Benefits

Bonus—payment or reward based on company performance, employee performance. Benefits may be cash or stock options/shares.

Social Security—Social Security covers disability, retirement, and Medicare. Social Security tax is 12.4%, half is paid by employees the other half by employers. The Federal Insurance Contribution Act (FICA) is another term for Social Security and it is sponsored y the U.S. federal government.

401K and 403b Plans—Section 401K of the Internal Revenue Code allows employees to contribute towards their retirement. Money that the employee sets aside for 401K is pre-tax dollars and accumulates interest until retirement. 403b Plans relate to nonprofit organizations. Companies can also make contributions to the retirement plans; some companies match all of what the employee contributes, other companies match $0.25 to your $1, and other variations as well. If the company is going to match what you, the employee is contributing to, this is considered an additional benefit and you should take advantage of this.

Disability Insurance—Some companies offer short or long term disability insurance. If you are away from work because of injury or a maternity leave, you will receive a partial income through your employer’s disability insurance program. Short-term does not begin until an eligible employee has been out of work for 5-10 consecutive work days and the plan may pay the individual 80-100% of the base salary for the first 10-30 days away from work, 50-75 for the next period, and so on. The maximum amount of time on short term disability is 180 days. Long term disability pay benefits a few years up to the age of 65; coverage begins after the short-term disability ends.

Healthcare—Coverage can include medical and dental insurance. When the company you are working for is large and established, your healthcare might include vision care, prescription drug benefits, and counseling services. Employers pay a significant portion of the costs. Various types of plans include individual, individual plus one, or family coverage in an HMO, PPO, or indemnity plan. Employers pay the bulk of the cost, and you pay a smaller amount. Salary wizards use the average cost for an individual and a family to evaluate appropriate compensation by healthcare.

Pension – This is a retirement plan that pays a fixed monthly cost each year in retirement (like an annuity). Employers are not required to provide pension plans but the Employee Retirement Income Security Act of 1974 does set the standards for those companies that do. Companies pay a set amount in benefits to the employee (defined benefits plan) that is calculated based on salary, years of service, and a fixed percentage. Most pension plans can be claimed when the employee is 65 years of age. Pension plans are stable benefits as it is not correlated to the performance risk that a 401K plan faces.

Time-off—Paid time-off includes vacations, holidays, personal leave, and sick days. Employees usually get between 2-4 weeks of vacation days plus 10-12 holidays each year. Companies often grant between 1-4 personal days, and sick days can vary from 5-15 a year. Some companies also have paid time off for elections, bereavement, military service, or jury duty. Paid time-off should be considered as part of your compensation.

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Last modified: July 31, 2008 14:58:43