Unit 4: Money Management

Lesson 2: Benefits of the Job

Topic 2: Understanding Fringe Benefits

OBJECTIVES

1. Identify different fringe benefits that employers usually offer.

2. Identify different fringe benefits that employers sometimes offer.

INSTRUCTIONAL FORMAT
This lesson will expand on some of the material covered in Topic 1 regarding benefits. Introduce the concept of fringe benefits by defining them in general. Fringe benefits is a term used to describe additional compensation that an employee receives beyond being paid for their work. Students need to realize that these benefits should be considered a part of their pay when looking at different job options. A job that pays $5.50 and offers paid sick leave, vacation leave, and health insurance is probably a better "paying" job than a job that pays $6.25 and offers no fringe benefits. It is important to stress that every company handles fringe benefits differently. Use the information below to clarify common fringe benefits.

1. Discuss benefits that are usually offered to regular employees.
   
   

   • Worker's Compensation – This a benefit that costs the employee nothing. The employer contributes to a fund that provides income and medical coverage to a person who is injured on the job. State and federal regulations require most businesses to offer this to regular employees.
     
     

   • Unemployment Insurance – This is a benefit that may cost the employee a small amount of money. This benefit provides supplemental income for employees who lose their jobs due to a layoff. Beyond being laid off from a job, there are various factors that are considered when granting a person unemployment benefits. The laws in most states require businesses to carry this insurance on their employees. Temporary jobs may not offer unemployment insurance.
     
     

   • Social Security – As mentioned in Topic 1, a certain percentage of an employee's pay is deducted through FICA (Federal Insurance Contribution Act) and Medicare taxes. The employee pays half and the employer pays the other half. This money goes into an account that provides the following benefits:
     

     • Retirement – Full benefits are payable at age 65 (with reduced benefits available as early as 62) to anyone with enough Social Security credits (earned through approximately 10 years of full-time work).

     • Disability – Benefits are payable at any age to people who have enough Social Security credits and who have a severe physical or mental impairment that is expected to prevent them from doing "substantial" work for a year or more or who have a condition that is expected to result in death. This should not be confused with SSI (Supplemental Security Income) which is paid to people who are over 65 and/or disabled and do not have significant income. This supplemental income does come out of Social Security funds.

     • Family Benefits – If you are eligible for retirement or disability benefits, other members of your family might receive benefits as well.

     • Survivors – When you die, certain members of your family may be eligible for benefits if you earned enough Social Security credits while you were working.

     • Medicare – Health insurance for people over 65 who are receiving retirement benefits and people who have been receiving disability benefits for at least two years.
       
       

2. Discuss benefits that are normally offered, but not required.
   
   

   • Vacation – Most employers offer days off with pay for full-time employees. The employee is granted so many days during the year, and the employee needs to schedule the time off in order to use the time. The longer a person works for the company the more vacation time she generally gets. This benefit does not cost the employee.
     
     

   • Holidays – In addition to vacation days, the employer designates certain days during the year as holidays. Like vacation, the employee usually gets paid for the holiday. Some companies are open on holidays, so the employees who need to work are usually given their choice between taking another day off at a later date or getting paid more for the time they work on the holiday. This benefit does not cost the employee.
     
     

   • Sick time – A full-time employee is sometimes granted a certain amount of time to use when he is sick. A person can call in sick and still get paid as if he was working. Some companies allow an employee to take a sick day when his or her child is sick. If an employee takes sick time, he may need to show documentation from a doctor to validate the claim of being sick.
     
     

   • Retirement – Some companies have a retirement plan to help employees accumulate savings for retirement income. In general, the company will contribute some money to the account and the employee contributes another part. This benefit may be optional. If it is optional, but the employee does not contribute, the company generally does not contribute either.
     
     

   • Continuing education – Some companies will pay for part or all of an employee's schooling to improve knowledge or skills in the given field.
     
     

   • Life insurance or disability insurance – This is a benefit that would provide income to the employee or surviving family if the employee dies or becomes disabled. Most companies pay the premium (monthly payment to provide the coverage), and employees can elect to contribute more if they want more coverage. For example, the base life insurance benefit may be $50,000. If the person wants $100,000 of coverage, she will need to contribute additional money each month. This money will deducted from each check.
     
     

   • Health insurance – This is probably the most important benefit to workers. Health insurance pays for the majority of medical costs when a person is sick or injured. Most employees need to pay for part of the monthly premium that the insurance company charges. If you bought health insurance through that same insurance company on your own, it would cost more; but, because the insurance company gets many customers by working with a specific company, they offer a discount on premiums. It is also important to point out that an employee who only wants herself covered is going to pay less than an employee who wants her whole family covered. Health insurance is sometimes offered to full-time employees.
     

SIGNS OF GENERALIZATION
Students are able to understand most of the benefits that are offered at their work. When starting a new job, they understand the benefits that are offered and are able to ask the benefits coordinator questions when they are confused about a benefit.

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