Getting a new job is both exciting and nerve-wracking. Maybe it’s your first job, or maybe you’ve upgraded to a better job. Regardless, you’re probably balancing the excitement of your new salary with the stress of meeting new performance expectations.
That said, the last thing you probably want to think about is choosing your benefits. Yet you’re required to make crucial decisions that affect you for the next year within the first 30 days of employment. To make life easier on you, we’ve put together a simple benefits guide to help you choose your benefits appropriately at that new job.
What’s Ahead:
Medical
Medical insurance is a must-have with your new benefits package. That is unless you’re getting them through a spouse or significant other. If not, this is usually the first thing you’ll sign up for, and it’s pretty easy to get confused by the various offerings.
The two major types of medical insurance you’ll typically be offered, and have to pick between, are a PPO (Preferred Provider Option) and a HMO (Health Maintenance Organization). The easiest way to explain the difference is by level of flexibility.
With a HMO, you are able to see physicians that are preselected by the insurance company, usually because they already have contracts with them. It’s often cheaper, but your options can be limited as to which doctors you’re able to see.
A PPO, on the other hand, is more flexible, and you aren’t restricted to specific doctors chosen by the insurance company. The insurance company still has some type of relationship with the physician or their practice, but there may be fewer restrictions.
The other thing to consider is the deductible you’ll pay. Sometimes you’ll have a choice, but many companies now will automatically put you into a high-deductible plan.
The benefit of a high-deductible plan is that it’s a lower monthly premium, but the downside is that you’ll pay more out-of-pocket before insurance kicks in. You may also have to pay an additional premium for your insurance-eligible spouse to join your plan. Companies do this to keep costs down, so it might be more beneficial for you and your spouse to be on your own separate plans with your individual companies.
Dental
With dental insurance, you’ll often get the option of a PPO and HMO, as mentioned above. Dental insurance covers preventative care, like semi-annual teeth cleanings for example. It may also cover portions of bigger procedures, such as root canals, braces, and crowns.
Make sure you fully understand what’s covered and what isn’t. If you’re someone who doesn’t have a lot of dental issues and you don’t often need things like crowns or root canals, it may actually cost you more in the long-run to pay for better dental insurance.
If you have young children, you’ll also need to consider their current or future needs, like getting braces. In this case it might make sense to pay more for a dental plan that covers a portion of these types of expenses.
Vision
The Employee Benefit Research Institute (EBRI) recently found that only 60 percent of organizations offer vision insurance. While this is a nice benefit to have, not everyone needs it.
Typically if vision insurance is offered, you’ll only get one option. It’s normally not expensive, and the primary purpose is to cover routine/preventive eye exams and a portion of the cost of contacts and/or glasses. Read the details carefully, though, because most vision plans will only cover up to a specific dollar amount on contacts or glasses (and it’s usually one or the other).
Life insurance
Most companies will provide you life insurance equal to your annual pay included in your benefits. To get more coverage (i.e. two to three times your annual salary) as coverage, you’ll typically need to pay a higher premium.
Another caveat is getting a physical exam. Depending on your company, you may need to have a physical exam, blood work, and other health related tests done in order to qualify for a certain level of life insurance.
Many times it’s cheaper to buy life insurance outside of your benefits, and you have more options. The two most common types of life insurance are whole life and term life—and you can read about them both in our breakdown.
HSA
A Health Savings Account, or HSA, is an account where you can deposit pre-tax money to use for medical expenses. They’re beneficial for those on a high-deductible medical insurance plans, as it allows you to sock away extra cash that might have otherwise gone to an insurance premium, for the purpose of paying medical bills.
A HSA is a very interesting option, and can act as a savings account toward retirement, if you use it correctly. My fellow Money Under 30 contributor Kevin Mercadante wrote an excellent piece on HSAs and why they’re such an interesting product to consider. Check that out, then decide how you want to use your HSA as part of your benefits package.
