SOUTHERN CALIFORNIA JOB MARKET : A SPECIAL REPORT ON EMPLOYMENT TRENDS : WORKPLACE ISSUES : BENEFITS PLAY IMPORTANT ROLE IN MAKING JOB CHOICES
When C. N. Angell moved to Southern California and entered the job market earlier this year, she was looking for more than decent pay and a new professional challenge.
“I wanted benefits,” Angell says. “My husband doesn’t get medical insurance with his job and, with an 18-month-old daughter, benefits were important to us.”
Angell, 28, says that she dismissed one job offer because the medical coverage was “terrible.” She would have taken another offer “if it had been the least bit interesting,” just because there was no waiting period to be eligible for coverage.
“But when the salaries and jobs were comparable, benefits were the deciding factor for me,” she says.
Angell’s quest for the right combination of job, salary and benefits was well advised, benefits experts say.
Discretionary benefits--things that your employer isn’t required by law to provide--typically add 16% to 24% to an employee’s base salary, and they may add even more.
“The only people to whom benefits are not valuable are those willing to throw away two or three months of pay,” says Charles P. Wood Jr., an actuary in the San Diego office of Wyatt Co., a national benefits and compensation consulting firm.
Some employers make it easy for you to assess just what you’re getting by providing what are known as flexible benefits. Under most flexible benefits plans, employees are allotted a certain number of “benefits dollars” and allowed to choose just exactly how they want to spend them.
If you take a job at Security Pacific National Bank, for instance, your age (because health and insurance premiums are tied to age), salary and length of service will be used to calculate how much money the company will give you to spend, explains David Chandler, first vice president in charge of employee benefits. Employees may opt to spend that sum, pay for additional benefits or decline benefits and take the money instead. In any case, the worker knows exactly how many benefit dollars he’s getting. They’re shown on his paycheck.
Flexible plans like Security Pacific’s are growing in popularity, but it is still far more likely that you will be presented with a predetermined package of benefits that fall into three basic categories: time off, medical benefits and retirement provisions. How do you know what they’re worth?
The value of time off is the easiest benefit to compute. All you have to do is multiply your daily pay (usually your salary divided by 260, the number of work days in a year) by the number of days off you’re being offered. Thus, if you’re considering an offer with a salary of $25,000 and five days off in your first year of service, that benefit is worth $480.75.
Computing the value of medical and dental coverage is trickier because there are so many variables--deductibles, co-insurance levels, employee contributions and the like. Actuaries employ complex formulas to assess the value of competing plans, but the average job seeker doesn’t have such formulas at his fingertips.
Nonetheless, Wood of Wyatt Co. says that there are a couple of ways to make a rough assessment of what an employer’s medical and dental provisions are worth to you.
The first is simply to ask the employer what the company spends per employee for medical and dental benefits. While factors such as the size and demographic profile of the company’s labor force can produce different premiums for identical coverage, Wood says that the potential employee still can get some measure of the comparative value of competing plans in this manner.
The second approach takes a little more work but probably provides a better sense of how the health benefits package is going to hit your own pocketbook. Wood suggests that a worker estimate for one year in the future what his demand for health care--medical, dental and vision care--will be and then look at how much that care will cost the employee under each potential employer’s health plan.
Especially important to consider if you are assessing a health plan in this manner are three factors: deductibles--how much you have to pay before coverage begins; the portion of a hospital’s or doctor’s bill that insurance covers after you’ve paid the deductible, and how much--if any--of the premium you will have to pay for yourself or for your family. Your own age, health and family status will determine the relative importance of these factors.
Besides time off and health care, a typical benefits package also will include life insurance, disability insurance (short-term and long-term) and retirement benefits.
Life insurance usually is expressed as your salary multiplied by some factor--typically one to three times. To ascertain exactly what that’s worth, you would have to price insurance premiums for the same amount of coverage. Short of doing that, at least take a look at the coverage level, Wood suggests. If you are considering two jobs that have roughly equal health-care benefits, but one offers significantly more life insurance, that may make that job more attractive.
Long-term disability insurance--which typically provides you with a portion of your usual wages for an extended period of time--can be a valuable safety net for a wage earner. To assess its value, consider what it will cost you while you’re working (some employers require workers to pay part of the premium) and what it will pay you if you do become disabled. Especially relevant are the waiting period before payments begin and what percentage of your wages the plan pays.
Retirement benefits are unquestionably the most difficult benefit to evaluate.
Two kinds of plans are common. Defined-benefit plans promise a specific level of benefits upon retirement, typically a percentage of your final average pay. Defined-contribution plans promise a specific level of contribution to a retirement fund, but make no guarantees about how much that fund will pay when you are ready to retire.
Since the relative value of these plans is virtually impossible to determine years in advance, your age may be more relevant in evaluating retirement plans, Wood says. For older employees who are closer to retirement, the predictability of a defined-benefit plan tends to be important. Younger employees who have years to build up a personal retirement fund may benefit more from a defined-contribution plan.
There is no guarantee that the benefits you so carefully scrutinize when you take a new job won’t be changed to become more or less valuable in the future. Wyatt Co.’s 1986 survey found, for example, that 44% of the surveyed companies had modified their medical plans during the preceding year. But at least considering your initial benefits package will assure that you take the best compensation offer you get.
PENSION GAP
Job-hoppers often lose out on pension benefits. This table shows how much more a person who stayed in a job for 30 years might receive in pension benefits than someone who worked for five companies over the same period. Based on typical defined-benefit pension plans, the table assumes that both launched their careers at age 35 and were hired for $25,000 a year. Some of the other assumptions are that both received annual pay increases of 6% and were vested at each employer after years of service.
Full-Career No. of Years Annual Benefit Employee Employed at Age 65 Company 1 30 $39,500 Job-Hopper Company 1 5 $1,500 Company 2 5 $2,000 Company 3 5 $2,700 Company 4 10 $13,100 Company 5 10 $23,000 Total 30 $23,000
Source: Hewitt Associates
