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How to Weigh Job Benefits - YouTube
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when i was a kid and my parents took me
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to the ice cream parlor i had one simple
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choice to make which flavor did i want i
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myself have always been a mint chocolate
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chip connoisseur but nowadays when we
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walk into a shop the real star of the
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show seems to be the toppings fruity
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pebbles boba crushed potato chips the
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ice cream seems a bit of an afterthought
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honestly shopping for a job in the
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modern era can feel eerily similar the
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salary can get lost in the fray when you
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compare it to the flurry of options and
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add-ons that can come with a new
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position
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insurance retirement on-site child care
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stock options vacation days tuition
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reimbursement bring your dog to work day
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phew
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obviously it's really nice for people
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who have these kinds of things to choose
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from but it can make it harder than just
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comparing one ice cream flavor to
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another but thankfully it's not
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impossible and today we will explore the
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buffet of employer benefit options and
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figure out how to pick the flavor combo
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that's right for you
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[Music]
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have you ever wondered why employers do
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this kind of stuff why bother with all
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these add-ons fringe benefits and bells
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and whistles
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one of the key drivers for employee
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benefit plans is basic human psychology
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according to maslow's hierarchy of needs
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we homo sapiens have an order with which
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we prioritize what's important to us at
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the very bottom of the pyramid you'll
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find the essentials like food water
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shelter and just one level up there's
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safety and security for our ancestors
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that might have looked like avoiding
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predators or natural disasters but in
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modern society how we make our money
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plays an enormous part in how we
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experience that safety and security when
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our income is erratic or we get let go
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from a job it can really feel like a
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fault line has shifted in our emotional
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foundation
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prior to the industrial revolution the
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majority of the labor force was based in
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agriculture on farms your job security
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was based on the fact that you were born
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into a certain family and by default
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your job and place in society was
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basically preset but as soon as
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industries like manufacturing and mass
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transportation took hold there was a new
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opportunity for consistent income which
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can be pretty appealing when you're used
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to hoping and praying that strange
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weather or a pest infestation doesn't
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ruin your financial security next came
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the first defined benefit plan or what
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we may think of today as a retirement
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plan the earliest private sector defined
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benefit plan here in the us was offered
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by the american express railroad company
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in the late 1800s similar offerings were
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also adopted by banks factories and
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public utilities the setup worked like
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this after you left your job you would
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continue to get paid by the company
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often a percentage of your salary but
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you had to have worked at the company
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for a significant amount of time say 10
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to 20 years and you usually had to be
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over 60.
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given that the average 20 year old in
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the late 19th century was only expected
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to live to around 60 or maybe 65
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employers were definitely playing it
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safe things really started to heat up in
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the 1920s not long after the
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ratification of the 16th amendment which
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established the perennial favorite the
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federal income tax almost immediately
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afterwards amendments created a laundry
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list of legal ways around it also known
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as exemptions one of the earliest
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exemptions allowed employers to deduct
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whatever they contributed to their
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employees pension plans this provided an
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extra incentive and the age of
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normalized retirement benefits came into
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full swing
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as you can see what started as an effort
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to meet our basic human needs of safety
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and security has morphed and evolved
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over the last century companies today
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keep piling on more and more of these
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perks to attract high quality employees
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so much so it's getting harder to
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effectively compare offers heck i'll
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admit if someone offered me a free tacos
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everyday benefit i have a hard time
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focusing on what i'm actually getting
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paid so let's dig into how to go about
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calculating your total compensation i
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think it's time to
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run the numbers
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this is taylor they are looking to make
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a big move from a sales job to a
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management position at another company
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they've received two offers that look
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pretty different on paper and would like
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to compare them side by side
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offer one comes from a well-established
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online bike sales company we like bikes
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they've offered the following a sixty
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thousand dollar base salary two thirds
