Compensation is the sum total of the monetary payment and benefits you’ll receive for your time and work. Compensation may include an hourly rate or annual salary, benefits, and possible incentives. Companies have several options when offering benefits. Many typical benefit packages include payment for work, health care, some type of retirement savings and other perks specific to the company.
Here are a few examples of what a benefits package may look like on an online job listing:
Benefits include - Excellent pay, travel benefits, 401K, dental benefits, and paid vacation. Salary is DOE.The best part about working at Company X:
- Participation in Company X Discount Program
- Free Meals
- Great Coworkers & Atmosphere
- On The Job Training
- Drug-Free Workplace
- Benefits (Medical, Dental, Vision, Life Insurance, 401K), after 90 days of employment
Non-exempt employees are usually paid wages. Wages are calculated by the hour. If an employee works over 40 hours in any given week, the employer is required to pay overtime. Overtime = 1.5 x hourly rate.
Some employees, such as those represented by unions, have set wages for a specific period of time covered by a contract.
Salary refers to a yearly amount of money an employee will receive. Most salaried employees are classified as exempt and do not typically receive overtime pay. Salaries are usually determined by the employees level of education, years of experience and other credentials depending on the position.
Many compensation packages include some type of health-care benefits. In today’s world, a solid healthcare plan is an essential benefit for many. Employees often compare health benefits between companies, and it is usually a big part in their decision to accept an offer.
Some employers offer health insurance. The employer often pays a large portion of an employee's monthly premium, and the rest is deducted from the employee's paycheck. Employer-sponsored plan premiums are deducted from pre-tax or gross income.
Some employer-offered health plans also cover vision and dental care.
Another way employers can help employees with their health care is by offering Health Savings Accounts (HSAs). If an employer offers high deductible health care plans, they can also offer HSAs.
HSAs are great for employees as they are able to contribute pre-tax dollars to help pay for health care costs. In addition, HSA funds roll over year to year, so employees don’t have to worry about losing their money.
Employees know it’s important to build a nest egg for their eventual retirement.
Some employers offer a 401k match where employees designate pre-tax dollars to be deducted from each paycheck. As an example, if an employee contributes a mere 5% of their gross wages or salary, the company will make a 50% match. Basically, in this example, the employer will contribute 2.5% of the employee’s wages or salary to the retirement account.
For an employee to have full access to their money, they must be fully vested. Vesting is the amount of time before an employers contribution is available to the employee. Vesting usually happens within 1 to 5 years.
For example, in a 5 year vesting period, for the first year after the employer contributes to the employees 401(k) account, 20 precent of the money belongs to the employee. In the second year, 40 percent belongs to the employee. Over the next 3 years, 60, 80 and 100 percent of the contributions belong to the employee. If an employee leaves before being fully vested, they will have to forfeit whatever portion correlates with when they leave the position.
Additional Insurance and Other Incentives
There are several additional benefits employers can offer. Some employers give annual bonuses based on performance, sales numbers, or how well the company did that year.
Other employers offer additional types of insurance such as life insurance, short and long-term disability insurance.
In addition, some employers offer wellness benefits such as gym memberships and/or onsite healthcare clinics.
Some companies even offer benefits like meal plans, parking or public transit passes, employee discounts and other perks.
With all the types of benefits employers can offer, potential employees must take time to study their options carefully. It’s vital to compare the monetary payment one will receive as well as the additional benefits to determine the best fit for you.
Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.