Negotiating Your Employment Agreement


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Introduction
One of the most critical steps in the Employment Process is securing an employment agreement that provides you with a clear understanding of how you will be compensated, benefit entitlements and other aspects regarding the job (to be reviewed in the next published segment). When discussing these points with your potential employer here are several suggestions and issues to consider before accepting a position:
 
Compensation:
There are two aspects to negotiating your compensation: -What are you presently being paid?, -What the market will pay for the job? What you are presently being paid should consider current base salary, annualized cash bonus, stock options or grants and their exercise date, profit sharing programs and level of participation, and the timing/expectation of your next increase. What the market will pay for the job can be determined by asking your potential employer what they expect to pay for the job and, you could research via the internet or employment agencies what a job with such credentials would be paid. The components of compensation include:
Base salary and the timing of the next increase -- get historical perspective on what increases one might expect
Bonus expectations could be valued as a percentage of base salary -- get the timing in which such bonuses are paid
Stock options/grants and the eligibility for participation in the program -- general information about the stock grants, vesting rights, number of shares and price of exercising the options
Profit sharing programs and the level of participation (normally a % of base salary predicated on the results of the business)
Frequency with which salary and bonuses are reviewed and paid
Is there a stock purchase plan, and employee stock ownership plan or related program in which you can participate in the growth and prosperity of the corporation

Benefits:
You should quantify your benefit entitlements by understanding the value of the benefit programs you have and ensure that you get similar or relatively the same benefits.
Benefit programs to consider and to study when considering a job offer include the following:
 
Medical Coverage and Dental Coverage:
 
Do you have a flexible plan where you have choices on the type of medical program you can select
Are there only managed care or HMO programs
What are the deductibles and co-payments
Do you make a contribution for coverage
Are there pre-existing exclusions, thereby delaying the receipt of medical coverage on the day you start the new job causing you to perhaps need to pickup COBRA coverage
Are prescriptions drugs separate, or covered at all
Dental programs are assessed based on their reimbursement levels or co-payments, deductibles, calendar year and lifetime coverage limits and orthodontia limits, and your level of contribution for such coverage

Life Insurance:
Protection of your family is a function of benefits for your surviving family. Issues to consider here when valuing life insurance programs should consider your present plan with the following provision of the new employer’s plan:
Is it multiples of your salary
Will you need to make a contribution
Is there a separate program in the event of accidental death and dismemberment
Is there dependent coverage for your spouse and children
Is there a separate plan for business travel and accident
Are there any programs that will provide your family with survivor income benefits, i.e., income continuation normally a % of base salary for the surviving spouse and a less of a % for the dependent children

Pension Program and 401k Programs:
When you leave a firm you give up certain vesting privileges which can only be replaced with a more generous pension program or 401k program, so consider the following:
If there is a profit sharing plan, is there a program in addition to the profit sharing plan
Is it a cash value formula, meaning you can take the money with you if you leave the organization following vesting
What is the formula and when are you vested
How old should you be and with how many years of service before you are eligible to vest, retire early, or have normal retirement

Short term and Long term Disability Benefits:
Coverage during a disability are critical to consider when accepting a position, it is protection for you and your family while recuperating from an illness or surgery. Normally short term disability benefits are for up to six months and start with a statutory provision (state provided), companies however normally provide you with an option to purchase additional coverage usually an amount stated as a % of salary with a formula driven on tenure.
The same is provided for Long Term Disability (LTD) coverage. However, the key to LTD is coverage can be purchased for disabilities that exceed six months and the payment can be tax free provided you paid fully for the coverage.
 
Other Benefits:
Consider the impact of taking on a new position and the value of vacation entitlements. You can negotiate time off with pay (dependent on your level and position), tuition reimbursements, and eligibility for receiving payments toward college, or other related business courses, company car or use of company car services, office space and dimensions, club memberships and dues, flexible spending accounts, or tax free contributions made by you to use for certain unreimbursed medical expenses and dependent care accounts. It is of even more value when a company subsidizes the use of dependent care facilities, workout facilities and cafeteria privileges.


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