Pay and health benefits???

Long story short I found out how much my coworker is making. Keep in mind we have the same job duties but we work for different sub-contractor company.

I make $50k and pay $50/month for full health benefits (dental+health+eye). My employer match up to 3% in 401k.

My coworker make $65 with no benefits.

Which one have the better package?

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eMeS

Impossible to say with the information you've given.

MS

passcert23

I am assuming you need qualifications and experiences.

Me: Have more education and more certs.

He: Got more work experiences.

As mention earlier we have the same job duties so we're on par with one another.

eMeS

passcert23 wrote: »

I am assuming you need qualifications and experiences.

Me: Have more education and more certs.

He: Got more work experiences.

As mention earlier we have the same job duties so we're on par with one another.

No, I think it comes to much more than that. Do you use your health benefits, are there any restrictions on using them, what would it cost you to buy them in the open market? Does your colleague purchase health insurance, etc......

MS

passcert23

I am young and rarely get sick. I check my eyes once a year and go to the dentist twice a year. When I get sick I usually just buy my meds off the counter. He get his coverage by being in the military.

The reason I am asking this is b/c I think my company is BSing me. This is my first I.t gig so I am unsure how everything work. They say realistically I am getting paid 60k b/c the company is paying taxes to keep me employed and paying for my benefits.

tpatt100

passcert23 wrote: »

I am assuming you need qualifications and experiences.

Me: Have more education and more certs.

He: Got more work experiences.

As mention earlier we have the same job duties so we're on par with one another.

Many times if you don't take benefits such as vacation, medical etc you can get a higher rate. At my last job not taking medical got me like 20 dollars a month back or something ridiculous but it was a very large company so they were able to get health care at a pretty reduced rate.

Smaller contracting firms can give you more money if you reject benefits because they pay a lot more for medical insurance due to their size (I think) so if you reject medical you save them a ton of money per month.

The guy who gets no benefits for 65 a year will get 1250 a month extra.

Your 401K match caps at 3 percent which comes out to 1500 per year.

I think the deal breaker for me is if you have a family. I know purchasing health insurance on your own you can get rates for a few hundred a month.

but.............

Looking at the coverage this can be pretty expensive if you actually use it.

I am seeing deductibles of 5,000 to 7,500 per year. And on top of that 20 percent coinsurance which means your paying 20 percent of the bill AFTER your deductible.

When my wife was in the hospital for 2 months due to pre term issues and then my son got sick and was in the hospital for two weeks the total came out to over 100K. Which means if I bought my own insurance I would have been out a 5K deductible and still owed over 15K out of pocket if not more.

My wife's insurance covered the whole thing besides the food I ordered a few times when I was visiting.

So yeah unless you get coverage under a spouse I doubt I would turn down benefits.

SubnettingGoddess

Is he on a 1099?

tpatt100

passcert23 wrote: »

I am young and rarely get sick. I check my eyes once a year and go to the dentist twice a year. When I get sick I usually just buy my meds off the counter. He get his coverage by being in the military.

The reason I am asking this is b/c I think my company is BSing me. This is my first I.t gig so I am unsure how everything work. They say realistically I am getting paid 60k b/c the company is paying taxes to keep me employed and paying for my benefits.

At my last job on the HR site where I can see my benefits they break down total value of my benefit package. You would be amazed at how much benefits cost and bigger companies can get a better deal for you.

If your making 50K and they say they are paying 60K that makes sense especially for medical.

apr911

Well if they pulled out the fact they are paying taxes to employ you, than your co-worker is probably on a 1099 contract which basically means he is required to pay the full tax amount and not the partial amount that you pay.

Also, your benefits make a BIG difference, regardless of if you use them or not... I know the company I work for will pay a couple thousand dollars in premiums this year to keep me insured.

My total comp package when you consider all the taxes and benefits my company shells out for is somewhere around 20-30% higher than the total gross I see in my paycheck each week.

Experience makes a big difference as well, especially in IT. As a lot of people on here will tell you, you can have all the education and certifications in the world but they arent worth the paper they are printed on if you dont have relevant experience to back them up.

As you said, your young... Once you get the experience, youll be able to start to earn more but keep in mind jobs will still come that will pay more and less than your peers all the time even if you are more highly qualified. Bottom line is the company is there to make money... Which means if they think they can get away with paying you less, they will.

