If you’re lucky, your job does more than just hand you a paycheck every other Friday. Many employers also offer non-salary employee benefits to keep their workforce healthy, happy, and motivated.
It’s important to understand any benefits your employer offers so that you can take full advantage of each. Each benefit has the potential to positively influence your own quality of life and financial future.
Some employer benefits are called “fringe” benefits because they are supplemental to your salary, and not an essential part of the job. Life insurance, for example, is considered a fringe benefit, along with free meals, use of company cars, stock options, childcare reimbursements, tuition assistance, and other perks. In contrast, other benefits – like health insurance – are mandated by federal law for companies of a certain size.
Health insurance has long been a controversial topic, partly because it’s so expensive. So thank your lucky stars if your employer offers decent health insurance coverage to you and your dependents.
You can likely choose from a few different insurance plans for basic health and medical care: to visit primary care physicians, specialists, hospitals, walk-in clinics, and urgent care/emergency rooms for a co-pay for each visit. Most (but not all) plans cover prescription drugs and treatments, too.
However, more specialized insurance, like for vision and dental needs, may be more iffy: Some employers offer them while others don’t. Be sure to be clear on what the coverage, well, covers.
If you enroll, a portion of your paycheck automatically will go toward your health insurance premiums; your employer will cover the difference from company coffers. Just keep in mind that most companies require employees to work full time to gain access to health insurance coverage. Other employers offer incentives to employees who waive health insurance coverage.
Your employer-based insurance is likely to be more economical and comprehensive than any coverage you could get on your own, but you never know, so be sure to shop around. If you have a working spouse, be sure to compare his or her employer’s plan to yours too.
Life insurance may not be the most exciting employee benefit – after all, how can you compare with free meals and a company car? – but it’s one of the most valuable to your family. Employer-provided life insurance takes an expense out of your budget – the premiums you’d pay for your own policy – helping to compensate your family would face in the event of your unexpected death.
A certain amount of coverage is provided free to you, often with the option for you to pay more to upgrade the policy’s face value. Before you do that, though, you better shop around. Better deals may exist elsewhere. (But there’s certainly no harm in taking the basic policy.)
Employer 401(k) Plan Match
Most retirement savings experts consider investing a 401(k) plan to be one of the must-have strategies for retirement planning. And its ace-in-the-hole is the company match.
A 401(k) is a retirement savings plan offered through your workplace. Contributions to it come directly out of your gross pay (reducing your taxable income) and can be invested as you request, usually into mutual funds offered by the plan.
Many employers who offer a 401(k) plan also agree to match up to a certain amount of every contribution the employee makes to their account. Some employers offer a dollar-for-dollar match, while others offer 50 cents on each dollar.
Regardless, it’s essentially free money that you should jump at the opportunity to take. Let’s say you make $1,000 every week and invest 10%, or $100, of that income into your 401(k). If your employer matches up to 6 percent of your income, they’re adding $60 to your 10 percent, and your $100 per week transforms into $160 without you doing anything extra! $160 turns into $320 which turns into $480, and before you know it, you’ve amassed a significant retirement fund.
Flexible Spending Accounts
Many employers, especially large organizations, corporations, and business entities, also offer flexible spending accounts (FSA) as an employee benefit.
An FSA gives you the option to set aside a portion of your pre-tax income to pay for medical expenses and dependent care expenses. You won’t be taxed on the money, and you can use it just like a checking or savings account to handle qualified expenses. Since your employer pays less in payroll taxes for every dollar you invest into your FSA, it’s a win-win benefit.
You may not be able to find an employer who offers every wonderful benefit possible, but you can use available employee benefits as one factor to consider when selecting a new job or negotiating a raise.
Read about micro-investing and how to get started with our complete guide: Micro-Investing: What It Is, Why It’s for You and How to Start.