I was comparing notes on Twitter with some peers in the UK and Australia. The idea of benefits confused them. They asked what a typical benefits package for employees in the United States looked like, and if it explained the difference in pay between our countries. So let’s take a look.
A typical benefits package for employees in the United States includes health insurance coverage, paid vacation days, paid holidays, and some retirement. But the details can vary a bit.
Differences in benefits packages
Benefits packages can vary pretty widely in their total value. For example, back when I worked on an Air Force contract, my employer lost the contract to a rival. The new company called me right away and arranged for an interview. They offered me the same job, with the same pay. But in effect I took a pay cut, because the benefits package wasn’t as good. Notably, the health coverage was more expensive and didn’t cover as much.
A few years later, I got a raise by taking a pay cut. My annual salary was a bit less, but the benefits package was better so I ended up with more money in my pocket each payday. It pays to get the details about how much the health insurance plan costs, along with other details like the copays.
It also makes sense to ask about opting out. In some instances, my employer’s coverage was so bad it was cheaper to opt out and use Obamacare instead. As much as some people complain about Obamacare, it’s cheaper than some employer plans.
Also pay attention to the paid holidays. I’ve worked for companies that give as few as six holidays per year: New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas. Ten is standard. If you’re used to ten, and get a job offer that includes less, adjust your salary expectations. Otherwise, in effect you’re working four extra days a year for free.
Health coverage is the biggest factor in an employee benefits package. If you have a pre-existing condition, the only way to get coverage is to work for someone else. I’ve had numerous people tell me over the years I should start my own business. I have. I’ve operated no fewer than three profitable businesses in my adult life. But I couldn’t buy coverage for my family because my wife has Type 1 diabetes. Entrepreneurship is for the completely healthy. It’s not a level playing field.
The cost of health coverage varies. Generally for me, to cover my family, it costs about $1,000 a month. Some employers pay more into it than others. I’ve worked for some that pay none of it, but working for them gives me the right to buy into the system. I’ve worked for some that pay all of it for me and for my kids.
But there’s more to the cost of health care than just the monthly deduction from your paycheck. Look into whether there’s a deductible or not. Some don’t. Some have extremely high deductibles, which means they don’t cover anything until you’ve already spent thousands of dollars that year. Also look at your copays. With some plans, it might only cost $10 to see a doctor. Another plan could charge you $100 to see the same doctor.
Don’t forget dental and vision
The other thing to keep in mind is coverage for your eyes and teeth cost extra. You need both of those, but that’s a separate plan. Usually it’s not terribly expensive, but ask. I’ve had plans where it costs $11 a month and they cover two visits a year, and if it’s just a cleaning and x-rays, I don’t owe anything else. Once you get beyond the basics, costs can vary widely. I’ve had plans that will pay for a dental implant, and I’ve had plans that make you pay out of pocket for things like that. I have one, and that was 10 grand out of pocket. My employer covered it, but then the company got bought out, and the new company didn’t. Getting that work done six months sooner would have saved me a fortune.
Be sure to get those kinds of details, especially if you think you might ever need expensive dental work.
The days when you could get a job with a big company, work there for 40 years, and retire with a nice pension are over. These days, the retirement portion of the typical benefits package is for companies to contribute a pittance to your 401(K) plan, on the condition that you contribute a certain percentage of your salary yourself. A good plan matches dollar for dollar. A more typical plan matches 50 cents on the dollar. This is money you won’t see for decades, but it counts. Factor it in.
This is a great deal for employers because 46% of Americans don’t participate. That means 46% of the time, they don’t have to contribute a thing. The other 54 percent of the time, they may have to contribute $3,000 a year. That’s a lot cheaper than funding pensions.
It’s pretty standard for companies to offer two weeks of paid vacation time to new employees. How long you have to stay to get more time varies, but with most of my recent employers, adding another week at around year 3 is pretty standard.
But there’s a gotcha here too. Be sure to ask what happens to unused vacation time. Some companies let you roll it all over. Some don’t let you roll any time. And some companies pay out your unused vacation balance at the end of your employment, while others pay out $0.
Make sure you know what you’re getting into, so you don’t leave paid time off on the table.
Many benefits packages offer a nominal life insurance package. It’s not a lot, but usually you get the option to buy more at a discounted rate, and frequently you don’t have to get a physical exam or anything as long as the amount is less than $250,000. Life insurance is fairly expensive and has a lot of strings attached, so this is one of the nicer parts of a typical benefits package for employees.
Other perks in typical benefits packages
I’ve seen other perks in benefits packages, but frequently they’re used to make a bad benefits package look better. One employer claimed to offer discounts on hundreds of products. The problem was the discounts weren’t very high and none of the products they offered were anything I needed or wanted.
I worked for another company that offered a discount of around 15 percent on the purchase of a Chrysler. That’s kind of nice, if you’re willing to buy a Chrysler. No one I knew took them up on the offer. Really, no one.
Some companies offer partial ownership in the company as part of the benefits package. Usually this means at certain times of the year, you can buy stock in the company at a discount. Frequently there are limits on how much you can buy, and when you can sell it. Depending on the company, this may or may not be available to all employees. Of the two companies I’ve worked for who offered this, one permitted everyone to participate, while the other limited it to certain pay grades. It’s possible that a third company I worked for offered it, but I just wasn’t eligible so they never mentioned it.
Counting the costs in a new employee benefits package
Like I’ve said before, sometimes I’ve received phantom pay raises because a new company offered a better benefits package than an old one.
Look at a current paycheck and figure out what you’re paying for medical and dental. Compare that to what a prospective employer is offering. Estimate what you pay in copays on medicine and trips to the doctor now versus what you would pay under the new package. Factor in other things as well, such as how far you have to drive to work each day, and how long it takes. I once had a job 35 miles away, and my commute was 45 minutes one way. Later I had a job 25 miles way, but my commute was 50-60 minutes even though it was closer. Some people don’t mind 30 minutes in the car every day, but that’s two and a half hours a week. I can write a couple of blog posts in two and a half hours. I don’t make a lot of money off that, but I make zilch driving in my car to work.
Sometimes you get an offer and the numbers just don’t work. That happened to me the last time I changed jobs. I got two job offers from different employers within two days of each other. One offered about 8% more money, but the difference in benefits packages and commute time favored the other offer. That made for an awkward conversation. I tried not to be a jerk about it, because there’s no reason to be a jerk to someone who wants to hire you. But you also have to do what’s best for you. That means taking the time to figure out which offer is actually better.