As a final note, HR typically has a big NO-NO Policy when it comes to discussing salaries for exactly this reason. Dont make a fuss over it or you will find yourself without any salary.

eMeS

apr911 wrote: »

Well if they pulled out the fact they are paying taxes to employ you, than your co-worker is probably on a 1099 contract which basically means he is required to pay the full tax amount and not the partial amount that you pay.

I'm always amazed at the lack of understanding that people have of this.

I don't mean to be a d*ck, but I'm stuck in an airport and my flight's been delayed 4+ hours, and writing on an Internet forum about taxation is exactly what's going to make me feel better!

First, all things held equal, the income tax rate is in exactly the same bracket for both at 25%. The only difference is that the 1099 guy has a chance at significantly lowering his AGI through deductions and adjustments, whereas the direct employee does not have the same options with respect to this. He could easily get his income tax bracket down to 15% or less.

FICA is what is paid by the direct employee at 7.65%, with the employer responsible for an additional 7.65%. SECA is the act that covers the self-employed, who must pay the full 15.3%.

However, the self-employed person is paying this tax on a percentage of net earnings, and therefore has much less tax exposure than the direct employee.

Tax codes in the US basically encourage 3 things: 1) Having babies, 2) Buying real property, and 3) Operating businesses. In the situation given, if the 1099 employee is ending up with a higher tax exposure then he is doing something very very wrong.

Another way to look at this is the direct employee still pays the full 15.3%, they just never get a chance to see it all as part of their gross earnings, and they don't get many chances to reduce the taxable amount.

And, not to get too political, but this is the inherent weakness in the whole Republican argument against rolling back the Bush tax cuts. People who earn $250k plus per year understand very well how to reduce their tax exposure. I even heard one candidate, the one in my avatar, indicate that small business owners have to pay income tax before they pay employees. This couldn't be further from the truth, and it's why people who've never run a business, such as that candidate, have no business talking about them.

apr911 wrote: »

Also, your benefits make a BIG difference, regardless of if you use them or not... I know the company I work for will pay a couple thousand dollars in premiums this year to keep me insured.

No, an unused benefit is worth exactly negative whatever the employee is paying for that benefit. The case could be made that insurance is never truly unused, but that's debatable. If one doesn't use their 401k match benefit, then they are in fact denying themselves a raise.

Not only that, but many employer's benefit packages are quite lame these days.

I have a really good insurance plan that I pay a ton for, but guess what, the full amount that I pay for it comes out of the revenue of the business, which further reduces any potential tax exposure.

I can't see how in this case the 1099 employee doesn't have the better deal, especially considering that his insurance is coming from a different source.

MS

apr911

eMes,

For the purpose of this discussion, both the point I made and the subsequent points you made were valid for this argument.

I was merely pointing out that as a 1099 employee they are required to pay the full tax amount and not the partial amount that passcert23 pays. As you put it:

Another way to look at this is the direct employee still pays the full 15.3%, they just never get a chance to see it all as part of their gross earnings, and they don't get many chances to reduce the taxable amount.

This was the comparison I was trying to make without getting too much into the numbers. I was not trying to offer exact quantification on the difference between taxes paid given that it can vary so much based on just how much the 1099 employee claims as net earnings.

I was trying to simplify the differences between self-employed and normal-employee taxes, maybe I did oversimplify it and could have been more clear. The self-employed pays more out of their paycheck than the normal-employed but at the end of the day, the tax rate is the same. As you aptly put it, the normal-employed just doesnt see that amount coming out of their paycheck.

No, an unused benefit is worth exactly negative whatever the employee is paying for that benefit. The case could be made that insurance is never truly unused, but that's debatable. If one doesn't use their 401k match benefit, then they are in fact denying themselves a raise.

Again, I think there is a misunderstanding here. My point with benefits was that they do cost the company something whether you use them or not.
As you once again aptly pointing out, not maximizing the employee match on the 401k is denying yourself a free raise. Further, the company is likely paying for some (subsidizing) of his insurance and other benefits thus they cost something, thus they pay him less because they dont pay for the insurance.

Meanwhile, the self-employed does need to pay for them and regardless of the tax implications, it is probably more than $50/month Passcert23 pays

erpadmin

While you are young and healthy now, don't ever discount health benefits. You never know when you will be glad you have it!

I had to have thoracic (chest) surgery a couple of years ago to remove a "thymic cyst". No one knows what caused it, but I have to take synthroid and whatnot.

