Play along with me here.
Let’s assume that your annual salary is $40,000. What would you do if your boss presented you with this scenario? You have the choice, right now, to renegotiate your compensation package. But here are the guidelines: You can earn an extra $15,000 of annual salary but you have to give up your benefits. That’s the deal. What would you do?
Let’s make this hypothetical case even clearer. You can keep benefits such as vacation time, sick days, car or gas allowance, child-care assistance and employee or supplier discounts, but you would have to give up any workplace health and benefits you may have (such as health, dental, vision, paid prescriptions, life insurance, short and long-term disability) and any workplace pensions and savings options (such as company RRSP contributions).
Benefits are a great way for organizations to attract and retain employees and are designed to add value to an overall compensation package. If employees take advantage of their benefits, chances are their organization will have a healthier, happier and more engaged workforce. But many people find it difficult to place a value on the benefits.
How much are your benefits worth?
A survey from LIMRA, a worldwide research, consulting and professional development organization, reports that 62% of employees value employee benefits as an important factor when comparing job offers from two separate companies.
However, the LIMRA survey revealed how unaware people are of the actual cost of benefits. “Overwhelmingly, our research found that employees simply did not know how much their benefits were worth,” noted Anita Potter, Assistant Vice-President, LIMRA group product research. “Without understanding the value of their benefits, how are employees making knowledgeable choices about who they work for and the benefits they select?”
We can rationalize a salary in our heads. It’s easy to anchor a dollar amount and its value, but far more difficult to place a value on benefits such as RRSP contributions or health insurance. It takes a bit of time and effort to calculate the value of benefits and we all know time is often at a premium in our busy lives.
To understand the value of benefits, you need to:
1. Take the time to learn your benefits
Benefits are designed to assist you and your family, so why would you leave responsibility for your understanding of them in the hands of your employer? The more you invest in understanding your options, the more peace of mind and security you’ll enjoy. Ask your company or group benefits provider a lot of questions. Visit your plan website to obtain benefit information and options. And ask friends, family or coworkers how they’ve maximized their benefits and what works best for them.
2. Create a plan that's right for you
We are all at different points in our lives and our benefit needs will vary according to our situation. For example, if you’re single you may not need family coverage. If you’re close to retiring, you may decide you need a different type of coverage. But, bottom line, if you have a plan, you’ll have a roadmap to help analyze your needs.
It would be tough to turn down a $15,000 salary increase, but you may be surprised by the potential value of your benefits.
Imagine this scenario. You’re married with two teens. One teen needs braces, the other needs a crown. Those will set you back $5,500 and $1,500 respectively. Throw in the regular six-month check-ups, x-rays, fillings and cleaning and your annual family dental bill is close to $9,500.
- Read more: Does my child need braces?
The good news is everyone’s teeth look great. The bad news is neither you nor your spouse can see them since you’re both in desperate need of prescription glasses. With eye exams and glasses, we’re looking at a grand. Let’s not forget the $1,800 the family spends annually on prescription drugs and your dental, vision and drug costs total $12,300.
- Read more: Does my child need glasses?
Now it’s time for a vacation. The good news is you’re going to the Caribbean. The bad news is on day-one you stepped on a jellyfish and your better half was hit by a wave and suffered a separated shoulder. Not too serious, but two medical appointments later and you’re down another $2,800.
- Read more: Got travel plans? Don’t forget health insurance.
Back home, the vacation and those two teens have led you and your spouse to start going for regular massage visits. Your back has also started acting up and you’ve started seeing a chiropractor. On a yearly basis, your “stress relief” costs are over $2,000. Add it all up and you’ve hit $17,100 – well over the $15,000 you would have had if you’d opted for the raise!
While this scenario is light-hearted and merely hypothetical, the realities of medical, dental and vision expenses, in-home nursing, disability leave, alternative treatments and long-term care costs are real and expensive.
Do your research and make a sound decision. Provincial health plans will provide some coverage and the specifics of what group coverage provides vary from plan to plan. But it’s important to understand the value of your benefits. Knowledge is power.
- Not a member of a group benefits plan? Learn how you can obtain personal health insurance coverage. Or if you are leaving a group benefit plan, find out how Health Coverage Choice can replace many of the benefits you had at work.
- Read more about considering voluntary benefits