How Do Jobs Benefits Work?

Job benefits will make up a large portion of your compensation once you enter the workforce; they may seem like an extra perk when working for a company, and they are, but the reality is that they can save you thousands of dollars each year.

While benefits are considered a supplement to your compensation, you will likely have to pay into these programs. Consider what benefits are available to you, what you are entitled to receive, and even how to negotiate the benefits your employer offers. It can seem stressful to pick your benefit package, but once you know what you want, it’ll be exciting to have them offered to you.

Guaranteed Benefits

Know what benefits you have the right to from the start. Mandatory benefits, also known as statutory benefits, are required by law to be provided to employees. Examples include compensation insurance and unemployment insurance. Some states mandate that paid sick leave is provided for all employees, for example.

Healthcare is one of the most important benefits anyone should have. Note that The Affordable Care Act (ACA) is offered to large employers (50 employees or more) by law, although many small companies offer this to their employees too.

Understanding Your Benefits

As convenient as it would be, you don’t necessarily have the luxury of picking and choosing which particular benefits you’d like to have. Knowing the answers to these following questions will help you navigate which benefits are best for you:

1. Does your employer offer package deals, or can you individually select their offered benefits?

2. Will your employer cover all or some of a particular benefit?

3. When will each benefit start?

4. Will I have to make payments each pay period or each month?

5. Do I need to pay taxes on the benefits?

6. Is the plan pre-tax or post-tax deduction?

7. Who is covered under my plan?

Some plans cover the employee only, while others can cover your current/future family members too. While most graduates are focused on landing their first job out of college, and not necessarily starting a family, it pays to think about what kind of plan would benefit you down the line.

One study states that employees typically stay with a company for an average of 4.1 years, so be mindful of the benefits you choose to enroll, though with the right benefits, you may want to stay with a company for years to come.

Job Benefits

Talk to the HR department about what benefits are open to you. Some benefits are unanimously important to anyone in the workforce, while others depend on your personal preference.

1. Health Insurance

Health insurance is the top benefit currently offered in the job market. It’s so important to have some form of healthcare for the cost of doctor’s visits and prescriptions – healthcare fees are costly, so if your employer can cover even some of the cost, you can save significant amounts of money. Even if you’re completely healthy now, you never know what will happen to you down the line, and it’s always good to be protected. You may be offered certain deductibles, an annual limit, or lifetime maximums for your plan. Oftentimes, medical visits will be covered, but you will have to pay a co-pay each time.

When you are looking into health insurance, it’s important to know the differences between a Health Savings Account (HSA) and a Preferred Provider Organization (PPO). On the upside, you can opt to have both plans. The question you should ask yourself is how to use both and boost your savings.

An HSA grants you a maximum in medicals costs you can use each year as set by the IRS. The contributions that you make to an HSA are tax-deductible, which means that your earnings in your account will not be taxed. On top of that, eligible medical expenses are tax-free too. It’s required that you have a high-deductible health plan (HDHP) to be eligible for an HAS, which will charge lower premiums. 

A PPO is a health plan that provides coverage through a contracted network of hospitals and doctors. You’ll pay less by using these networks but will have to pay extra if you need to go outside of what’s provided to you. You won’t need a referral from your primary care physician if you wanted/needed an appointment with a specialist, which is a great benefit to have.

2. Dental Insurance

Dental care can cover preventative care like a routine cleaning, x-rays, and exams, surgical care like root canals, and even orthodontic care such as braces and retainers. Like healthcare, you may have to pay a co-pay while they cover other visit expenses.

Like healthcare insurance, you must consider the right dental plan for you. Dental insurance plans can come in the form of a PPO or a DMO (Dental Maintenance Organization). Both plans have established deals with dentists that are designed to make it more affordable to receive dental care. The key difference between the two is that a PPO lets you choose your dentist for coverage, whereas a DMO lets you choose from list of contracted dentists in your region to be your primary care dentists.

3. Vision Insurance

Like dental insurance, your employer might cover certain costs and services – eye exams, contacts, and glasses are some of the common covered inclusions.

