In the current labor market, college grads might be satisfied with just landing a paying job, but it’s important that they understand all their benefits and learn how to take advantage of any perks.
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Stacy Jensen, senior professional in human resources and HR consultant at Diversified Human Resources, explains that employers are not legally obligated to provide employees with any benefits and stresses every employee should know exactly what a company is offering.
“When you accept a job offer it is crucial to look at the total compensation you are being offered, and not just your salary,” she says. “A company that pays for your medical, dental and vision insurance, as well as contributes to a retirement savings plan on your behalf may be adding an additional $6,000 to your total annual compensation.”
Although the talk of benefits, insurance, and 401(k)s can be confusing and overwhelming, here’s what financial advisors and human resources experts say recent hires should expect.
Paid time off is a valuable benefit, says Wendy Edgar, senior professional in human resources and Americas director, people at Ernst & Young LLP.
“Flexibility to meet demands and commitments at home and work is increasingly becoming important in the workplace--it's very appropriate for candidates to ask about a company's time off policy.”
Jensen explains that initial job offer letters may be vague about paid time off (PTO) policies including accrual caps, carry forward amounts, or "use it or lose it" policies, and advises tactfulness when inquiring.
“Asking in a way that demonstrates you are thorough and value your worth will only further prove your fastidiousness to the prospective employer,” she says. “Making ‘demands’ or complaining about the offerings will likely be perceived as a turnoff.”
Employees should look at all of their available options for company health insurance plans, particularly paying close attention to the deductible amounts (the out of pocket cost before any benefits are payable). A higher deductible can reduce the premium for the insurance (how much the plan costs), explains Edgar.
“There are other important items to consider: if the company's medical plan requires that you see a network doctor or facility to get the highest level of benefits, does the network include your medical provider? Is there any coverage for non-network providers? What services are specifically excluded?”
Dental and vision insurance are also frequently offered through employer-sponsored plans, but Jensen warns new hires not to be surprised if there is no employer contribution toward those premiums.
More employers are offering high deductible plans called Health Savings Accounts (HSAs), according to Ameriprise Financial advisor Jim Hanna, an optional employee and/or employer funded account that can be a good choice for grads in good health to contribute towards on a pre-tax basis.
“If you need medical care, withdrawals typically can be made tax-free,” he says. “If you leave the job, you may be able to take this money with you by converting to a private HSA health plan.”
Before choosing a plan, go over all available options with an independent health insurance representative.
If an employer does not offer disability insurance, Jensen explains it can be simple for healthy young hires to purchase a plan through an outside party.
“You'll want to stack up the cost versus your risk and a host of other factors if you are considering that purchase,” she says.
The need for life insurance may feel far off to a young employee, but Edgar suggests participating in a life insurance program as soon as possible to ensure maximum coverage.
“Don't wait until you're married and have additional responsibilities because you might develop a health condition that precludes you from purchasing coverage later,” she warns. “By setting things up early in our working lives, we can ensure that we're in the best position for later on in our career.”
It is crucial that young grads start planning for retirement at a young age.
Many companies offer retirement plan options, allowing employees to start saving right after an eligibility/waiting period and some offer matching contributions, says Jensen.
“Most savvy investors will tell you that you should at least put aside the maximum amount that your employer will ‘match,’” she says. “You should arrange to meet with the company's 401(k) financial advisor to assess your current financial situation and risk aversion to determine your comfort level with contributing to a retirement plan.”
Keep in mind that although not all employers match employee contributions, it doesn’t have to be a deal-breaker, says Hanna.
“If no match is offered, consider contributing 8 percent of pay, then increasing this 1 percent per year to 15 percent total,” he says. “Consider investing a portion of your check into a Roth 401(k), if one is offered, or a Roth IRA. Although you won't get the tax deduction up front, you will likely be glad later when withdrawals may be tax-free assuming conditions are met--consult your tax advisor.”
After receiving the entire benefits package information, Edgar recommends new hires carefully review all of the materials and consult a professional with any questions.
“Pay attention to your employer's communications on all topics, including benefits. Benefits change over time, so you need to stay up-to-date.”