Compensation Is More than Salary

Corinne Marasco


IN CHEMISTRY NOVEMBER/DECEMBER 1994
(Reproduced with permission.)

A fringe benefit is any benefit a worker receives in addition to pay. For example, paid holidays, sick leave, health insurance, and pensions are fringe benefits. In seeking a first job, new graduates may not typically think of fringe benefits as part of the compensation package. However, employee benefits are important to employees and employers. In 1993, benefits amounted to nearly 30% of total compensation costs, according to the U.S. Bureau of Labor Statistics. Thus, an employee who earns around $21,000 per year actually costs his or her employer $30,000. The only legally required benefits are payments made on the employees' behalf for Social Security, workers' compensation, and federal and state unemployment insurance. Although federal and state laws do not require the payment of fringe benefits, most employers provide some fringe benefits to their employees.

What types of benefits could be included in an employer's benefits package? A typical benefits package may include the following:


Although employers are not required by law to furnish health insurance, all states require employers that do provide health insurance to provide minimum benefits, which usually include coverage for newborn children and for pregnancy. Additional benefits that may be provided, albeit to a smaller proportion of employees, include:

Young professionals are typically least concerned with their pension benefits. It is difficult to conceive of retirement financial needs when you are seeking a first job. However, given the likelihood of multiple job changes and early retirement options, you should seriously consider a company's pension investment from the beginning of your career. An employer is not required to provide a pension to its workers. If the employer does not provide a pension program, the job seeker is advised to start his or her own retirement investment plan as early as possible.

If the employer does provide a pension plan, the plan must meet minimum standards established by the Employee Retirement Income Security Act of 1974 (ERISA). This act established funding standards and mandatory provisions. Plans are divided between defined benefit and defined-contribution plans. Defined-benefit plans specify a formula, typically based on earnings and length of service, to determine an employee's benefit. Defined-contribution plans usually specify a formula to determine employer and employee contributions. Individual employees have an account, with contributions and earnings added periodically. The benefit is the account balance at retirement rather than a previously specified amount.

Vested rights are the rights of employees to pension benefits upon satisfying the conditions for receiving benefits. These rights are nonforfeitable and typically occur after completing five to seven years of employment with a company. This time period is mandated by the Tax Reform Act of 1986, which changed the vesting period for pensions from 10 years to a period of five to seven years.

This article is obviously brief and does not cover all possible fringe benefits. It should give the job seeker some guidance on considering compensation beyond salary. For more information call ACS Department of Career Services (1-800-227- 5558) for the September 1994 Workforce Report
on "Fringe Benefits: An Overview."