When it comes to insurance benefits, you’ll likely hear the terms deductible, premium, and beneficiary:

• Deductible: the amount of money the employee must pay for an insurance company to pay for the policy
• Premium: the amount you pay every month
• Beneficiary: the person/entity that will receive the benefits of the insurance policy

4. Retirement Plan

Employers typically offer several types of retirement plans that will help you save for life after work. Companies generally offer 401(k) plans to their employees, where employees can contribute portions of their paychecks towards a savings account, and it is relatively common for employers to match these contributions. This is a critical job benefit because the earlier you start to save for retirement, the more secure you’ll be when your paychecks eventually stop rolling in.

Some companies even offer profit sharing and Employee Stock Ownership Plans (ESOPs), in which employees become shareholders of the company and receive company earnings or discounts on company stock. Learn more about retirement planning HERE.

5. Paid Time Off/ Vacation Days

Most companies offer a set amount of paid time off and/or vacation time. Ask your employer how many you have, when you can start to use them, and if they can be rolled over into the next year if you don’t.

6. Life Insurance

While we never want to think negatively, life insurance could save you a lot of money in the event of an unexpected death. It will essentially leave your beneficiaries with a decent sum of money in the event of your passing. Accidental death and dismemberment (AD&D) insurance is like life insurance, only this policy covers certain accidents.

7. Disability Insurance

There are short-term and long-term variations of disability insurance depending on your particular needs. If you exceed the limit for number of sick days you’re granted, you may have to be extended into the short-term disability insurance plan.

8. Tuition Reimbursement

Some graduates might be considering the pros and cons of applying to post-graduate programs. Many employers offer tuition assistance to help you get an advanced degree but be sure to read the fine print on these opportunities – sometimes employers require a that you earn a certain grade before they reimburse you. You should also be sure that the program or course you register for is covered by your employer.

9. Parking/ Commuting Reimbursement

The cost of parking and commuting can cost you hundreds each month, and some companies will offer reimbursement or services to help you save on getting to and from work.

10. Development Programming

Some companies will offer their employees free training and certification courses to help them gain new skills on the job. It never hurts to enroll in these learning opportunities, they can only help you become a more marketable employee.

Down the line, you may want to check out certain benefits like maternity/paternity leave and dependent care options at your company. Paid time off to take care of a newborn, or daycare options near your office, can be both comforting and financially beneficial.

Some perks, though not particularly necessary, can contribute to an amazing work environment for you. They shouldn’t make or break a job opportunity, but they certainly can make a job even more enjoyable. Here are some examples:

• Gym amenities and onsite facilities
• Mobile phone reimbursement
• Food and beverages
• Company Equipment (work phones, computers, vehicles, and the like)
• Rewards
• Flexible hours and/or remote work opportunities

What Benefits Can You Negotiate in a Job Offer?

Be aware of the do’s and don’t of negotiating your job benefits. It’s only appropriate to negotiate your benefits with HR once the company officially offers you a position. You should finalize all negotiations before you accept the offer. Note that you aren’t stuck with your benefit plan for your entire career; current employees can negotiate/change their benefits at annual or performance reviews.

Certain benefits may be difficult to negotiate because the terms have been set already by the company. Generally, retirement plans, health insurance, dental, vision, and life insurance policies are relatively set in stone.

Whatever the negotiation, get all agreements in writing. This will help to ensure that whatever verbal agreements you had with you employer are seen through.

Does Every Job Offer Benefits?

Unfortunately, not every job offers benefits, but that doesn’t mean you shouldn’t have them, especially health insurance. If a benefits package isn’t provided to you, make your own! Check out Health Insurance and Health Reform Authority Louise Norris’ article, How can I get health insurance if my employer doesn’t offer it? to learn how to create your own package.

This is part of a bigger series that was designed to guide recent college graduates towards reaching their professional goals and benefiting from their studies. Check out our guide to post-graduate life to learn how to leverage your degree financially.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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