Employee Benefits: A Key Part of Job Compensation

During this “Great Resignation” era when many workers are changing jobs or considering a job change, it is more important than ever to consider various types of employee benefits and their economic value.  

Also known as “fringe” (short for fringe benefits) or “perks.” employee benefits generally equal 25% to 50% of a worker’s gross pay. Thus, they are a key part of workers’ total compensation package.

Purposes of employee benefits include:

¨    recruit and retain talented employees (e.g., total benefits package)

¨    enhance workers’ financial security and health (e.g., health insurance)

¨    improve employee morale (e.g., paid vacation)

¨    increase productivity (e.g., profit sharing) and human capital (e.g., educational benefits and training)

¨    improve an employer’s reputation as a good place to work for and do business with (e.g., flexible work hours)

 

Below is a description of ten common employee benefits and benefit-like policies in the current labor market:

Paid Vacation- This is one of the most common employee benefits.  Workers receive their usual pay but are allowed a certain amount of time (e.g., one to four weeks) off from work.  Often, the number of paid vacation days is based on years of service and increases with seniority. Vacation pay is part of a worker’s income and is fully taxable on federal and state income tax returns.

Paid Sick Leave- With this benefit, workers are paid but allowed to stay home when they, or sometimes a family member, are sick.  Leave may be uniform for all employees (e.g., 10 days per year) or based on years of service. Some employers allow workers to accumulate sick leave. Others take a “use it or lose it” approach where sick leave cannot be carried forward to future years. Like vacation time. sick day pay is fully taxable.

Paid Personal Days- This is a third type of  fully taxable paid leave. Some employers provide a certain number of annual  personal days for family emergencies or time-consuming activities (e.g., moving, jury duty or other court-related business, doctor’s visits, attending a wedding or funeral, house closing, travel snafus, and a child’s or pet’s illness). Workers may also use personal days when they run out of vacation or sick leave and need extra time off.

Holidays- Many employers provide a fixed number of paid holidays. These days are generally for national celebrations (e.g., New Year’s Day, Memorial Day, July Fourth, Labor Day, Thanksgiving, and Christmas). Some employers also purposely shut down their operations for week or two (e.g., colleges and universities around the holidays and some factory production lines) and pay their workers during this time.

Family Leave- The Family and Medical Leave Act requires employers with 50 or more workers to provide up to 12 weeks of unpaid leave.  To qualify, employees must have worked at least one year. Family leave allows time off to care for a newborn, a new adopted or foster child, or a seriously ill family member. It also provides unpaid leave when employees, themselves, are too sick to work.

Unpaid Leave- Workers may be able to negotiate time off without pay for reasons unrelated to family and medical leave.  Unpaid leave requests are often handled on a case-by-case basis. An example might be an employee who wants to take an extended road trip with friends or another who needs an unknown amount of time off to care for a sick or dying relative.

Educational Benefits- Many employers encourage their workers to learn new skills and pay tuition for college courses or specialized training. Some, not only cover tuition, but even allow workers “release time” to attend classes during business hours. Workers typically have to submit documentation of a passing grade or attendance. Paid sabbaticals are also available through some employers where workers get time off for extended study, community service, or creative projects.

Telecommuting- In the wake of the pandemic, liberal telecommuting policies are now being viewed as a key employee benefit. Workers who save two hours of driving and a half a tank of gas per day will save hundreds of hours of unproductive time and hundreds of dollars. Increasingly, employers are shifting to hybrid models where employees work at home for two or three days and in an office for two or three days. Some even allow workers’ pets at the office!

Flexible Hours- According to a recent study, 95% of workers want flexible work hours; even more so than they want remote work locations. More employers are increasing workplace flexibility in an effort to recruit and retain workers.