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of health insurance premiums covered a
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free gym membership and the possibility
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of a five percent annual bonus after
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their first year they'll be eligible for
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10 paid vacation days a year and a 401k
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with a 3 match taylor's goal should be
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to try and whittle all this down into an
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hourly pay rate the hours are capped at
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40 hours a week and assuming they work
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50 weeks a year that gives us 2 000
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working hours annually
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just the base alone would come to 30 an
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hour the average individual cost of
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health care premiums comes to about
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seventy four hundred dollars a year with
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employers usually paying for 83 of that
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tab but remember we like bikes is paying
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two thirds so that's worth an extra 247
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an hour not bad at all the 90 a month
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gym membership tacks on another 54 cents
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an hour the possibility of a 5 bonus
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isn't a sure thing but taylor feels
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confident they can hit their goal so
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that's another dollar fifty an hour so
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for the first year with the company this
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offer is worth thirty four dollars and
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fifty one cents an hour or sixty nine
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thousand twenty dollars annually in the
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second year an extra 90 cents an hour is
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added for the 401k match and an extra
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dollar 38 for the 10 days paid vacation
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which brings the new number to
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36.79 an hour or 73 580 for the second
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year and beyond now obviously this isn't
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money they'll have in their pocket after
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every hour of work but rather the
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approximate worth of the total
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compensation expressed in an hourly
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format
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let's look at the second offer this is a
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tech startup called educatopia with an
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open sales role selling software to
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schools
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they're offering 72 000
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base salary lunch in their fancy
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cafeteria every day and five stock units
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upon signing with the potential for more
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to be granted as bonuses
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they even offer two weeks of paid
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vacation after the first year but right
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now there's no 401k match and they only
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pay a quarter of the insurance premiums
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this one's a little trickier but let's
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see what we can do base salary works out
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to 36 dollars an hour nice
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let's say that lunch is worth 12 bucks a
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day times 250 working days a year is an
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extra dollar fifty now the covered
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quarter of insurance premiums tax on 93
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cents an hour bringing us to
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38.43 in year one and 40.58 cents in
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year two so despite the fact that
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they'll be on their own to figure out
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retirement savings this is still looking
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pretty good not so fast taylor
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what if after chatting with a potential
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co-worker at the final interview it
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becomes clear that the company's culture
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seems to encourage working late and on
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weekends it's not uncommon for startups
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to expect 50-hour work weeks from their
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employees if in reality taylor ends up
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working an extra 10 hours a week those
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hourly rates tank to 30 dollars and 74
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cents here one and 32 dollars and 47
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cents year two
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suddenly the first offer is looking
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mighty good again the only thing that
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could possibly tip the scales stock
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units are a gamble at this point so
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they'll have to think nice and hard
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about how much risk and how much grind
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they're willing to tolerate now we
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understand that some job benefits don't
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come with a price tag and can't be
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crunched on a spreadsheet jobs can offer
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benefits like working from home or
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flexibility of work hours that are more
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of a personal values conversation than a
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financial one it's also critical to take
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the time to get a feel for who your
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direct manager is going to be and what
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the growth opportunities are a 2019
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study found that 57 percent of employees
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quit their job because of their direct
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manager as the saying goes people don't
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quit jobs they quit bosses remember when
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it comes to picking the right job for
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you the salary is important but it's not
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the whole picture you are giving them
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your most valuable non-renewable
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resource your time so do your digging
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run those numbers beforehand and you'll
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be reaping the benefits for years to
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come
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and that's our two cents
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quick before you go do you know what you
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want to be when you grow up no matter
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your answer we think you should check
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out future of work a new six-part
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docu-series on pbs voices hosted by
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julia and me that explores the real big
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work-related questions that americans
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are facing today everything from debt
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and the gig economy to career identity
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and so much more check it out link in
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our description and be sure to tell them
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that two cents sent you
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[Music]
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thanks to our patrons for keeping two
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cents financially healthy click the link
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in the description to become a two cents
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patron
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