By Sheryl Smolkin
Read this article and comments at Moneyville.ca
You are being recruited for a new job. The salary is not much more than you are earning now, but the recruiter says the company he represents has a much better benefits plan. Yet comparing one benefits plan to another can be a challenge.
The first thing you should do is to make sure you understand your current company’s program. Get the benefits booklet out of your bottom drawer. Ask questions about anything you don’t understand.
Then you have to figure out how the benefit plans offered by the new organization measure up. You will typically get a one-page summary with your offer of employment, but you can request more detailed information.
The basic building blocks of any benefits plan are:
• Health insurance for expenses not covered by your provincial plan.
• Dental benefits.
• Group life insurance.
• Short- and long-term disability plans.
• Retirement savings plans.
• Vacation and other paid time off.
But the devil is in the details.
Health and dental plans. First of all, compare the cost to you of the benefits offered by both your current and prospective employers. For example, more than 60 per cent of the companies participating in Towers Watson’s 2009 Comparison database absorb the full cost of employee health and dental coverage.
Also consider other health and dental plan design features that limit reimbursement. A plan that pays 80 per cent of all covered drug, paramedical and dental expenses with no maximums is much more valuable than a program where you have a family deductible of $100 before the plan kicks in; reimbursement is only 50 per cent; and, annual plan maximums apply for most services.
Then drill down and find out what kind of coverage each employer actually offers for each of the core benefits. For example,
• It is becoming more common for plans to cover paramedical professionals such as audiologists, speech therapists and acupuncturists.
• A comprehensive dental plan will include some major restorative work and orthodontics.
• Dental reimbursement based on the current year’s fee schedule is preferable, or you will end up paying more out of your own pocket.
Life insurance. One of the key advantages of group life insurance is that you don’t need a medical examination to qualify. About 80 per cent of the companies surveyed by Towers Watson in 2009 pay the full basic life insurance premiums and the median coverage was 1.5 times annual salary.
Most companies also give you access to optional employee-paid group life insurance for your spouse and children.
Disability. When comparing sick leave or short-term disability plans look for a program that kicks in as soon as possible after you go off sick and pays the highest per centage of salary. It is less desirable if you must wait two weeks and then collect Employment Insurance sick benefits before you are eligible for long-term disability.
Long-term disability premiums and coverage vary a great deal, but when you pay the premiums, any benefits received if you become disabled are tax free.
Flexible benefits. A flexible benefits or “cafeteria” plan can be attractive because it allows you to make choices. According to Tim Clarke, health and benefits innovation leader for consulting firm Aon Hewitt, some companies are actually designing a flex plan option where if you have 80 per cent coverage under your spouse’s plan, you can buy and pay for only 20 per cent coverage under your plan.
Retirement Savings. Defined benefit pension plans typically promise to pay a specified monthly benefit at retirement based on salary and years on the job. In contrast, defined contribution plans or group RRSPs only deliver a lump sum at retirement based on employer/employee contributions plus investment returns.
A defined benefit plan is a better deal if you plan to stay with one employer until retirement. If you are just starting your career, you may prefer a more transparent and portable defined contribution arrangement. Surveys conducted by Mercer over the last 10 years reveal that the median contribution levels for both employers and employees is five per cent each.
Paid time off. Last but not least, ask about paid time off, flexible work arrangements and other family-friendly policies. If you have worked for your current employer for 10 years and have four weeks of vacation, you will not want to start over with two or three weeks of annual leave. Being able to be at home occasionally may mean you can coach your son or daughter’s soccer team.
Ultimately, your decision should be based on the total rewards package including compensation and benefits. But if your priorities are an extra week of vacation, orthodontic coverage for your children or a maternity leave top-up, any one of these may trump other rich programs offered by your current employer and entice you to jump ship.