18 HR Terms Every Orange City Business Owner Should Know
HR terms are a vital component of any business owner’s vocabulary. For example, if you’re an entrepreneur and want to hire employees for your startup, you’ll need to know some of the top HR terms.
Especially regarding benefits, workers’ compensation, or any other term related to human resources (HR). In this article, we’ll lay out some of the most critical HR terms that every business owner should know (and be able to use) to make intelligent decisions about their company’s future.
1. FTE (Full-Time Equivalent)
The FTE is the number of hours worked by a full-time employee, and it’s used to calculate the cost of benefits and other expenses, such as health insurance or retirement savings. The FTE is calculated by dividing the total hours worked by the number of full-time employees.
2. FMLA (Family and Medical Leave Act)
FMLA allows employees up to 12 weeks of unpaid leave per year in cases involving the birth, adoption, or foster care placement of a child; the care for a spouse, child, or parent with a serious health condition; or when an employee is unable to work because of their serious health condition.
The law applies to employers with 50 or more employees within a 75-mile radius, so if you’re smaller than that and still want to offer these benefits—and should! —you might be able to find a way around this requirement by calling in some help from larger companies nearby.
The most important thing about FMLA is that it’s not paid time off (but you can use other paid time off if you have it). This means that if your employee does take leave under FMLA, they won’t get paid for those days off unless another type of paid leave overlaps with them (for example, Vacation time).
3. Workers’ Compensation
Workers’ compensation is a form of insurance that provides wage replacement and medical benefits to employees who are injured while on the job. This topic covers work-related injuries, illnesses, or fatalities and applies to all public and private sector employers in every state.
These laws vary by state, but some things are universal:
- you must be covered by workers comp if you have one or more employees (even if those employees don’t work full-time). Suppose you don’t want to buy workers comp insurance either because it’s too expensive or because your business is small and there isn’t much physical risk involved in your line of work. In that case, your only option is self-insurance (paying for accident claims out of pocket).
- if someone gets hurt at work—whether from an accident during regular or nonwork hours—they can file a claim with their state’s department of labor so long as it meets specific requirements (for example, being injured on company property).
4. COBRA (Consolidated Omnibus Budget Reconciliation Act)
COBRA is a federal law that allows you to continue providing health insurance coverage to your employees. It takes effect when a qualifying event occurs, such as the employee’s termination of employment or a reduction in hours.
When you want to stop offering health benefits to an employee, you can make them sign COBRA paperwork so they will receive payments for their medical costs if your company plan no longer covers them. Here’s how it works:
- employees pay 100% of their premiums for the first 18 months (sometimes less). After that period, they pay 65%.
- the maximum duration for this type of insurance is 36 months; however, this can vary based on state law and other factors like age and family size.
5. 401(k) and 403(b)
401(k) is a tax-deferred retirement plan, and it’s funded by employee contributions and employer contributions, which can be matched (or not). You may have heard of 401(k) plans in the news recently, as they are coming under increasing scrutiny because of financial advisers who give bad advice.
403(b) is a tax-deferred retirement plan for employees of tax-exempt organizations. Like 401(k), it’s funded by employee and employer contributions that often match your contributions. The main difference is that employers don’t pay Social Security taxes on 403(b)s, so they’re more expensive than 401(k)s in states with high-income taxes or property taxes (e.g., California).
6. 401(k) Match
A 401(k) match is when the employer matches the employee’s contributions. For example, if you contribute $100 to your 401(k), your employer will also contribute $100. This is usually up to a certain percentage.
7. Acts of Discrimination
Discrimination is the act of treating one person or group differently than another based on race, gender, age, sexual orientation, and other factors. Discrimination can be illegal in some cases, depending on the context. For example, it’s unlawful to discriminate against someone because they’re disabled or have a criminal record. But discrimination doesn’t always have to be intentional; it can also happen unintentionally.
For example, an employer might ask about an applicant’s religion when filling out their application but then accidentally forget to ask about their race—which would be considered discrimination if someone was denied employment because of their religious beliefs but not their race.
8. FMLA Leave
FMLA leave is unpaid time off for employees who need to care for themselves or a family member due to a severe illness.
It’s important to know that FMLA leave is only available for those employees who have been with your company for at least 12 months and have worked 1,250 hours over the past 12 months. If you meet these criteria, you’re eligible for up to 12 weeks of unpaid leave within a year. A few things you should keep in mind:
- you can’t replace an employee on FMLA leave with another employee; however, if you can’t fill their position without exceeding your limit on part-time workers (which depends on whether or not there are 20 full-time equivalent employees), they may be able to come back part-time once they return from their medical leave.
9. Severance Pay
Severance pay is a payment made by an employer to a terminated employee. It is usually initiated for reasons such as the employee’s retirement or resignation, but it can also be paid if the employee was fired for cause (for example, misconduct).
The severance pay depends on how long you’ve been with your company and what kind of job you do. It can be anywhere from 2 weeks to one year or more.
10. Benefits
Benefits are any type of payment or compensation provided to employees by their employer.
