Many employers offer workers benefits in addition to a paycheck. Fringe benefits often equal a quarter (or more) of a worker’s salary. They are generally provided at no or low cost to employees and provide products or services that workers would otherwise have to pay for out of pocket or do without (e.g., health insurance). Benefits are generally tax free, so for average earners, every dollar of benefits is worth about $1.40 of earnings. Below is a description of over a dozen common employer benefits:
1. Health insurance: Health insurance is a common fringe benefit. Some employers offer a choice from among several group health plans, while others provide only one. Characteristics of high-quality health policies include:
- a low yearly deductible ($100 to $300),
- a low annual co-insurance cap (a.k.a., “stop loss”) of $2,000 or less,
- low ($5 to $15) co-payments for office visits,
- a wide choice of medical providers,
- high ($1 million or more) or unlimited lifetime maximum payments, - mental health and substance abuse coverage, and
- no wait for pre-existing conditions.
Some employers also continue group health coverage for retirees as a supplement to Medicare. A premium may or may not be charged, and years of service may determine eligibility.
2. Flexible Spending Accounts (FSAs): These plans allow workers to contribute pre-tax income annually to be used for out-of-pocket medical expenses and child/elder care. Any money left in an FSA account at the end of the calendar year is lost. It cannot be carried over. Therefore, planning ahead is essential, as well as scheduling elective year-end expenses.
3. Disability insurance: This coverage helps make up for lost wages if a worker is sick or injured on the job or anywhere else. Often, the coverage period is short (two years or less). Workers may need to purchase additional coverage through their group policy or on their own to carry them to age 65.
4. Tuition reimbursement: Generally, employees pay for courses, and their employer reimburses them if they receive a passing grade. University employees may get free or reduced tuition for themselves and/or family.
5. Child/elder care: Benefits can include an on-site dependent care center, emergency (e.g., sick child) care, overnight care for business travel, and resource and referral services.
6. Employee discounts: Examples include store discounts for retail workers, free tuition for those who work at colleges, and free or reduced travel for airline employees. Many employers also provide discounts on their products/services or company stock.
7. Retirement plans: Employer benefits include pensions (defined benefit, defined contribution, or cash balance), profit-sharing plans, thrift savings plans, employee stock ownership plans (ESOPs), and salary-reduction type plans such as 401(k)s for corporate workers and 403(b) plans for those employed by schools and nonprofits.
8. Group term life insurance: Benefits are generally a multiple (e.g., three times) of a worker’s salary.
9. Legal and financial counseling: Some employers provide pre-packaged legal services or financial seminars. Other employee assistance benefits include counseling for family/marital problems or substance abuse.
10. Incentive stock options: These are increasingly being offered to non-managerial workers and allow employees to receive cash or stock after a specified vesting period (e.g., three to five years).
11. “Cafeteria" plans: Employers provide a fixed amount of benefit dollars, and workers decide its allocation among a choice of benefit options.
12. “Flex-time” and telecommuting: Some employers provide workers with flexibility in their workday, thus saving them commuting time and money.
13. Errand (“concierge”) service: Some employers try to reduce stress in employees’ lives by providing services at the workplace such as shopping, car washing, dry cleaning, and shoe repairs.
14. Other employer benefits: These include adoption benefits, group auto and long-term care insurance, paid sabbaticals, a company car, paid time off for community service, discounted mortgages, and group discounts.
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