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Understanding Your Benefits

Topics: Career Advice

Negotiating your benefits package when you are offered a job is key to your overall salary negotiation strategy – but it’s tough to negotiate benefits when you don’t know your 401k from your PTO. But have no fear, because PayScale is here to help you translate HR-speak into English and make sure that you know what these benefits terms mean so you can negotiate them effectively. PayScale’s Salary Report will tell you what benefits are typical at specific jobs and companies and give you a starting point to begin negotiations.

Retirement Savings

When you are starting your first job, retirement is probably the last thing on your mind. However, if you can start saving for your retirement early, future you will benefit greatly. (In fact, future you might even hop into his or her time machine and give present you a big hug, because those will be a thing by then, right?)

By far, the most common type of employer-sponsored retirement plan is a 401(k) (or, a 403(b) if you work for a non-profit or a 457(b) plan if you work for the government) is a special savings account that you deposit income into before taxes. And if you don’t touch the money before you are 59 ? years old, you can enjoy that money, plus interest, tax-free as well! Some employers add to the pot by matching your contribution up to a certain amount – so you get even more free money if you contribute to your savings.

Negotiation Strategy: You can’t touch your retirement savings right away, but employer matching definitely contributes to you total compensation in the long run. So if your employer can’t up your salary, ask for an increase in their matching. Or, if you move from a company that does match to one that doesn’t, or matches less, calculate that into the salary you ask for in the first place.

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More employers are now required to provide employees with employer-sponsored health insurance than ever before, but there are often many different options associated with the plans they offer. Here is a list of common plan acronyms:

  • HMO: An HMO insurance plan is one in which you get maximum coverage but only from a small group of approved health care providers. These are providers that work in a small network (a single hospital group, for example), and the overall selection is smaller. Most HMO plans do not offer coverage for out of the ordinary treatments, like chiropractic care, but this may vary state to state.
  • PPO: A PPO insurance plan usually offers you the option to choose from a wider group of medical providers and includes coverage for different kinds of treatment. You have greater choice in providers with a PPO plan, but they are often more expensive.
  • HSA: An HSA insurance plan usually has the lowest monthly cost, but has higher deductibles and other out of pocket expenses. (Preventive care is still covered at 100 percent though, as required by federal regulations.) However, it allows you to create a special Health Savings Account, in which you can deposit pre-tax income to use toward medical expenses. Also, many employers will add money to this account for you to kickstart your savings, and whatever money you don’t spend stays in your account and collects interest, tax-free. You can use this money toward future medical expenses, or save it for even more retirement money. If you are young and healthy, with few medical expenses, this is often the best financial option.

Negotiation Strategy: Ask for a bigger contribution to your HSA, or for your employer to pay a greater percentage of your monthly premium. If you don’t need your employer’s health coverage because you already get coverage from a partner, ask them to credit those savings toward your salary.

Time Off

Now that you don’t get summer vacation or spring break anymore, vacation time will become a very important part of your life. Some companies break up your PTO, or paid time off, into different categories, like sick days, personal days and vacation time. Other companies give you one set amount of PTO and don’t care why you take the time off. Some employers give you all your PTO at once, so you can technically take a one week vacation right away; other employers make you accrue it over time, and you “earn” a little bit of it each week. Some employers (PayScale included) even offer unlimited PTO, and trust you to make sure that you work enough so that all your work gets done on time.

Negotiation Strategy: Whatever the rules are around PTO, you can always ask for more! In fact, PTO is a great thing to negotiate, because it doesn’t cost your employer any extra money to give you time off. So if they can’t budge on salary, ask for more vacation time.

Stock and Equity

Unless you were an Econ major, the stock market might feel a little overwhelming. Don’t let that scare you off of getting the best value out of your compensation though! Many companies offer equity or stock options as part of their job offers, so take a deep breath and start negotiation.

  • Equity: Equity means you get a piece of ownership of the company. If you work for a private company, this may be an actual percentage (or part of a percentage of ownership). When you are early in your career, this usually just applies to very small companies or start-ups.
  • Stock Options: Stock options give you the opportunity to buy a certain number of shares in a publicly-traded company at a specific price (usually discounted, sometimes free) at a specific date. You usually have to wait a certain amount of time before you can sell these shares – this is called vesting. If the stock goes up, you can sell the stocks at full price based on the discounted rate you bought them at.

Negotiation Strategy: Ask for more! Stocks and equity aren’t guaranteed money, but if the company rises in value, this adds to your long-term compensation greatly. If you are working for a small company that can’t pay as much salary as bigger companies, and you believe in the company, owning a piece of it may make it more worthwhile to work there.


Bonuses are extra money that you receive in addition to your base salary. Not every company offers every kind of bonus, but you can always ask. Here are the most common types of bonuses you may be offered:

  • Signing Bonuses: This is a bonus you get upon formally accepting a job offer.
  • Annual Bonus: This is a bonus you receive every year. These are usually conditional upon the how well you have met personal goals set by your manager or how your team has performed as a whole.
  • Spot Bonus: These are bonuses given to you without notice, usually based on performance.
  • Profit Sharing: This is a bonus given to all employees in a company based on how the company meets specific overall goals.
  • Referral Bonus: This is a bonus you receive for referring somebody to a job within your company. Usually, the employee must stay on for a specific amount of time for you to receive the money.

Negotiation Strategy: If you have a skillset that is unique or if you are interviewing for a position that the company has had trouble filling, ask for a signing bonus if it isn’t offered. Also ask for performance based bonuses and set specific goals around them. This not only increases your total cash compensation if you meet them, but shows your employer that you want to be a high-performing employee.

Commuter Benefits

Getting to work can be the hardest part of work, especially if you live far from the office or have to deal with excessive traffic. Many employers offer commuter benefits, ranging from free public transport passes to tax-exempt accounts to pay for parking. And if traffic is a pain, ask about flex time so you can avoid it, or the ability to work remotely, so you can avoid the headache altogether.

Negotiation Strategy: The ability to telecommute or work flexible hours may save you time on your commute and make you more productive. If that is something that matters to you, start small – ask for these privileges on a trial basis, and expand that permission once you’ve proven that you are indeed a top performer.

Education Benefits

Education benefits, whether it’s a certificate, special class or an advanced degree, make you a more valuable employee. Many employers will help pay some, or occasionally all, tuition costs. Or if that doesn’t apply to your field, they may pay for you to get trained in specific skills. Once you have these skills, certificates or degrees, you can ask for a higher overall salary as well.

Negotiation Strategy: If your employer doesn’t have a specific education benefit policy, but you have a specific class or program in mind, propose something specific. Come prepared with the reasons why this will benefit them as well. For example, if you are a software developer and want to learn a new language, make sure to explain how that specific skill will help you achieve business goals and make your employer’s product better.

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