprehensive support for global talent acquisition.
In this article, we will explore the nuances for global companies hiring talent in the United States and an overview on the importance of healthcare benefits.
Employers of Record (EOR) vs Professional Employer Organizations (PEOs) in the United States
When working with an Employer of Record (EOR) or Professional Employer Organization (PEO), employers should consider the various factors that are associated with each service, and which one is right for their business. The key differentiators between EORs and PEOs lies in the level of employer responsibility and the degree of control retained by the client company.
An EOR takes full responsibility for employment-related matters including HR, payroll, benefits administration, tax compliance and employment-related tasks.
In addition, its services are often used by companies to hire employees in countries or regions where they do not have a legal entity or presence, enabling international expansion without establishing a local entity.
A PEO, on the other hand, shares employer responsibilities with a company, focusing on HR and administrative support. PEOs assume certain HR-related risks and liabilities, providing risk management and compliance support, which can be beneficial for small and mid-sized businesses.
However, many PEOs require a minimum number of employees in order to business with them, which can be a challenge for foreign companies hiring in the United States for the first time.
Nuances of U.S. Healthcare and Benefits
The U.S. healthcare system is known for its complexity and nuances, particularly when it comes to healthcare benefits. Navigating the intricacies of healthcare coverage and understanding the range of benefits available can be challenging.
From the intricacies of insurance plans, to the variations in coverage levels, it’s crucial to grasp the nuances of U.S. healthcare and benefits to make informed decisions for your business.
Government Legislation
The Affordable Care Act (ACA) is one of the most significant pieces of legislation that drives employer requirements regarding healthcare in the United States.
The ACA's Employer Mandate, also known as the Employer Shared Responsibility Provision, requires certain employers (with 50+ employees) to offer health insurance coverage to their full-time employees and their dependents. If they fail to provide affordable and minimum essential coverage to their eligible employees, they may be subject to penalties.
Impact on Talent Attraction and Retention
Health insurance plays a pivotal role in talent attraction and retention within the United States. Job seekers often prioritize positions that offer healthcare coverage, especially if they have dependents or pre-existing medical conditions.
By offering such benefits, employers can attract a larger pool of qualified candidates and increase their chances of hiring top talent. Additionally, employers can use these benefits to effectively convey their commitment to prioritizing employees' well-being and demonstrate a long-term investment in their success.
Tax Considerations
In the United States, social taxes owed by employers is lower than in many other countries. However, most employers choose to contribute toward their employees’ health insurance as an added benefit given that the US does not have a socialized healthcare system.
Taxes paid by employers go towards various government programs and services. These include funding Social Security and Medicare benefits, providing unemployment insurance, supporting the operation of state and federal governments, and contributing to other public services and infrastructure projects.
Health Coverage
Providing healthcare coverage is crucial for employers in the United States as it promotes employee well-being, attracts and retains talent, ensures compliance with legal requirements, improves morale and engagement, saves costs through preventive care, and enhances public perception.
It is a valuable investment that benefits both employers and employees in multiple ways. To choose the right healthcare plan, it is essential to understand the differences between minimum coverage and higher coverage plans, their associated costs, and the extent of benefits they offer.
Minimum coverage plans fulfill the basic requirements and typically cover essential health benefits like preventive services, emergency care, prescription drugs, and maternity care. These plans they often come with high deductibles, meaning individuals must pay a significant amount out of pocket before their insurance coverage kicks in.
In contrast, higher coverage plans go beyond the minimum requirements and provide more extensive benefits and services. They often cover specialist care, mental health treatment, vision and dental care, and offer more comprehensive prescription drug coverage.
While higher coverage plans generally have higher premiums, they come with lower deductibles to meet before their insurance starts covering a portion of the expenses.
Understanding Different Health Insurance Plans
The United States healthcare system is known for its diverse range of health insurance plans designed to accommodate the unique needs of individuals and families. Different health insurance plans offer varying levels of coverage, benefits, and cost-sharing arrangements. These include premiums (monthly payments), deductibles (amount paid before coverage begins), copayments, coinsurance, and out-of-pocket maximums.
Here are the key aspects of three commonly encountered types of insurance plans in the United States:
- High Deductible Health Plans (HDHPs): These plans have higher deductibles and lower monthly premiums, meaning individuals pay more out-of-pocket before insurance coverage begins.
- Health Maintenance Organizations (HMOs): HMOs provide a network of healthcare providers, and individuals choose a primary care physician (PCP) who coordinates all medical care. Referrals are usually required to see specialists, and out-of-network care is generally not covered except in certain emergencies.
- Preferred Provider Organizations (PPOs): PPOs offer a network of preferred providers, but individuals have more flexibility in choosing healthcare providers. Referrals are not required for specialists, and out-of-network care is possible but more expensive.
