AOF Applied Finance

AOF Applied Finance

Lesson 13Employees

AOF Applied Finance

Lesson 13

Employees

Student Resources

Resource / Description
Student Resource 13.1 / Note-Taking Guide: Labor Statistics Research
Student Resource 13.2 / Reading: Employee Benefits
Student Resource 13.3 / Interview Guide: Employee Benefits Grid
Student Resource 13.4 / Table: Benefit Packages
Student Resource 13.5 / Assignment: The Right Company for Me

Student Resource 13.1

Note-Taking Guide: Labor Statistics Research

Student Name:______Date:______

Directions: Visit the US Department of Labor’s Bureau of Labor Statistics website to research the first four questions: .

Once you are on the Bureau of Labor Statistics website, select the Wages by Area and Occupation heading, then click on the “For over 800 occupations” button. Note that occupations are grouped by industry category. Scroll down and search through the lists to find the average salaries (“annual mean”) of the following occupations:

Occupation / Average Annual Wages
Accountants and Auditors
Loan Officers
Computer Programmers
Chemical Engineers
Secondary School Teachers
Dentists
Dental Assistants
Restaurant Cooks
Hairdressers, Hairstylists, Cosmetologists
Retail Salespersons
Tellers
Elevator Repairers

Review the data you gathered. In your opinion, what factors do you think account for the differences in annual wages?

Within theWages by Area and Occupation section of the website, click on “for over 800 occupations” and thenclick on “All Occupations.” What is the national annual wage?

For a small-sized company that pays 15 employees this average wage, what would the total wage cost be each year?

Go to and check the boxes for “Private industry, All workers, Total benefits” and “State and local government, All workers, Total benefits.” Retrieve the data. For the most current reporting periods, what percentage of total compensation goes toward benefits?
Private industry: ______

State and local: ______

In your opinion, what do you think accounts for the differences between these figures?

Student Resource 13.2

Reading: Employee Benefits

Keisha and James are friends about to graduate from college. They are looking for their first professional-level jobs and have gone separately to a job fair on campus. Later, over coffee, they compare the employers they talked to.

James likes stability and predictability. He makes long-term plans—for his life, for his finances, for his future wife and children. Keisha wants intense experiences—to learn as much as she can in a year or two at a job and then move to another one; to travel; to experience the world. She wants a job where she’ll learn intensively and make lots of money, even if it comes from overtime.

She listens patiently while James runs on for 10 minutes about the benefits one employer offers. “They have a choice of health care plans,” he relates. “You can join an HMO—that’s ahealth maintenance organization, like Kaiser Permanente, where you go for all your medical needs—office visits or hospital care. Or they offer a PPO, a preferred provider organization, where you go to certain doctors and hospitals that have contracts with the plan. The only thing they don’t have is a fee-for-service (FFS) plan, which reimburses you or the doctoryou choose as you incur expenses.”

“James,” Keisha says, “I haven’t been sick since I had a cold in my sophomore year. I’ve never had a broken bone. I’m not worried about how much an employer kicks in for my health plan. I’m not planning to need it.”

“But, Keisha, their dental plan pays 80% of the cost of regular dental work and 50% for braces for your kids,” he points out. Keisha doesn’t bother pointing out that neither of them has kids. Taking a risk, he points out: “You could get your own teeth straightened.” He’s embarrassed her, but no more than she’s been embarrassed by her crooked smile, which her mom couldn’t afford to get fixed.

James moves on quickly. “There’s a vision plan, too. They pay part of the cost of getting your eyes checked and buying glasses or contacts….” He trails off as Keisha starts to have a glazed look in her eyes. She has perfect eyesight, of course.

He keeps going: “They have all these disability programs in case you become too disabled to work because of an injury or disease.” Keisha groans.

“Can I interest you in disability insurance?” James tries. “If you’re disabled, it pays a portion of your monthly salary.”

