Employee benefits are an important part of your compensation package. Benefits range from paid time off (PTO) to health insurance to retirement and 401(k) plans. Most employer health plans are more comprehensive than what you can buy privately, have lower deductibles, and are much cheaper. Understanding benefits can help you accurately assess a compensation package and ensure that you're not leaving money on the table.
Let's look at some common employee benefits.
Health and Life Insurance
You need health insurance – even if you never go to the doctor – because you don't know when you'll experience a serious illness or be involved in an accident. A low-cost health insurance plan with a high deductible (the portion you will pay out-of-pocket) is often very affordable. In addition, you will put money into a Health Savings Account (HSA) tied to the plan to pay those out-of-pocket expenses. Your employer may add money to your HSA account to encourage you to choose this affordable option.
Many employers also offer traditional insurance plans with higher premiums. However, you will still save money because the employer typically pays 50-80% of the cost.
Consider buying life insurance when you first enroll because they will often waive pre-existing conditions or diseases. You may not be able to increase your coverage later, so buy as much as you can afford. The rates will be very competitive when purchased through your employer.
Also, consider purchasing disability insurance so that part of your salary is replaced if you are unable to work for some period. The rates are also extremely reasonable – think the price of a grande caramel macchiato – per pay period or even monthly.
401(k) and Retirement Plans
When you contribute money to a 401(k) or IRA, you are contributing pre-tax dollars. This will reduce the income tax you pay by deducting the amount of your contribution from your gross income. You will eventually pay tax on money you take out of the plan, but ideally, that will be when you are retired and in a lower tax bracket. Many employers also match part of your contribution – in other words, free money!
Paid Time Off (PTO) and Holidays
Many employers no longer distinguish between vacation and sick days – it is all PTO to be used at your discretion. It may or may not be able to be rolled into the next year if you don't use it all. You will be paid for the PTO days used and for holidays that are officially recognized by the company. Some companies offer paid parental leave and paid time off to volunteer,
The paid holidays most companies honor are New Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas. Government jobs typically include additional days.
You may be single and carefree when you are hired, but consider future needs for a spouse or child, and take advantage of benefits being offered at rock bottom prices. Your base salary plus your benefits make up your compensation package. Consider things like flex time and remote work options and how those could impact your future. Ask questions and read the information provided by the company so that you can make an informed decision as you consider or compare job offers.