For some of you, starting a full-time job may be just around the corner. The prospect of a salary is likely very exciting, but there are some things you should understand about your paycheck. A few weeks ago we discussed how the cost of living affects how much you make. A more expensive city (like Manhattan) will have a higher salary simply because it is more expensive to live there. You have to take this into account when deciding whether or not to accept a position. You also have to consider the value of the benefits offered to you by the employer.
Employee benefits, sometimes called perks, can make a job with a slightly lower salary more valuable overall. Examples of benefits may include the following:
- Insurance (including health, dental, vision, disability, and life)
- Retirement plans
- Paid and unpaid leave (including holidays, vacation, and sick days)
- Child care
- Tuition reimbursement
- Relocation assistance (to help with moving costs)
- Wellness programs
- Stock purchase plans
- Latte art classes
The benefits listed above, among others, have monetary value. In addition to your salary, the employer is paying all or part of the cost for benefits. There are benefit calculators like this one from Calc XML available online that can help you determine the total value of your salary and benefits package. Make sure you understand exactly what you’re getting before you accept a position.
When you receive your first paycheck, you may find that you are receiving less than you anticipated. This is likely because of taxes and any required employee contributions to the benefits listed above. Here are the taxes you’re likely to see listed on your paycheck:
- Fed OASDI/EE: This is your contribution to Social Security. Every employee contributes 6.2% of his or her paycheck.
- Fed OASDI/ER: This is your employer’s contribution to Social Security. They match the amount you were required to pay.
- Fed MED/EE: This is your contribution to Medicare. Every employee contributes 1.45% of his or her paycheck.
- Fed MED/ER: This is your employer’s contribution to Medicare. They match the amount you were required to pay.
- Fed Withholding: This is your income tax. Rather than paying the tax once a year, a portion is withheld from your paycheck each month. The amount withheld is determined by what information you filled out on your W-4 (which is completed at the start of employment). When you file your taxes each year, you either receive a refund (if too much was withheld) or you send a check to the IRS (if not enough was withheld).
- State Withholding: This is your income tax paid at the state level. It functions much like the Fed Withholding.
Other taxes may vary by state, so if you see something you don’t understand on your paycheck ask the Human Resource Department at your workplace.
Find books about employee benefits available in Andersen Library by doing a keyword search in Research@UWW.