Receiving your first job offer is one of the most exciting things that happens in early adulthood, but it can also be nerve racking. School simply doesn’t teach you about insurance, retirement, or benefits!
My cousin recently received 2 job offers, and she asked me to walk through them with her. She asked some great questions and seemed to appreciate the answers, so I wanted to share what we talked about with readers.
Pay: Understanding your salary is pretty straight forward – it’s how much you make per year, which is generally divided into 26 bi-weekly paychecks. Variable pay, like commissions and bonuses, may not be as simple. It’s imperative you understand how these components are calculated so you know what to work towards.
Signing Bonus: A signing bonus is an amount paid when you sign your offer letter and other employment paperwork. In my cousin’s particular case, however, she will be paid the signing bonus the first paycheck AFTER she starts. Also, pay attention to what stipulations there are for repayment if you leave the job.
Relocation Package: It’s expensive to move for a job, especially across the country. And I don’t just mean moving expenses. To rent, you’ll almost always need to furnish first, last, and security up front. A relocation package in combination with a signing bonus can help cover what basically amount to startup costs for your adult life. Again, know if and when this would need to be repaid if you leave the job.
Student Loan Forgiveness: Increasingly, organizations are offering to pay some of their employees’ student loans during their tenure. One of my cousin’s offers included $10,000 per year for the first 3 years.
Employee Handbook: The employee handbook is put in place by the employer and covers a variety of topics (see examples below). Employees are required to abide by the policies and procedures included in this document, so it’s imperative to understand what is in there and therefore the conduct you are agreeing to as an employee. Compliance: code of conduct, conflicts of interest, fraud, safety Policies: PTO, leave of absence, attendance, travel, diversity, dress code Benefits Information Corrective Actions (consequences)
Education: Many employers offer tuition reimbursement. If you’re considering pursuing an education, you may want to seek out employers that will cover your school. This can end up being a substantial financial benefit.
Retirement Benefits: Most US employers offer 401k (or 403b) plans, in which the employee picks a percent of their paycheck to be withheld pre-tax (up to about $19,500). Often, employers match some of what an employee contributes. For example, they might match the first 3% contributed. The employee then directs the investment of those funds, which grow over time and aren’t taxed until taken out after age 59 ½. When receiving multiple offers, it’s important to compare the employer matches. Matching 10% of what you contribute is very different than matching all of your first 3%, for example.
Health Insurance: In the US, healthcare is expensive – there’s no other way to say it. There is a lot that goes into evaluating which healthcare plan to choose, like your budget, risk tolerance, and likelihood of illness or large expense (like a pregnancy) – and only you can know what makes sense for you. Pay attention to how much will be withheld from each paycheck. -- What is a health savings account (HSA)? If you select a high deductible health plan, you will likely be offered a HSA. You are limited to how much you can contribute: $3650 for individuals and $7300 for families. Employees contribute this amount pre-tax, then the money can be invested and the growth is not taxed if the account is used for approved medical expenses. I’m going to say that again. HSA’s allow you to save money and spend it without ever paying income taxes on it. The catch is that any healthcare needs throughout the year will cost more than with a traditional health plan. -- What is a flexible spending account (FSA)? It’s easy to get confused between a HSA and a FSA. Unlike a HSA, a FSA has to be used either in the year you save the money or in the following year. You basically estimate how much your healthcare spending will be for the year, and your employer takes the amount allocated by the employee from each paycheck (pre-tax). When the employee has a medical expense, they submit an expense report and receipt to the employer, and the employer reimburses the employee. For more information, check out Health Insurance: Types, Levels, and How to Choose.
Dental and Vision Insurance: Most employers offer dental insurance. Some also offer vision. Make sure to take these costs into account when evaluating an offer.
Voluntary Life Insurance: Many employers offer employees life insurance for free at approximately the amount of the employee’s salary. Every benefit plan I’ve seen also includes the option to buy additional term health insurance. If you are healthy, do not do this. The group life insurance rate is likely to be higher than a privately purchased policy. To purchase your own policy, you will need to undergo a health screening, but it is covered by the insurer and will likely result in a lower rate.
Paid Time Off (PTO): Most employers require employees to accrue PTO over time, and at certain tenure milestones the employee starts accruing more. For example, you may accrue 1.5 days per month for your first 5 years, 2 days per month through year 10, and 2.5 days per month after that. Taking PTO is an important part of having a healthy work-life balance and should not be taken lightly. When comparing offers, make sure you compare the PTO.
My cousin and I took into account the differing 401k matches, compared the salaries and bonuses, and adjusted the one offer that didn’t include the student loan forgiveness. An added layer of complexity regarding my cousin’s offers was that the jobs would be in 2 different states. We made cost of living adjustments too. It turned out that they were within about 10% of each other. Luckily, the one that ended up providing the best and highest benefit is also the job in the area that will offer her the highest quality of life. I think she learned a lot and feels sure in her decision. I hope her story helps you too!
Photo Credit: Hush Naidoo Jade Photography
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