“Life insurance? It gives your survivors a one-time payment of two and a half times your annual salary if you die accidentally.” Keisha thinks of her mom, who’s still paying off her grandmother’s funeral expenses. Even if Keisha were not around, a life insurance settlement would pay for a funeral and make her mother’s life a whole lot easier.

“AD&D?”

“AD&D—what does that mean?” she asks. James was hoping she wouldn’t want to know.

“Accidental death and dismemberment,” he says. “If you’re killed or maimed in an accident, they give you money as compensation for the body part you lost.”

“Too gruesome, James.”

“Then let me tell you about paid time off,” James says. “You get 11 paid holidays a year, plus 2 weeks paid vacation—3 weeks after 5 years—and 2 weeks sick pay, so you get your salary even if you’re out sick. If you’re called for jury duty, they give you your regular salary.” Keisha’s thoughts float off. Jury duty might be kind of interesting. She’s thought about going to law school and would like to see the inside workings of the courts. If someone would pay her to observe, that wouldn’t be bad.

“If you’re in the military reserve and have to go on military duty for training, or you get called up, they’ll continue to pay your regular salary.” James is on a roll.

“And you have to hear about their retirement plan. You know that hardly any employers bankroll pension funds anymore—defined-benefit plans. They mostly use defined-contribution plans, where employees can set aside some of their salary pretax, and invest it in a 401(k), a 403(b) if you work for a government agency,or a 457 plan if you work for a nonprofit.”

“You’re out of your mind, James!” Keisha tells him, laughing. “You’re 22 years old and you’re thinking about retirement already.”

“You have to start thinking about it now. Look, if I start putting money into a 401(k) now, in five years I’ll be vested in the plan and my employer will start putting in money, too.They’ll match a certain percentage of my contributions. You know you don’t pay tax on that money until you draw on it in retirement, don’t you?”

“Wait,” Keisha interrupts, “free money from your employer? And no income tax?”

James nods yes. “And that money will be invested in the stock market and will be growing—all of it, mine and the employer contribution. It could double or triple by the time I want to retire—early. Then I can travel or teach or mentor young kids just coming up.”

Keisha is silent, torn between the idea of getting free money and not wanting to stay at a job for five years. She changes the subject. “James, most companies offer those benefits. Tell me about something that’s not run-of-the-mill.”

James is happy to.

“I can buy into the company:They have astock option plan, which gives employees the right to buy company stock at a fixed price.”

“They have education assistance:If I want to go for a master’s degree in business administration or another work-related degree, or if I want to take seminars to help me in my job, they’ll pay the tuition and fees.”

“There are benefits not directly related to the job, too,” James continues. “They’re called quality of life benefits:

I can work out in the company gym.
There’s a child-care center onsite for preschoolers, and for school-age kids they’ll subsidize outside child care. Have you priced afterschool care? It’s about $500 a month—per child.
If you adopt a child, they’ll provide Adoption Assistance—help with the fees and legal work.
There are three company vans that employees can use to vanpool, as long as they pay for gas and tolls.
To cut back on commute time, there’s flextime—you come in later and leave later.
Some departments will even let you telecommute part of the time; you can work on your home computer and tap into the company network.

There’s more, but I can see I’m not really persuading you.”

“Okay, James, I do see the benefit of working for a company that gives you all that stuff, but what I really want is to just make a lot of money and then take time off to travel. So how’s the starting salary there?”

“Keisha, do you have any idea how much all those benefits are worth in money? It’s almost 44% of your salary! Think of your salary being almost half again as much as you’re hired for. It’s more than just a paycheck.”

Student Resource 13.3

Interview Guide: Employee Benefits Grid

Student Name:______Date:______

Fill in the grid using Student Resource 13.2, Reading: Employee Benefits, as your resource. Then survey three adults with full-time jobs and ask each of them if their employer provides a similar type of benefit. Keep a tally of their responses in the “Survey Says . . .” column.