Other
Some companies offer other types of health-related benefits such as business travel insurance (if you’ve taken a job that requires a lot of travel, odds are you’ll get this—if not, ask about it), disability insurance (to cover your pay for a period of time if you become disabled), and accidental death insurance (if you die by some force of nature, the company will pay additional benefits—kind of morbid, but take it if it’s free, otherwise forget it).
Financial benefits
401(k)
Nearly every company should offer a 401k retirement plan (or 403(b) if they’re a nonprofit). If they don’t, they’d better offer some extraordinary other benefits that you simply can’t pass up. A retirement savings plan like a 401(k) is the foundation of a secure financial future. It’s important to know that you’ll have options to save.
Since most employers offer a retirement savings account, the biggest thing you’ll need to look for is the employer match. As a benefit, most companies will offer to match your contribution to your retirement savings, up to a certain amount—usually a percentage.
For example, say your company matches dollar-for-dollar up to 5 percent of your contributions. That means for every dollar you contribute to your retirement savings, up to 5 percent, you’re getting the company to give you an extra dollar. That’s free money, people!
Here’s that math on what it actually looks like:
Let’s assume you make $40,000 per year and your company matches dollar-for-dollar up to 5 percent. Let’s also assume you get paid bi-weekly (so 26 times per year).
Since a retirement savings account like a 401(k) is pre-tax money (taken out of your paycheck before you pay taxes), it’s a true 5 percent of what your gross pay is.
So your bi-weekly gross pay would look like this:
- $40,000 / 26 = $1,538.46
If you contribute 5 percent of that to your 401k…
- $1,538.46 x .05 = $76.92
So you’re contributing nearly $77 every paycheck to your retirement savings. But wait, we forgot about the company match! Since they’re giving you a dollar-for-dollar match up to 5 percent, they’re also putting in $77 on your behalf every paycheck.
At the end of the year, not considering investment ups and downs, you’ll have almost $4,000 in retirement savings. It would only be about $2,000 if you didn’t get the employer match.
The point I’m making here is simple: An employer match is one of the most powerful benefits you’ll ever get on a job, assuming you take advantage of it. If you don’t contribute at least enough to get the employer match, you’re missing out on thousands of dollars in the long run.
Check out what your employer’s match is and start putting at least that much into your retirement savings account right from the start—that way you won’t miss it and you’ll be taking full advantage of this benefit.
Pension
While only 38 percent of employees are offered a pension plan, it’s a great benefit if you have it available to you. And, frankly, it’s one that you can’t actually decline.
A pension is a retirement account that your company maintains until you retire—at which point they give you a designated amount each month as a payout. (This is known as a defined-benefit plan, as opposed to 401(k)s, which are a defined-contribution plan.) In most cases, this depends on how long you’ve been with the company.
Pensions used to be more common in jobs like manufacturing when employees would stay with the same company for 40 years. Now they’re more of an added-bonus when you join an organization.
I worked for a company previously that gave me a 5 percent match on my 401(k), plus an additional 3 percent that went into a pension fund, contributed entirely by the company. If you find an organization that does something similar, you should definitely be excited about it.
Profit sharing
Another rare yet phenomenal benefit, profit sharing is when the company will give you a set dollar amount or percentage of their profits, typically on a quarterly or annual basis. This obviously isn’t something that you select (because it’s given to you) but something you should be skeptical about.
Here’s what I mean: Some companies will attempt to lure you in with the promise of a certain dollar amount or percentage in profit sharing. While this might sound great, there’s no way to predict a company’s future performance. I would either negotiate a set percentage to have in writing (and be longer than one year) or negotiate some other benefits to be better, because you can’t always count on profits.
A quick side note: Profit sharing is different than gainsharing, which usually considered to be more of a pay-for-performance incentive. If your company mentions gainsharing, they’re probably talking about paying you extra if you meet specific milestones, so ask about it if you’re unsure.