I read my EOB (explanation of benefits) after all my hospital visits and whatnot....seems the hospitals love playing games with the insurance companies.....$300k (that's THREE HUNDRED THOUSAND!!) was what it cost to deal with my health issues. What did I pay out of pocket....about maybe two hundred dollars (yes $200). Not counting the $50 I pay every check for premium and the $15 copays.... (generics are $3, brands are $10 if there are no generics....if there are, then it's $25).

So yeah, your buddy is getting $65 an hour with no benefits....if he's not a W-2 employee he's responsible for his taxes. You definitely have the better deal (it costs more for your employer), and there isn't a "let-me-see-if-I-can-forgo-health-insurance-for-more-money" deal either....you don't want to do that anyway!

apr911

To follow-up on what ERPadmin had to say on this...

I had to have my gallbladder removed at 22. I was healthy up to that point with no indication of any problems and to have gallbladder problems at that age is very rare... Suddenly woke up in the middle of the night with nausea, vomiting and other uncontrolled bodily functions. Went to the hospital where they diagnosed it as gall stones.

The surgery just to have the gallbladder removed was 117K. That doesnt include the week I spent in the hospital, the meds, the MRI, the ERCP surgery, etc.

Bottom line is it adds up quick. I look at how much my company pays for my benefits and while I would love to have that much more in my paycheck each year, I know the value of it even if I dont use it this year or next... All it takes is 1 trip to the hospital for something unexpected and you could find yourself regretting wanting that extra couple thousand/yr in your paycheck and turning down benefits.

Of course, what do I know, there are a whole host of people in this country who willingly forgo insurance for exactly that reason (they want their money now)... I guess that will change with Obama's new plan (not that Im an advocate of it)

eansdad

From my experience with sub-contracting companies they will pay you what they think they can get away with. I've worked on projects where the pay disparity was large ($9/hr vs $22/hr) for the same job title with similar experience. Is it fair that your co-worker is making more...no but it happens. Learn for next time or when a pay raise comes around.

tpatt100

eansdad wrote: »

From my experience with sub-contracting companies they will pay you what they think they can get away with. I've worked on projects where the pay disparity was large ($9/hr vs $22/hr) for the same job title with similar experience. Is it fair that your co-worker is making more...no but it happens. Learn for next time or when a pay raise comes around.

Yeah that is usually how it works. I had a coworker always **** and moaning everyone else got paid more than he did. I didn't know what he was getting paid but by the sound of it he was low balled. He kept complaining and I told him if he wanted more go to corporate and demand a pay increase or your quitting.

He said he could not afford to quit, that was when I told him that he should better prepare next time, if you accepted an offer then you accepted an offer nobody has to pay you more. Your the only one that can take an offer nobody can force you to accept it.

powerfool

I am sorry, but acting like people are crazy to bring up the 1099 issue is just plain ridiculous. Also, your explanation wasn't spot on. There are many other factors in the difference between a W-2 and 1099 employee.

First of all, the standard tax issues. The 1099 does have to pay the other half of the FICA taxes, which drops him down a bit... a few thousand a year at that level, not too drastic.

Beyond that, he isn't getting any retirement contribution/matching from his employer... another few thousand, potential.

He definitely isn't getting insurance from them. And for $50/month, I would imagine the company is paying between 30-50% of the actual premium.

Finally, it is extremely unlikely that the 1099 employee gets any paid sick leave, holidays, or vacation time, whatsoever, which is the biggest difference. Now, I suppose he may get this in his contract, but those sorts of contracts would be few and far between. That would be like you going to Starbucks daily, normally, and you pay them for the days that you don't buy because you are sick or out of town... you wouldn't do that.

In the end, I would say that the W-2 employee at $50k is probably about the same, or slightly better, than the 1099 employee at $65k unless there are other circumstances to improve the 1099 employees situation (like a working spouse that gets medical benefits for both, or has the opportunity to write off a substantial portion of his/her income for tax purposes).

Again, it really is a very difficult situation to comprehend, it isn't black and white. For me, that percentage (30%) above my pay would would be about $15-20k too little to cover the difference in benefits and taxes. I would probably require 45-55% more than my base to make up that difference, and that doesn't include my annual bonus.

eansdad

Correct, with out knowing all of the differences between the 2 contracts people can only guess as to which is better. If all things being equal and he is paid more but minus the health/401k then I would say he is making out better if only because he has is health befits anyway through the military.

Point is though never under value your skills but don't over estimate how bad they need you for the job. It's a tough walk but it's one that needs to be walked by all of us.

Not to be rude but you can always look for another job.