Employee Benefits 101
By Peter Vogt
March 18, 2009
Understand your employer's benefits program before you agree to it.
Would you ever want to give up a healthy chunk of your salary? In effect, that’s what you’ll be doing if you disregard the various employee benefits you’ll have access to in your first job.
Many new college graduates simply don’t understand their employers’ benefits programs or their significance in real-dollar terms. “They underestimate the value of their benefits and don’t take advantage of benefits that defer compensation until later,” says Terese Corey Blanck, principal of College to Career, a career consulting firm in suburban Minneapolis.
Your total benefits package could potentially add 30 percent to your overall compensation. So it’s foolish to remain in the dark. Here’s a quick rundown of the benefits you’ll most likely be offered and what they can do for you.
When you’re young, it’s easy to think you’re invincible and practically immune to disease or injury. But a single trip to the emergency room or being diagnosed with a relatively common condition can quickly turn into an overwhelming bill.
Medical insurance helps cushion the blow. If you’re lucky, your employer will pay your entire insurance premium each month. It’s more likely you’ll pay a small percentage, and your employer will cover the rest. Whatever the arrangement, it’s almost certainly in your best interest to sign up.
Don’t forget to check into additional forms of health insurance as they apply to you:
- Dental Insurance: This helps you keep your teeth healthy by covering preventive maintenance and repair.
- Disability Insurance: This will help you pay the bills if you’re somehow temporarily or permanently disabled.
- Life Insurance: This covers the cost of your funeral if you die and, more importantly, provides for key loved ones you leave behind.
Who wants to think about retirement when you’re just starting out? Whether it’s a 401k or a 403b or some other type of employee-sponsored retirement plan, you should strongly consider this option.
You’ll be able to contribute to the plan without first paying the usual federal (and in many cases, state) income tax on your contributions. You won’t pay that tax until retirement, when your money is actually distributed back to you. Better yet, your employer may contribute to your account as well, usually matching a percentage of your contributions.
Paid Time Off
This benefit is exactly what its name implies: Paid time away from work for vacations, holidays or illness.
Feeling so crummy you’ve just got to stay in bed today? Your pay won’t be docked as long as you still have allotted time left in your bank.
Flexible Spending Account
You may know this benefit as a Section 125 plan. Whatever the terminology, a flexible spending account allows you to set aside some pretax money to pay for things like health insurance premiums, child care or even that new pair of glasses you’ve been meaning to buy. This helps you reduce your income tax bill at the end of the year, thus saving you money you otherwise would have to give to the government.
Perhaps you see a graduate degree, certification course or industry-specific training program in your future. Many organizations offer partial or even full tuition reimbursement for educational activities they see as benefiting not only you but also the organization as a whole. That’s the equivalent of being handed hundreds or even thousands of dollars.
It’s impossible to describe every possible employee benefit here. Every company offers different benefits, and individual situations vary. So don’t be afraid to get some guidance from your organization’s HR department, a trusted campus advisor or your parents. After all, most schools don’t teach you this stuff.
But you don’t want to learn your benefits lessons the hard way.
For more information on benefits plans, visit Monster’s Salary Center.
This article originally appeared on MonsterTRAK.
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