The Benefits of Negotiating Your Benefits

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Not Using Company Medical Benefits? Negotiate Other Perks Instead

When it comes to the topic of negotiation, most people's main focus is on salary. As David Lee Roth reportedly once said, "Money can't buy you happiness, but it can buy you a yacht big enough to pull up right alongside it."

However, an increasingly important factor in an overall compensation package is health benefits. According to a 2007 study by the Kaiser Family Foundation, since 2001 premiums for family coverage have increased 78%, while wages have risen 19% and inflation has risen 17%. In 2010 the OECD ranked the US #1 in total health expenditure per capita: $8,233. And while I’ll leave the detailed health care reform discussions to the political blogs, it’s going to be a huge issue in 2013.

Considering the enormous cost that companies shell out for health benefits for employees, wouldn’t it make sense to factor that in for a job seeker that does NOT need to take benefits? Let’s look at this purely from a negotiation standpoint.

Higher Salary in Lieu of Benefits?

"Susan" from Michigan recently wrote me with that question. She was offered a base salary of $45,000, but because she would be listed on her husband’s health plan, she would not need those benefits for this new position. She had done her research and calculated that the cost savings for the employer would be approximately $5,000, so couldn’t she argue for a $50,000 salary?

While I’m sure there are some smaller companies out there that might consider this arrangement, I didn’t think it was a common practice and I had not come across many scenarios where this was the case.

The HR Perspective

I spoke with a friend of mine that has worked in human resources for many years, and she confirmed my suspicions. She told me, "In my experience I have had candidates ask me that and my immediate answer is no, it makes no difference. I do know some firms that might give employees a little extra money if they waive benefits, usually in the form of a stipend, but it's never the full value."

She continued, "One of the reasons this isn’t done is because of the disparity in costs across plans. Some hires will take employee-only coverage which is far less costly in premiums vs. another employee who may cover the entire family vs. another employee that declines coverage altogether. Because companies don't ask or hire people based on what coverage they need, it’s a variable cost that changes often."

The other reason this is not a common practice is the complication around the additional salary. For the sake of argument, let’s say the company Susan was speaking with does agree to the $50,000 salary with no benefits. She works there for a year and gets a 10% raise to $55,000.  But 4 months later, her spouse gets laid off and loses his benefits, prompting Susan to need to sign up for a plan.

Would the company then need to reduce her salary by $5,000? Would they pro-rate the benefits for the year by 4/12ths? If Susan’s 10% raise was based on her previous salary, is this affected since her salary is now reduced? The numbers get tricky.

This is exactly how I had responded to Susan. It would be easy for her to take a $5,000 "credit" for forsaking benefits now, but if she needed them later, would she be willing to give back that money? Not likely.

What to Do Instead

Knowing that benefits are rarely something that a company has a lot of flexibility with, should a candidate avoid bringing up the subject completely? Not so fast.

First, it never hurts to ask. Companies are always looking to cut costs, and you may come across a firm that is willing to be flexible in this area. One thing you want to be sure of is when coverage begins. Is it on the date of hire? The first of the month following your start date? Or is there an open enrollment time period some time in the future? If you need to cover your own insurance for a period of time, that’s an expense you need to account for.

Next, you can use this information for negotiating leverage. The company doesn’t know that you know they don’t usually budge on benefits, right? In any negotiation, there are a number of things up for discussion:

  • Base salary
  • Bonuses and commission
  • Job Title
  • Vacation Time
  • Health Benefits
  • Training and travel

The key thing to note is that different people will put a different priority on each benefit.

One person might really value a higher title, but be fine with the standard amount of vacation. Another might not care as much about bonuses, but loves international travel and truly values more vacation time.

You need to decide what’s important to you, but during a negotiation, you don’t need to reveal to the company what’s most important to you. Every negotiation has give and take.

Let’s say that you are the work/life balance person, and really want to increase their offer from 2 weeks of vacation to 3. Start by putting forth the same case that Susan made. Show research that benefits are valued at $5,000, but you’ll be saving the company that money by being on a spouse’s plan.

If and when the company responds that they don’t have flexibility in increasing the salary, you can counter and negotiate for the increased vacation time. Because this isn’t a "hard cost" that companies need to spend money on, as a concession they might be more likely to give you the extra vacation time you desire.

In the end, while you might not get the additional money you need to buy that yacht, at least you’ll have the vacation time to rent one.

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