When you negotiated a job offer for your first gig, it probably went something like this:
Employer: “We can offer you $7.25 an hour plus a free meal every shift. Also, you’ll only work late nights and early mornings.”
As your career has progressed, hopefully you’ve gotten better offers and more comprehensive benefits packages. Eventually, like most people, you’ve probably come across something on a job offer letter and thought “I have no idea what that is.”
Financial incentives can be great, but only if you understand what they are and how to take advantage of them. There’s no point in having great stock options or a retirement plan if you don’t actually know how to make them work for you. To actually get the incentive, you need to do your research.
Read below for a list of the most common financial incentives and what they mean for you as an employee.
The best way to take advantage of a company’s 401k is to contribute as much as you need to get the maximum employer match. For example, if your company matches 100% of what you put in up to 10%, then start contributing 10% of your salary. If you’re putting in anything less than 10%, you’re leaving free money on the table.
Make sure to look at the vesting schedule to see how long you have to work there in order to get all of the employer contributions. It’s common for people to leave before they’re fully vested, not realizing they’re giving up thousands of dollars in the meantime.
An ESPP or Employee Stock Purchase Plan is when an employee can purchase company stock at a discount. This is a financial incentive to get employees more personally and financially invested in the company.
The best way to use an ESPP is to invest in it sparingly and not make it the cornerstone of your portfolio. If 50% of your holdings are in your company and your company tanks, you could be out of a job and lose thousands in your retirement account. Treat the ESPP like candy. It’s ok to have a little, but don’t make it the entire meal.
Every company has their own bonus schedule, some based on your earnings and others based on how much the company produces as a whole. When you start a new job, ask your supervisor what it takes to earn the bonus. The sooner you know what your metrics are, the sooner you can start working toward them.
Never count on getting your bonus, even if you’re consistently hitting your numbers. The economy could have a downturn or your employer might not hit their internal revenue figures. If you spend your bonus before you get it, you could end up in hot water if it doesn’t come through.
Remember that you’ll owe taxes on your bonus, and usually it’s taxed at a higher rate than the rest of your salary. Factor this into your budget so you’re not surprised when the pay stub arrives. In general, it’s good practice to treat a bonus as exactly that – icing on the cake, but nothing to base important financial decisions around.
A restricted stock unit (RSU) is a stock given to an employee on a vesting schedule similar to a 401k. When the employee is fully vested, they receive the stock free and clear, minus an amount withheld for tax purposes.
Unlike an ESPP, the RSU does not require the employee to spend any of their own money to receive the stock. Once they’re vested, they can sell the stock at any time.
As an employee, you have inherent value that your employer has chosen to invest in. Like most assets, that value can be increased if the right steps are taken. In this case, that means furthering your education or training.
Companies are often willing to reimburse their employees for tuition, as long as the education or training can directly benefit them in the future – and as long as they’re confident you’ll stick around long enough for them to see that benefit.
Ask your supervisor or HR department about the possibility of tuition reimbursement, even if the company doesn’t typically offer this as a benefit. They may be willing to change their tune if you can convince them it’s a smart investment. They typically won’t pay for your education directly, but rather reimburse you for the cost of tuition after you’ve completed the course or courses.
Zina Kumok is a freelance writer specializing in personal finance. A former reporter, she has covered murder trials, the Final Four and everything in between. She has been featured in Lifehacker, DailyWorth and Time. Read about how she paid off $28,000 worth of student loans in three years at Debt Free After Three.