Benefit Category / Examples and Descriptions / Survey Says…
Retirement Plans / Y:______N:______
Health Care Plans / Y:______N:______
Disability / Y:______N:______
Life Insurance / Y:______N:______
Stock Options / Y:______N:______
Paid Time Off (PTO) / Y:______N:______
Quality of Life Options / Y:______N:______
Education Assistance / Y:______N:______
Other: / Y:______N:______

StudentResource 13.4

Table: Benefit Packages

Below are the benefits offered by two companies for two entry-level positions. Read them over and discuss them with a partner. Later, you will use this information to write a summary on which business you would choose to work for based on the information. Consider not only salary and benefits but also characteristics of the company and the job when you make your decision.

Company 1:
Bank of Croesus / Company 2:
Midas Investment Advisors
Company profile / Publicly held; in business 22 years / Privately held; in business 3 years
Type of job / Economist / Financial analyst
Starting salary / $38,000 / $32,000 plus company car
Job prospects in this field / Demand expected to grow, especially in private industry; current salary growth is slow / Stiff competition but high earning potential and likelihood of rapid advancement
Health insurance / Choice of HMO or PPO; no copay; dental insurance; vision plan; family coverage fully paid by employer / Choice of HMO or PPO; $50copay per visit; dental insurance; family coverage paid 50%
Disability and life insurance / Short- and long-term disability policies fully paid by employer; AD&D; life insurance at 2.5 times annual salary / Short- and long-term disability policies 50% funded by employer; AD&D; life insurance at 2.5 times annual salary
Retirement plan / 401(k); after 5 years, employer matches first 2% contributed by employee / 401(k); no company contributions
Stock option plan / Available to executives after 3 years / None
Vacation and holidays / 13 paid holidays;2 weeks’ vacation / 11 paid holidays;2 weeks’ vacation
Bonuses / Performance bonuses of 5% of annual salary; $100 employee referral reward / Performance bonuses of 10% of annual salary
Educational assistance / Employer pays 50% of tuition for work-related courses / Employer pays 100% of tuition for work-related courses
Quality of life benefits / Free checking account;special rates at nearby gym;child-care discounts;adoption assistance;transit passes / Limited telecommuting; company gym
Unusual requirements of job / None / 7 a.m. start time;heavy telephone contact;30% travel;evening and weekend hours expected;tight deadlines

Student Resource 13.5

Assignment: The Right Company for Me

Directions: Today is your lucky day. You have just been offered both of the jobs that you interviewed for! You have decided that in order to make your decision, you should carefully research the benefit packages and options that each profession has offered you. Carefully review Student Resource 13.4, Table: Benefit Packages. Take notes on some of your thoughts, comparing and contrasting the differences of each package. Next, turn to a partner and discuss your observations. After you have examined and discussed particular aspects of each benefit package, choose one of the positions to accept.

Now that you have made your decision, write a summary explaining the reasoning behind your decision.

Make sure your assignment meets or exceeds the following assessment criteria:

Your summary clearly describes the chosen job and company.
It shows an accurate understanding of benefit packages and options, and how company values are expressed in the compensation packages offered to employees.
It correctly describes at least three specific benefit options.
It accurately applies the concepts covered in this lesson.
The summary is neat and legible, and uses proper spelling, grammar, and punctuation.

Example

Based on my research of your company profile and the benefit options that you offer, I am pleased to announce that I would love to begin working as an economist with your company. Given that your bank has been in business for more than22 years, I love the stability that your company can offer.

As an individual with a desire to start a family, the fact that you offered a wonderful health insurance plan with no copays and included dental and vision insurance is really important to me. I also appreciated your disability and life insurance options as well as your quality of life benefits. In my opinion, the child-care discounts and the special gym rates all can be added to the competitive salary that you offered, as these are day-to-day expenses that my family expects to have.

Furthermore, your stock option plans and annual bonuses all encourage employees to stay with your bank. This fact contributes to having slow employee transient rates, and I am someone who loves to work in an environment where personnel rarely fluctuate.

All of your benefit packages and employee incentives truly say something about how your bank values and cares for your employees. I am proud to be included in the Bank of Croesus family!