How Much Are Your Benefits Really Worth?
By: Cynthia Meyer - October 31, 2018
Are you overlooking the real value of your benefits when you think about your compensation? Probably. According to the Bureau of Labor Statistics, benefits accounted for about 32% of employer costs of compensation for U.S. workers in June 2018, with salary making up the other 68%.
That’s an impressive number to start with, but when you look at it from the perspective of the employee, the impact is more striking. Employer-paid benefits improved wages for private industry workers by 46.6% ($11.50 average benefits costs for average wages/salaries of $24.72 per hour). Did I mention that most of those employee benefits are not taxable to the employee?
It’s a good time to practice some benefits appreciation.
While you’re making decisions about your health insurance and other employee benefits for the upcoming year during this open enrollment season, I invite you to take some time to calculate and appreciate their value. Think of it this way: if you were self-employed, you’d have to earn more than 50% more per hour to pay your own benefits costs plus the employer’s share of FICA taxes (Social Security and Medicare). That’s assuming you could get similar pricing on insurance, which is unlikely. While there are many advantages to being your own boss, lack of access to group insurance coverages and retirement planning contributions aren’t in the plus column.
How to estimate the financial value of your benefits
Health Insurance (typically $5,000 – $30,000) – Your health insurance is the most significant component of your benefits. How can you value what your employer contributes for you and your family, as well as the discount you receive on coverage for participating in a large group plan? According to the 2018 Milliman Medical Index, the cost of healthcare for a typical American family of four covered by an average employer-sponsored preferred provider organization (PPO) plan is $28,166, with employers typically picking up 56% of the cost. That means that participation in their company sponsored health care plan is worth at least $15,788 for that family.
Of course your insurance costs may be different, and your employer may subsidize more or less of that. In my case, my employer pays 100 percent of my individual health insurance premium. My husband’s employer pays most of the coverage for him and our kids. Don’t dismiss the enormous financial value of company-subsidized health insurance just because it’s a common benefit in large companies. You’d have to earn nearly twice as much as the premium costs to pay for that insurance on your own after taxes.
Article Source: Forbes
** Disclaimer Required by IRS Circular 230** Unless otherwise expressly approved in advance by the undersigned, any discussion of federal tax matters herein is not intended and cannot be used 1) to avoid penalties under the Federal tax laws, or 2) to promote, market or recommend to another party any transaction or tax-related matter addressed.