A 401(k) is the most common type of retirement savings program offered by companies, and has all but replaced the traditional pension plan. A 401(k) is an employer-sponsored retirement plan that allows a worker to save for retirement while deferring income tax on the saved money and earnings until withdrawal. The employee elects to have a portion of his or her wages paid directly, or "deferred", into his or her 401(k) account. In participant-directed plans (the most common option), the employee can select from a number of investment options, usually an assortment of mutual funds that emphasize stocks, bonds, money market investments, or some mix of the above. There are maximum contribution limits. For 2013, the maximum contribution to a 401(k) is limited to $17,500 for individuals under the age of 50.
Some companies will match a percentage of your contributions to your 401(k) program. A common employer matching formula is 50% of 401(k) employee contributions, up to a certain contribution limit (typically a maximum of 6%). This can be a powerful wealth builder and a valuable piece of an overall compensation package.
Companies typically offer relocation assistance on a case-by-case basis. If a company offers a relocation package, it will come in the form of either a relocation bonus or they will take care of moving your household goods, similar to a military PCS move. If you receive a relocation bonus, the amount will vary depending on the company, the position you are hired for, and the physical distance involved in the move. Relocation assistance can significantly add to the overall value of an offer.
Bonuses can significantly increase the value of your overall compensation package. Listed below are a variety of bonuses companies can offer. You may receive one or more of these bonuses depending on how your individual compensation package is structured. Bonuses are typically taxed at a higher rate than your normal wages. Consult your Orion Candidate Recruiter if you have any questions concerning a bonus or bonuses you may be in line to receive.
Some companies may offer a signing bonus as an incentive to accept a company's offer. Signing bonuses are usually paid within 30 days of a candidate accepting a position. Signing bonuses are not standard components of every company's compensation package. Several years ago, a signing bonus was more common. Today, they are given out much less frequently. Typically, a signing bonus must be paid back in full if a candidate does not complete a predetermined period of time with the company.
A large number of companies include a performance bonus as part of an overall compensation package. This discretionary bonus is typically based on both company and individual performance criteria and is normally paid on either a quarterly, semi-annual, or annual basis. The amount of this bonus can vary widely depending on the individual company and position you are hired for, but is typically computed as a percentage of your base salary.
Some companies may offer tuition reimbursement for college or graduate school classes. Typically, there is a limited amount of assistance available. Additionally, most companies require that classes taken apply directly to your position or the industry in general.
Company Car or Car Allowance
Most sales positions that involve a significant amount of driving (such as pharmaceutical and medical device companies) provide either a company car or a monthly car allowance as part of your overall compensation package. A company car or allowance can add seven to ten thousand dollars to the overall value of your offer.
If a company car is provided, the company typically leases the car and pays the monthly payment, insurance, gas, and the maintenance for the vehicle. The company owns the car. Some companies allow you to use the vehicle for personal use.
If you are given a car allowance, you are paid a monthly stipend in the form of bonus by the company to cover your vehicle related costs. Unlike a company car, you would personally own or lease the car, and you would use the allowance to pay for the car payment, the maintenance and the insurance. In addition to the stipend, the company may also reimburse you for your work-related mileage.
Employee Stock Plans
There are three primary stock option plans that companies may offer as part of an overall compensation package: Employee Stock Option Plans, Employee Stock Ownership Plans (ESOPs), and Employee Stock Purchase Plans (ESPPs). Each is different and offers unique advantages. All three can add significantly to the overall value of an offer.
Employee Stock Option Plans
Some companies use Employee Stock Option Plans as an additional way to compensate their employees. These plans allow an employee to purchase a specific number of company shares during a specified period of time at a fixed price. For example, if an employee gets an option on 100 shares at $10 and the stock price goes up to $20, the employee can "exercise" the option and buy those 100 shares at $10 each, sell them on the market for $20 each, and pocket the difference. But if the stock price never rises above the option price, the employee will simply not exercise the option.
Employee Stock Ownership Plans (ESOPs)
An ESOP is a type of tax-qualified employee benefit plan in which most or all of the assets are invested in stock of the employer. Like profit sharing and 401(k) plans, an ESOP generally must include at least all full-time employees meeting certain age and service requirements. Employees do not actually buy shares in an ESOP. Instead, the company contributes its own shares to the plan, contributes cash to buy its own stock (often from an existing owner), or, most commonly, has the plan borrow money to buy stock, with the company repaying the loan. All of these uses have significant tax benefits for the company, the employees, and the sellers. Employees gradually vest in their accounts and receive their benefits when they leave the company (although there may be distributions prior to that).
Employee Stock Purchase Plans (ESPP)
An ESPP is similar to a stock option plan. It gives employees the chance to buy stock, usually through payroll deductions over a 3-to-27-month "offering period." The price is usually discounted up to 15% from the market price. Frequently, employees can choose to buy stock at a discount from the lower of the price either at the beginning or the end of the ESPP offering period, which can increase the discount still further. As with a stock option, after acquiring the stock the employee can sell it for a quick profit or hold onto it. Unlike stock options, the discounted price built into most ESPPs means that employees can profit even if the stock price has gone down since the grant date.
Questions about the types of civilian benefits you can expect to receive in corporate America? Please ask your Candidate Recruiter who will be glad to help you.