By evaluating factors such as network limitations, cost-sharing arrangements, and coverage exclusions, employers can make informed decisions to mitigate risks and ensure adequate coverage for their employees.
Example: Employer Costs in US vs UK vs France
While it may seem that offering healthcare coverage to employees in the U.S. makes the costs of employment more expensive, it's important to note that the cost of healthcare is shared across multiple parties.
In a socialized system, the government and the employer typically bear a substantial portion of healthcare costs through taxes, which may result in a perception of lower individual expenses. However, in the U.S., individuals contribute through employer-sponsored insurance premiums, out-of-pocket costs, and/or government programs like Medicare and Medicaid.
Considerations for Hiring in the United States
Importance of Future Employee Needs
Considering the needs of future employees is crucial in developing a comprehensive benefits strategy. By anticipating their requirements and preferences, businesses can position themselves as attractive employers and build a long-term talent pipeline.
Once a health benefits plan is chosen, changes cannot be made to the plan until the next enrollment period. If an unsatisfactory plan is chosen for the initial period, it could have an impact on talent attraction. Ultimately, the health benefits plan that is finalized must be offered to all future eligible employees to ensure compliance with the law.
Enrollment Periods
In the United States, employees typically have specific enrollment periods during which they can sign up for or make changes to their healthcare coverage. These enrollment periods help ensure that employees have access to healthcare coverage, and allow employers to manage the administration of their benefits programs effectively.
- Initial enrollment period: The first opportunity for employees to enroll in their employer's health insurance plan occurs when they are newly hired or become eligible for benefits. This period is typically limited to around 30 days.
- Annual open enrollment period: Occurs once a year, usually in the fall when employees can make changes to their healthcare coverage for the upcoming year. They can choose a new plan, add or remove dependents, and make other benefit-related decisions. Open enrollment allows employees to review options and select the best coverage for the following year.
Eligibility and Benefit Information
Understanding eligibility timelines is vital as there are windows in which employees become eligible to enroll or change their plans. Typically, benefits for employees start on the 1st of the month following the start hire date.
For instance, if an employee starts on May 6th, then they would become eligible for benefits on June 1st. Open enrollment periods, qualifying life events, and plan changes should also be communicated effectively to employees, ensuring they have the necessary information to make informed decisions.
Open enrollment in U.S. healthcare refers to a specific period of time during which individuals and families can sign up for or make changes to their health insurance coverage.
This applies to various healthcare programs, including employer-sponsored health plans, individual health insurance plans, and government programs like Medicare and Medicaid.
Outside of open enrollment, employees may be eligible for a special enrollment period if they experience a qualifying life event. Qualifying life events include significant life changes such as marriage, divorce, birth or adoption of a child, loss of other health coverage, or a change in employment status.
When a qualifying life event occurs, employees typically have a limited period, typically 30 to 60 days, during which they can make changes to their healthcare coverage outside of the regular enrollment periods.
Offering 401(k) and Employer Contributions
401(k) plans in the United States are designed to help individuals save for retirement and provide a tax-advantaged way to accumulate funds over time. They offer flexibility, potential employer contributions, and investment options that can help employees grow their retirement savings.
Employer contributions to retirement plans, including 401(k) plans, are prevalent in many industries. By offering competitive retirement benefits, employers can align themselves with industry norms and remain competitive in attracting talent on a global scale.
Understanding state-specific regulations regarding employer contributions to 401(k) plans is essential as certain states have implemented or are in the process of implementing state-sponsored retirement savings programs.
Programs such as the California Secure Choice Retirement Savings Program and the OregonSaves program typically require employers who do not offer retirement plans to automatically enroll their employees in the state-sponsored program.
However, these state programs are not mandatory 401(k) contributions from employers but rather provide an alternative retirement savings option for employees.
Depending on where an employer offers a 401(k), they may be required to, or may choose to, offer a matching contribution. This can be considered an attractive employee benefit. Match amounts will vary depending on the type of 401(k) plan you are enrolled in.
Employers should be aware of policies that are set in place regarding 401(k) as employees will not be able to access the account immediately due to a 90 day waiting period. Encouraging employee contributions and offering employer match benefits can result in potential long-term benefits and financial security for employees.
Summary
Understanding the nuances that come with the hiring employees in the United States is crucial for attracting and retaining top talent. Employers who fail to abide by necessary regulations and procedures could face risks for their businesses.
By offering comprehensive health insurance plans, considering employee preferences, and developing long-term benefits strategies, employers can create a competitive advantage for hiring talent globally.
If you’re looking for an Employer of Record (EOR) provider with the ability to support employers in 180+ countries worldwide, learn more about partnering with RemoFirst.