Company-Specific Perks- Another type of employee benefit are those related to an employer’s product or service line. Think discounts at retail stores and car dealers, free travel for airline employees, free or reduced tuition for college and university employees, stock or stock options for corporate employees, and free or reduced-cost company swag.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 

 

The Great Re-Evaluation of 2021

We are now 18 months (March 2020- September 2021) into the pandemic. Worse yet, there is STILL no end in sight. Instead of “getting back to some semblance of normal,” we’re hearing a lot about increasing COVID-19 cases, breakthrough infections, booster shots, mask mandates, vaccine hesitancy, and events that are being cancelled (e.g., the 2021 Financial Planning Association conference).

On September 30, I will be doing a free, one-hour webinar for the New Jersey Coalition for Financial Education (NJCFE) about COVID-19 and Your Finances. This webinar will provide an overview of dozens of pandemic-related impacts on American families and action steps that people can take to stabilize or improve their finances.

Topics to be covered in the webinar include inflation, budgeting, taxes, investments, and charitable gifting. Another topic that I will be discussing is “The Great Re-evaluation,” the pandemic-inspired mindset shift that many people have had in the way they view their lifestyle, jobs, relationships, residence location, and more.

COVID-19 prompted a fundamental reset in the lives of many Americans who were freed from pre-pandemic routines, had more time for self-reflection about their dreams and feelings, and began to envision a different future. 

Has it changed your thinking, spending, habits, and plans? 

Below are five key aspects of life that many people have been re-evaluating:

Employment- The “Great Resignation” is underway as people are quitting jobs at a much higher-than-normal rate. In April 2021 alone, 4 million workers walked away from jobs and polls show many more are planning to change employers, and even industries, after 18 months of living a new lifestyle and acquiring new contacts and skills. Many are seeking higher pay, better benefits, shorter commutes, remote work options, flexible work hours, and better overall work-life balance. I can personally name at least a dozen colleagues who recently left long-time employers to pursue new career paths.

Retirement- COVID-19 has cut both ways. For some workers, it crystalized their mortality and the number of “good years” or even “summers” they have left, so they exited the workforce sooner than planned to enjoy a more relaxed lifestyle. Some retired due to concerns about personal safety. Others realized they want to work longer, especially if their job now provides the ability to work from home and flexibility in work hours and location. Unfortunately, as the Center for Retirement Research noted, not everyone can delay their retirement. Black workers and those with less education are less likely to do so.

Health Impacts- From sports stars and Olympians to ordinary people, we are seeing increased attention paid to mental health and overall wellness during a time of stress and uncertainty. This includes a desire for increased life balance and fewer stressful, hard-charging, work days. People are now viewing commuting time, work-related travel, and 60+-hour work weeks through a different “lens” and many do not want to resume this lifestyle. Financial planning industry thought leader Michael Kitces recently wrote about “subtraction” strategies that people can use to simplify stressful lives.

Relationships- Again, COVID-19 has cut both ways. Some people experienced “too much togetherness” during COVID-19 lockdowns and ended less-than-solid relationships. Others reported a new-found closeness with their family and friends that they want to continue going forward. COVID-19 undoubtedly informed numerous decisions about marriages, divorces, and parenthood. Differing viewpoints about mask-wearing, vaccination, and indoor gatherings have also affected relationships.

Spending- More mixed impacts from COVID-19. For some people, COVID-19 inspired a YOLO (you only live once) FOMO (fear of missing out) mentality because it showed that the future is unpredictable and not a given. This may have led to “let’s do (or buy) things while we can” over-spending. Others with lower expenses  (e.g., commuting and child care) as a result of COVID-19 may now have adequate emergency reserves and a thoroughly ingrained savings habit.

Finally, a sobering note of caution. Some people, especially those living on the “financial edge,” have not had the ability to “re-evaluate” their lives. Out of financial necessity, they continue to work, often in public-facing jobs with high COVID-19 transmission potential, or they stay in unsatisfactory, sometimes even abusive, relationships. Some are now facing eviction.

Bottom Line: The ability to “re-evaluate” your job and your lifestyle is a privilege that is not realistically available to everyone. If you have the opportunity to do a post-COVID re-evaluation and re-set of your life, make the most of it!