HR Terms Demystified (Benefits Edition)
Employee benefits can feel like an alphabet soup of acronyms and HR jargon. It’s easy for a small business owner to get lost in the terminology especially if it’s their first time creating a benefit package. Here’s a quick guide to some of the most common HR benefit terms and what they actually mean.
Insurance
Unemployment Insurance - A state-run program that provides temporary financial assistance to employees who lose their jobs through no fault of their own. Employers fund it through payroll taxes.
Workers’ Compensation - Insurance that covers medical expenses and a portion of lost wages if an employee is injured or becomes ill because of their job. It also protects employers from most lawsuits related to workplace injuries.
Insurance Premium – The amount your employee, your business, or a combination of the two pay each month to keep health insurance active.
Deductible – How much employees pay out-of-pocket for covered health services before the insurance starts paying.
Retirement Plans
401(k) or 403(b) – Employer-sponsored retirement savings plans (403(b) is often for nonprofits) where employees can contribute pre-tax dollars to be used in retirement.
Employer Match – When a company contributes to a retirement account, often matching an employee’s contributions up to a certain percentage.
Vesting – The timeline for when an employee fully “owns” employer contributions to their retirement account.
Paid Time Off (PTO)
Family and Medical Leave - Job-protected, unpaid leave that allows eligible employees to take time off for certain family or medical reasons, such as welcoming a new child, caring for a sick family member, or recovering from a serious health condition.
**This type of leave is required under FMLA for employers with 50+ employees within a 75 mile radius (and other state specific requirements may apply)Short-Term Disability - A type of insurance that replaces part of an employee’s income for a limited period (usually up to six months) if they can’t work due to a non-work-related illness or injury.
Long-Term Disability - Insurance that provides partial income replacement for an extended period—often until the employee can return to work or reaches retirement age—after short-term disability coverage ends.
Bereavement Leave - Paid or unpaid time off that allows employees to grieve and make arrangements after the death of a close family member or loved one.
Accrual – The process of earning PTO over time (for example, a certain number of hours per pay period).
Carryover – PTO that can roll over into the next year if it’s not used.
Use-It-or-Lose-It – A policy where unused PTO expires at year-end (restricted in some states).
Other Key Benefit Terms
EAP (Employee Assistance Program) – A confidential service that provides employees with counseling, legal help, and other resources.
FSA (Flexible Spending Account) – A pre-tax account employees can use for medical or dependent care expenses, with a “use-it-or-lose-it” rule in most cases.
HSA (Health Savings Account) – A tax-advantaged savings account for medical expenses, available with high-deductible health plans; funds roll over year to year.
Wellness Benefits – Programs or perks to support employee health, like gym reimbursements or mindfulness apps.
Commuter Benefits - An employer-sponsored program that lets employees use pre-tax dollars (or company-provided funds) to pay for eligible commuting expenses such as public transit, parking, or vanpooling—helping reduce both commuting costs and taxable income.
Professional Development Funds - Money set aside by the employer to support employee growth through training, certifications, conferences, or continuing education that enhances their skills and career advancement.
Why It Matters
Understanding benefits isn’t just about compliance—it’s about making informed choices. Offering clear, well-explained benefits can set your business apart and help attract and retain talent.
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