Stock options and stock-purchase programs
Stock options can come in many sizes—and the higher you are in the organization, the bigger the option, assuming it’s offered. Stock options are a way to give executives and upper level management access to bonus dollars beyond their normal salary. It’s really a form of profit sharing, in a sense.
Unless you’re in a high-level management position or executive role, you probably won’t have stock options available to you — at least ones worth tens of thousands of dollars. If you do, know that it’s an amazing benefit and gives you the option to buy the company’s stock at a certain price during a certain time period, which means you can get the company stock cheap.
An employee stock-purchase program (often just called an ESPP) on the other hand, is a benefit your company may offer as a way to buy their stock cheaper than it sells for on the open market. Most organizations give you a 5 to 10 percent discount on the price of their stock, but only allow you to buy it during certain times of the year. They’ll also make you hold on to it for a certain amount of time to prevent any kind of day-trading or manipulation.
Still a great benefit, an ESPP can bolster your retirement portfolio if you work for a solid company with good financials. Check out my article on value investing first, then decide if buying your company stock at a discount is a good idea or not.
Lifestyle benefits
Vacation time
This one is pretty self explanatory, but you’ll want a full understanding of your vacation time when joining an organization. Here are a few questions to ask or consider:
- Can I use my vacation time prior to earning it, or do I have to accrue the hours before using it? Some organizations will only let you use the hours you’ve earned, and some will let you “borrow” hours early in the year to take vacation time.
- Does any unused vacation time roll over into the next year? Important if you’re taking a big vacation, having a baby, or just not someone who uses a lot of vacation.
- Can I purchase additional vacation time? Very important if you are someone who values time off more than other benefits. One company I worked for let me buy an extra week of vacation which equated to taking a week off, unpaid, when it was all said and done. It was well worth it.
Holidays
You’ll almost always get national holidays off, such as Thanksgiving and Christmas (unless you’re in something like the medical field or work for Disney World, which are open 365 days a year). The key is to see what additional holidays you get, and how they’re used.
For example, if you work in the financial industry, you’ll get bank holidays, which gives you an extra few days off every year. But holidays might count against your total vacation time, especially if the company uses PTO (more on that below).
Personal and sick time
Along with vacation and holidays comes things like sick and personal time off. Know exactly how many days you’re given, if you’re given any at all, in advance so you can plan your year accordingly. If you’re someone who always gets sick and you don’t get any sick time (i.e. you have to use vacation or a personal day), you might not want to plan any major trips.
You may also be given a couple of personal days, which can be used for anything, and often with little notice. These are typically reserved for emergencies that you can’t plan for.
One other thing to note is that many companies are now using Personal Time Off (or PTO) instead of dealing with any of the differences between vacation, holiday, and sick time. Instead, you earn a certain amount of PTO to be used however you desire—vacation, sick, or personal.
Other benefits
Aside from all of the more common benefits, there are quite a few that are often overlooked. Here are some of best benefits that your recruiter or Human Resources department may not initially cover with you:
- Wellness. More than half of American workers now have access to some type of corporate wellness program, which include things like gym memberships, weight loss programs, and discounts on health insurance for being healthy.
- Career development. Perks like tuition reimbursement are becoming more and more common, as employees look to grow themselves professionally. Check into your benefits package to see if you can get money for working toward a degree or certification. Also check to see what kind of internal development options you have, such as a formal mentoring program or leadership development classes.
- Commuter benefits. If you’re working in the city center, your company might reimburse you for taking the subway or even help you pay for parking. If this isn’t already included in your benefits package and you are going to be spending significant money on commuting, I recommend you ask about some type of commuter benefit being included in your package.
Summary
There you have it. Those are the most common benefits you’ll have to know about, and choose, when you start in your new job. Don’t forget to check in every year during open enrollment to make sure your benefits still suit your current or upcoming lifestyle (i.e. if you’re having a baby).
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