14th December 2022

Can Employers Offer Different Benefit Packages to Different Employees?

Offering Benefits the Right Way

As business leaders, we know how critical it is to keep our employees engaged, and one great way to do this is with competitive benefits packages. However, it can get expensive to offer the same high-level benefits to each employee, especially if you run a small business. This begs the question: are employers allowed to offer different benefits to different employees? If so, what’s the best way to go about doing this?

These are important questions, and since there are laws surrounding employee benefits, it’s crucial to ensure you’re offering benefits the right way. In short, the answer is yes, employers can provide different benefits for different employees. The key is to do it correctly.

What Does the Law Say?

Though it’s always best to consult with licensed legal professionals if you have questions, getting a brief overview of the laws regarding benefits can be a helpful starting point. The first question to consider is this: how big is your organization? Organization size matters quite a bit when it comes to benefits. A company with 50 or more full-time equivalent employees is considered an “applicable large employer” and they are required to offer insurance to all full-time employees based on the Affordable Care Act. A business with less than 50 full-time employees is exempt from this mandate.

Once you’ve determined what requirements fall on your business based on size, the next key aspect to consider is which classes of “similarly situated employees” you have; all similarly situated employees are entitled to the same level of benefits. This just means each employee in a certain “class” or level of your business must have access to the same benefits. For example, this might look like offering health insurance to all full-time employees, but not to part-time employees.

Employee class could include factors such as full-time or part-time employees, employees in different geographic locations, employees hired on different dates, or former employees versus current employees. You can even use employee position or seniority as a basis for determining which team members have access to which benefits package – just make sure you’re being consistent about offering the same package to employees in similar positions.

Though there are many ways to divide up who gets which benefits, it’s important to make sure you’re using bona fide employment-based classifications and are not influenced by a discriminatory bias.

How to Avoid Discrimination

The best way to avoid discriminating against any group of people when differentiating your employee benefits packages is to learn which groups are protected classes. Generally speaking, protected classes include:

  • Gender
  • Race
  • Color
  • National origin
  • Religion
  • Disability
  • Genetic information
  • Citizenship status
  • Age

Some states go even further and include marital status, weight, and sexual orientation, so be sure to do your own research.

Keep Benefits Competitive

Once you know what is legally required of your company when it comes to offering different benefits, remember to keep them competitive. In this time of high inflation and low employee engagement, great benefits can draw in and keep top talent. It may take some time to work through what is doable for your business and enticing for your team, but it’s worth the work to figure it out! And remember, benefits can go beyond a paycheck and healthcare; there are a lot of ways to show your team members you value them.

What Does This Mean for You?

While the information provided here is a helpful guide, it’s crucial to do your own research to ensure you’re complying with all applicable federal and state laws. Remember to consider the size of your organization and which protected classes your team members fall into. In short, it is your right to offer different benefits packages to different employees! Just make sure you know how you can and how you can’t define benefits eligibility.

While we can’t offer legal counsel, we’d love to help you in other ways!

If you could use some coaching to figure out how to better lead your team, consider checking out our Executive Coaching program. Or, if you’d rather have your whole team in on the learning process, feel free to look into some of our training options, such as our Team Building Training or our Productivity Training.