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A Guide to Employee Benefits in the U.S.

When recruiting talent for your company, it is important not only to offer a competitive salary, but also to have a strong benefits package to offer new employees. Benefits indicate to your staff that they are a valued part of your team, and that their well-being is important to the company. Happy, healthy employees who feel well taken care of also tend to work harder and are more loyal. That means less turnover and lower costs for you.

For foreign companies that are starting their U.S. operations, you may not be able to offer all the typical benefits at the beginning. You will need to come up with the right balance for a start-up that wants to attract the best talent.

Below are some typical benefits that are offered to employees in the United States:

Paid Time Off

Sick days and vacation days are generally offered to full-time employees, but the number of days can vary from position to position. The term PTO, or Paid Time Off, generally combines sick and vacation days into a single policy, which is different from how other countries might handle it. But this also varies from company to company in the US, with some still keeping them separate.

Another big difference in the US is that unlike many other countries, there is not a mandated number of days a company is required to give employees for sick or vacation days. In fact, companies could decide not to give any PTO days at all (though that is not something we recommend for a variety of reasons). What has become the unofficial standard is for employees to receive up to two weeks of paid vacation in addition to regular holidays, with more time added at different mile markers for being with the company (ex. at 5 years, they get an additional 5 days off per year, etc.). Offering more PTO at the start (which is in line with European policies), is one way foreign start-ups can attract better talent.

Retirement Benefits

Companies often offer a 401K plan, which is an employer-sponsored retirement account. This is instead of the older pension policy that rewarded employees for staying with the company. With a 401K, employees participating in the plan designate a percentage of their pre-tax salary to the account, and employers often match that contribution up to a certain percentage every paycheck. 401K accounts allow employees to invest their pre-tax dollars for use after retirement with minimal tax burden.

Often an employee only becomes eligible to participate after a certain amount of service with the company (for example, after 6 months). 401Ks can also be used to help retain employees through the process of vesting. With vesting, the employee only owns a certain percentage of their account that the company has contributed. If they leave before they are 100% vested, the money they do not own yet stays with the company. For example, some plans might increase the vested amount by 20% each year. Therefore, an employee has to stay with the company for 5 years to be 100% vested.

Insurance:

We covered insurance the company needs to get to cover itself in an earlier post. These are insurances for the employees that the company offers as benefits:

  • Health Insurance: This covers the cost of medical treatments. Dental insurance, like medical insurance, protects policyholders for dental costs. Similarly, vision insurance protects policyholders for eye care, including the cost of eyeglasses (or a part thereof.) In most developed countries, all citizens receive some health coverage from their governments, paid for by taxation. This is not the case in the US. Instead, health insurance is often part of an employer’s benefits, and is paid for by the company.
  • Life Insurance: Provides a monetary benefit to a decedent’s family or other designated beneficiary, and may specifically provide for income to an insured person’s family, burial, funeral, and other final expenses. In the US, life insurance is sometimes part of an employer’s benefits, and is paid for by the company.
  • Disability Insurance: Short-term disability is meant to cover your expenses following a serious illness or injury. Long-term disability insurance, on the other hand, serves as income replacement in the event that your illness keeps you out of work after your short-term disability benefit period ends. It can even last until retirement, depending on your circumstances and plan. Not all benefits plans offer disability insurance, but many employers offer disability insurance to their employees at no extra cost or at a discounted group rate.

Other Options

Some benefits are found less frequently, and in larger corporations (or in start-ups that hope to entice talented employees when the salary is not competitive). These benefits can include:

  • Tuition reimbursement – to encourage employees to take continuing education or help pay for outside training that will help them on the job.
  • Gym membership or discounts – healthy employees cost the company less from a health insurance standpoint, so it benefits the company to promote a healthy lifestyle!
  • Childcare benefits – as we have seen during the pandemic, childcare in the US is not guaranteed like in other countries, and if the company can help with this, it ensures their employees can come to work and focus on the job.
  • Commuting and travel assistance – sometimes this is to encourage policies (like using public transportation to reduce carbon emissions) or just as an added benefits in lieu of higher salaries.
  • Wellness programs – like the gym memberships, this focuses on happy and healthy employees, which will in turn cost the company less overall, and help keep them satisfied at their job!
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A Guide to Employee Benefits in the U.S.

In our previous post on the topic, we covered some important things to remember when setting up your company in the U.S. market. Beyond operations, sales, and marketing, a manager would be remiss not to focus on how cultural differences might impact the success of a subsidiary.

The U.S. is not homogenous

Unlike several other countries, the U.S. is vast – and not just in its size. Americans tend to break up the country into its East and West coasts, and the Midwest. But there are even more segments, like the South, Pacific Northwest, the Northeast, Florida, and Texas – all of which differ greatly from each other. There are several big cities, countless medium-sized markets, and even more rural or suburban areas. Interacting with people living in big cities will differ greatly from interacting with people in smaller towns. While it would be unwise to generalize, it is best to understand the culture of the part of the U.S. in which you are doing business before having expectations.

Patience is not always a strength among Americans

When in negotiations or conducting business, Americans tend to want to just get the deal done. While many other cultures take their time, get to know everyone involved, and move along at a comfortable pace, those in the U.S. do not always see a need to drag things out. Get ready for what looks like impatience, when in reality it is just a desire to be efficient and effective.

Don’t plan on in-person meetings 

At least not all the time. The tendency for Europeans and Asians to conduct most business in person is not the same in the U.S. Phone calls, emails, and now even video conference calls are the norm. Businesspeople like to work efficiently, and don’t gather in person unless it is necessary. First meetings, larger negotiations, and important topics are generally discussed in-person. Otherwise, don’t be offended or surprised if many of your interactions are taking place remotely.

Open-minded over traditions

A positive aspect of Americans in general is their ability to have an open mind. Many other cultures rely heavily on traditions, and act in certain ways because history dictates that they should. That is not the case in the U.S. Americans tend to welcome new ideas and concepts perhaps more freely than their foreign counterparts.

That being said, Europeans tend to rely on strongly forged bonds in which trust is paramount. Loyalty is key. Americans tend to be looser and more pragmatic when it comes to doing business. They don’t necessarily need to have known someone for years to begin working with them. At the end of the day, it’s about getting the deal done.