You’ve been offered a job that sounds fantastic – it pays a very good salary and the workplace has a great atmosphere. You’re eager to take it, but wait: thoroughly evaluate the benefits package before you accept the job. According to the Bureau of Labor Statistics (BLS), in 2010, the average employee benefits package comprised 30 percent of the total compensation package, and the average value of benefits was $8.11 per hour. You can try to calculate the value of the benefits on your own, but some experts believe the best way to put a dollar value on benefits is asking the prospective employer to do it for you.
Example: Job A and Job B
Let’s say Job B pays $2,000 more per year than Job A. You take job B because of this, but maybe you don’t realize that Job A covers 100 percent of the health insurance premium and Job B pays 75 percent of it. With Job B, $200 per month is deducted from your paycheck to cover health premiums and there’s a $500 deductible you’ll pay before the insurance covers the rest of the cost. You’ll pay a total insurance premium of $2,400 per year and you may have to pay a $500 deductible if you need healthcare services during the year. Although Job A pays less in terms of salary, it may be a better financial choice just based on healthcare benefits. And then there are also the retirement account and other benefits to consider.
Many employers are charging employees more for their health insurance than in the past, however employer-provided health insurance is still a bargain. Keep an eye out for potential costs such as:
- Employee-paid premiums
- Maximum annual out-of-pocket expense
- Coinsurance, which requires you to pay a percentage of the total cost of healthcare
- Healthcare services the insurer doesn’t cover
With a 401(k) plan your contributions are tax-deferred (except for social security taxes). Most employers match between 50 cents and 1 dollar for every dollar you contribute for up to 3 to 6 percent of your salary. For example, if you make $40,000 per year and you contribute $200 per month and your employer match is 75 percent for up to 6 percent of your salary, your employer is putting in another $150 per month, which works out to be $1,800 per year. Not taking advantage of an available 401(k) plan at work is like simply rejecting free money.
With a 401(k) plan you accept responsibility for the investment risks and potential losses due to fluctuations in the market. Typically, jobs which don’t offer a retirement plan are not worth considering unless the salary is high enough to allow you to easily contribute to your own retirement account.
Defined Benefits Plan
Some experts believe a defined benefits plan is better than a 401(k) plan because the defined benefits plan is not affected by market performance. Instead, the employer has all the investment risks and unless the company files for bankruptcy and can’t fund the benefit plan, your pension is guaranteed. Due to the costs and risks, fewer employers are providing defined benefits plans these days.
If a defined benefits plan is available, find out how long it takes to become vested. After you become vested you have a non-forfeitable right to benefits funded by the employer even if you leave your job and work for another employer.
Some people believe a defined benefits plan is risky because the employer may not be able to fund the pension plan. However, these plans are typically protected by the Pension Benefit Guaranty Corporation, an independent agency of the United States government. If the company goes bankrupt, your benefits may be reduced, but you are guaranteed to receive a minimum percentage of your promised benefits.
Flexible Spending Account (FSA)
A Flexible Spending Account (FSA) is a pre-tax benefit account used to help offset the costs of healthcare and dependent care for you and your family. Money deducted from your pay and going into an FSA is not subject to payroll taxes. However, there’s a significant disadvantage of an FSA – the funds not used by the end of the year are lost to you.
Benefits in Private Industry
These 2011 statistics will help you compare the types of benefits and employer financial contributions you’ve been offered compared to all workers in private industry:
- 73 percent of full-time employees had access to retirement benefits, 85 percent to medical, and 75 percent to paid sick leave
- On average, single coverage employers paid 80 percent of the medical care premiums for full-time employees and 68 percent for family coverage
- 7 percent of unmarried domestic partners (same sex and opposite sex) had access to retirement survivors benefits
- 29 percent of same sex unmarried domestic partners and 25 percent of opposite sex unmarried domestic partners had access to healthcare benefits
(Source: Bureau of Labor Statistics, National Compensation Survey, March 2011)
Here’s a laundry list of typical employee benefits you should be aware of when job hunting:
- Medical, vision and dental insurance
- Health and wellness programs
- Life insurance
- Short-term and long-term disability coverage
- Paid holiday, vacation and sick leave
- Disability insurance
- Retirement plans
- Stock options
- Severance package
- Employer-paid day care center
- Prepaid legal services
- Education assistance programs and scholarship funds
- Adoption assistance
- Maternity leave
- Flexible work schedule
- Health club
After you graduate from college, benefits, such as a retirement account and health insurance, may not grab your interest. You may think benefits are the concern of older workers, but there are a lot of older workers who wish they paid more attention to benefits when they began their careers. Besides, asking questions about the benefits package makes you look smart to the person offering the job!
Brian Jenkins writes about many different college and career topics for BrainTrack.com. He has contributed content to BrainTrack’s career planning guide.