This can include health insurance, retirement plans, and other items like life insurance and disability coverage. Benefits are generally considered part of the total compensation package that an employee receives while working for a company—and they can often be negotiated as part of a salary negotiation process between you and your candidate.
Employers typically pay for benefits; however, this is not always the case. For example: if an employee pays for his health insurance plan through his employer’s flexible spending account (FSA), this transaction would not be considered a “benefit” because it does not cost the business anything out-of-pocket (it’s like getting paid in cash).
11. HMOs and PPOs
If you’re unfamiliar with the terms, HMOs (health maintenance organizations) and PPOs (preferred provider organizations) refer to plans that offer discounts for participating providers and services. An HMO is more restrictive than a PPO in that members are required to seek care from doctors within the network—meaning they can get reimbursed only if their doctor is included in the plan. This usually means fewer doctors are available, but you’ll have lower monthly premiums.
PPOs offer more flexibility in choosing your provider: You can choose any doctor or hospital that accepts your plan as long as it’s within your deductible/out-of-pocket maximums. The downside here is that these plans tend to come with higher deductibles and co-pays compared to an HMO—so while they may seem like less of a hassle at first glance, they might end up costing you more over time!
12. FSA (Flexible Spending Account)
An FSA is a tax-advantaged account that allows you to pay for eligible health care expenses with pre-tax dollars. That means you can put money in your FSA and then deduct the fee from your taxes, saving you money on things like:
- health insurance premiums, copayments, and coinsurance
- dental care costs like x-rays, braces, and retainers
- eyeglasses and contact lenses
- vision exams
13. ACA (Affordable Care Act)
Affordable Care Act (ACA) is a federal law that requires employers with more than 50 employees to provide health insurance coverage to their full-time employees. Businesses with 50 or fewer workers are not required to offer a range under ACA. If an employer already provides coverage, it must be affordable—meaning the employee’s share of premiums cannot exceed 9.5 percent of their household income.
If you’re unsure whether your business falls under ACA, talk to your tax professional or financial advisor about ways to prepare yourself for this change so that when it comes time for implementation, nothing catches you off guard!
14. Disability Insurance
Disability insurance is a type of insurance that pays you a monthly benefit if you are unable to work due to an illness or injury. It’s not the same as health insurance, which covers treatment for those injuries. Disability insurance (also known as long-term disability insurance) is designed to replace your income if you cannot work. If your business offers disability coverage, each employee must understand how this coverage works and when they can expect to receive benefits payments.
15. Short-Term Disability
Short-term disability, also known as temporary disability insurance, is a form of disability insurance available to workers who cannot work for a short period. Most short-term disability plans will provide benefits for one to six months. This type of coverage typically delivers between 50% and 70% of an employee’s monthly income during their period of disability.
Short-term disability insurance can be critical if you have employees who are completely disabled or unable to work temporarily because they’ve recently given birth or had an illness requiring hospitalization. It also provides peace of mind when considering hiring people with pre-existing conditions—if those individuals become disabled during their employment with your business, they’ll be eligible for benefits provided by your plan’s short-term component.
16. Long-Term Disability
Long-term disability insurance is a type of employee benefit that provides income to an employee for a specified period when they cannot work due to illness or injury.
Employers can buy long-term disability insurance for their employees through a third party or self-insure, which means the business covers any costs associated with long-term disability. In both cases, premiums are paid out monthly as part of an employee’s salary.
Long-term disability benefits are typically purchased separately from short-term disability benefits and are not included in most group health plans (though some employers choose to add them).
17. Life insurance, Family Life Insurance, AD&D (Accidental Death & Dismemberment)
Life insurance is a contract between an insurer and an insured to pay a designated beneficiary. Usually, the insured’s family, if the insured dies during the term of coverage. The policy may be purchased through an agent or broker, by mail, over the phone, or online.
Life insurance policies are typically issued on two basic plans: term life and cash value life. Term life provides coverage only for a specified period (the term) at one premium amount and pays only if death occurs during that period. Cash value plans offer a range for your entire lifetime at regular premiums with no expiration date and can accumulate cash value in addition to paying out upon death.
The benefits paid by these policies are often called “death benefits” because they’re made payable upon death; however, there may also be disability benefits paid instead of the face amount of coverage when an insured becomes disabled before reaching age 65.
18. Visas and Work Permits
If hiring employees from other countries, your new hire will likely need a visa. Visas are also required for workers from other states or cities (e.g., if an employee moves from one state to another). Understanding how much time and effort goes into obtaining visas and work permits before hiring is essential.
HR Terms Are Necessary to Know as Soon as You Start an Enterprise
To create an enterprise, you must know how to navigate the legalities of employment. You need to understand the different types of employees and what each type means for your business. For example, if you hire an independent contractor instead of a full-time employee, you can save money on taxes but will have no insurance coverage or benefits.
On top of that, every business owner must know how to navigate the legalities surrounding benefits and taxes for their workers and themselves.
In conclusion, HR terms can be very confusing. The more you know about these terms, your company will be better off. We hope this article has helped demystify some of them for you and given you a good starting point for further research. Contact Vision HR for all your HR needs!
