By U.S. state and federal laws, businesses are required to pay Federal Insurance Contributions Act (FICA) taxes, pay unemployment insurance taxes, carry workers' compensation insurance coverage, provide partial wage replacement insurance coverage, and provide leave under the Family and Medical Leave Act (FMLA), as well as offer continuation of health insurance coverage.

Social Security Taxes

The U.S. Internal Revenue Service (IRS) requires every employer to pay FICA taxes, which consist of Social Security taxes and Medicare taxes on behalf of their employees at the same rate that employees pay. In 2015, the Social Security tax rate is 6.2% for both employees and employers, resulting in a 12.4% total Social Security tax rate. Likewise, for Medicare tax, employers are responsible for a 1.45% tax rate and employees pay the same, making the total Medicare tax rate 2.9%. The Social Security tax rate has a wage base limit, which was $118,500 in 2015. However, Medicare tax has no wage limit.

Starting in 2013 and later, employers must withhold an additional Medicare tax of 0.9% for a portion of wages that exceed a certain limit, which was $200,000 in 2015. The additional Medicare tax is the sole responsibility of the employee.

Unemployment Insurance

Depending on the state in which a business is incorporated, it may have to pay unemployment insurance taxes on behalf of its employees. If a business is required to pay these taxes, it must register with a state's workforce agency. For example, the California Employment Development Department administers an unemployment insurance program that requires all California employers to pay unemployment insurance tax. The program in California pays benefits to all eligible workers who have lost their jobs, and employers pay an unemployment insurance tax rate as high as 6.2%.

Workers' Compensation

Businesses are required to offer insurance benefits to their employees who acquire occupational diseases or suffer injuries as a direct result of their work. Businesses can obtain workers' compensation insurance coverage either through a commercial insurer or through a self-insurance program. Workers' compensation insurance typically covers wage replacement benefits, medical treatment, vocational rehabilitation and other benefits.

Disability Insurance

Certain states and territories require businesses to provide at least partial wage replacement insurance coverage for eligible employees who must stop working due to sickness or injury that was not a result of work. These states and territories are California, Hawaii, New Jersey, New York, Puerto Rico and Rhode Island. Certain states allow employers to collect money from their employees through payroll deductions as a compensation for obtaining disability insurance coverage. For instance, New York allows covered employers to deduct half of 1% of wages paid to employees if they choose to, but not more than 60 cents per week.

Family and Medical Leave

The FMLA requires employers to provide 12 weeks of unpaid leave during a 12-month period of time. The act protects employees from losing their jobs as a result of birth and care of their children, placement for adoption or foster care of children, care for immediate family members as a result of serious health issues and care of the employees' own health problems. Certain employers can choose to offer paid leave depending on compensation policies in place. The act also requires employers to maintain group health benefits for eligible employees who take unpaid leave. The FMLA applies to all public organizations and private companies with more than 50 employees.

COBRA Coverage

Employers with 20 or more employees must comply with the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 by offering continuation of health insurance coverage to former employees, former employees' spouses, dependent children and retirees for a period of up to 18 months. The COBRA coverage must be offered at the employer's health insurance group rates.

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