Evaluating Employee Benefits Before You Take a New Job
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Benefit plans can add considerable value to an employee's overall compensation and are a key reason that many employees accept — or decline — a job offer. That’s why, if you are looking for a new job, it’s important to understand and evaluate the benefit plans available to you before accepting a position.
The following are common types of benefits offered by employers:
Group health insurance. Around 50% of Americans receive health care coverage through their place of employment, making it the most common benefit offered by employers. Some companies pay for 100% of the group health benefits they offer, while others only cover a portion of the insurance costs. Health plans can vary in terms of coverage options, deductibles and reliability, so it’s a good idea to ask your potential employer what health insurance plans they offer and then spend time comparing those options to the coverage you already have in place.
If you and your family are all in relatively good health, you may not be worried about whether your new health insurance options are a downgrade from what you’re used to. However, if you or a loved one has significant medical needs and you’re interviewing with an employer that doesn’t provide affordable health insurance, you’ll need to evaluate the opportunity carefully. Does your potential employer offer coverage for your preferred doctors? Do you feel confident that any increase in salary would cover additional health care expenses? It’s also important to ask about coverage for things like vision, dental and mental health providers, especially if you already regularly use those services.
Health savings accounts (HSAs). An HSA is a type of account that helps consumers save for health care expenses, provided they participate in a high-deductible insurance plan. Employers set up HSAs so employees can contribute pre-tax dollars that they can then spend on medications, doctor visits and other medical services. Some employers even match employee contributions.
Paid sick time and vacation days. At some point, everyone gets sick or burned out at work. Companies know this, so many offer paid sick time and vacation days (sometimes referred to as paid time off or PTO), allowing workers to recharge and come back to their jobs ready to tackle new challenges.
Evaluating this benefit is rather easy, as some companies simply offer more vacation and sick days than others. Be sure to ask how quickly the company makes time off available to new employees and if there’s an accrual policy. For example, you might receive your PTO in a lump sum, or you could be expected to earn (or accrue) a portion of your PTO every pay period Some companies grant additional sick and vacation days every year, while others add days after an employee has stayed with the company for a certain amount of time.
If flexibility is important to you — perhaps you have young children who require a lot of time and attention or an ailing family member in need of care — PTO or even work from home opportunities are important benefits to consider. A position with a company that offers flexible hours might be worth more in the long run than a job with higher compensation but little PTO.
Retirement benefits. Few businesses offer traditional pension plans anymore. Instead, most companies let employees invest in retirement accounts. Among the most popular are 401(k) plans, and many employers match employee contributions up to a certain percentage. This works for the company in two ways: It provides an additional benefit to entice potential employees, and it encourages current employees to save money for retirement.
Retirement savings are vital. However, if your prospective employer doesn’t offer this type of benefit, the good news is that there are several options for individual retirement planning:
- Traditional IRAs. With a traditional IRA account, you may be able to deduct some or all of your annual contributions from your income on your federal tax returns. The IRS website details the rules you must follow.
- Roth IRAs. A Roth IRA is another retirement plan recognized by the IRS. It allows you to take after-tax dollars and sock them away in an account where they will grow tax-free forever (at least according to current IRS rules).
- 401(k) Rollover. If you had a 401(k) through your previous employer, you can roll over those contributions into a traditional IRA when you change jobs. Depending on the situation, you could wind up making more money by leaving the existing employer-sponsored retirement fund as is. However, if you value personal control, rolling your 401(k) into an IRA will put you in charge and provide access to more investment choices. You can read more on the IRS website.
Stock options. Some employers offer a type of benefits that allows their employees earn or purchase stock in the company. Employees can evaluate stock options by analyzing how well one company’s stock performs against another’s. Stock options aren’t for everyone. If you don’t take much interest in the stock market, this type of benefit may not be worthwhile compared to other employer incentives.
Other benefits. As workforces continue to grow and develop, many employers have started offering creative benefits packages to more closely target their employees’ unique needs. Companies with young workforces, for example, may offer student loan assistance. Meanwhile, other companies may offer in-office daycare, pet-friendly buildings, physical and financial wellness services or attractive onsite perks such as free coffee or napping spaces. It’s up to you to determine whether any of these additional benefits sweeten the deal.
Given all the benefit options out there today, employers can clearly offer much more than a paycheck. Without considering these other benefits in addition to the compensation offered, you could end up selling yourself short.