Thursday, August 28, 2008

Health Care

As a bonus to overcome World War Two wage and price controls companies began offering “fringe” benefits including health insurance. We came to expect that as a part of our compensation package. As health care costs increased, companies began increasing the employee payment and raising the co-pays. Now many companies are cutting health care coverage or eliminating it altogether.

Many (most?) employees would buy their own policies BUT when the companies stop offering the coverage, they don’t add the money they used to spend for non-cash compensation to your salary at the end of the week.

For those of you who are not sure what I mean, your have a compensation package which includes your salary, the value of your health insurance, paid vacation, sick leave and paid personal time (like for doctor’s appointments).

The value of the things your company pays for that you don’t have to pay for directly is call non-monetary compensation. But you must calculate it as part of your hour wage when comparing job offers. Think about one company offering a company car for business travel and another offering mileage. One package may be slightly better or worse than the other.

If your company stops paying for something like health care, you just got a pay cut since you’ll now have to take that amount off your weekly check to pay for the same coverage. Your take home pay went down and that is the real definition of a pay cut.

When a company claims that they need to "cut costs" and the cost is part of your compensation, what they are really saying is "we want you to take the loss so our profit won't". My question is always "why should I pay to keep your profit level above some arbitrary number?"

In most cases of cost cutting the issue is not keeping the company open it's 7% profit versus 9% and the company want's you to take the loss to keep that number higher.

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