Recently, I had the opportunity to have a conversation with a group
of people who were just hired at a large local employer. I was there more to observe than actually
help with specifics.
Men and women, young and old, and with a variety of backgrounds and
experience, they all had that eager look in their eye. Each had expressed their excitement to be
there starting a new chapter in their professional lives.
Papers were being shuffled, IDs being copied, and forms being
filled out. Until a hand goes up.
What do we put for tax withholding?
The HR person does her best to address the question, offering her
best explanation about exemptions. But
she is clear that she isn’t offering tax advice and then turns nervously
towards me.
I’m not there in a tax capacity, nor do I play a tax person on
TV. Even though I probably could have
offered some tips, I decline as I don’t know their specific tax or financial
situations.
I heard a few in the group offer tips to others. One person even said she used to work in
payroll and was offering ideas. The
others listened closely as she explained having more taken out each check would
lead to a bigger refund later.
After all of the W-4 forms were filled out, there were discussions
about benefits, such as health insurance, retirement plans and disability
insurance.
In each case, there were questions about how they worked. Especially in the case of the disability
insurance, there were lots of questions about how it would pay, how much it
would pay and what would qualify someone.
For these folks, their pay will consist of base pay plus
commissions, with those being the most successful having commissions make up
the majority of their take home pay. But
the disability insurance is calculated on the base pay portion, setting up for
a nasty surprise if someone had to use the benefit.
This particular session stood out for me. These new employees all had prior experience
at “real” jobs, so this wasn’t the first time they had to fill out these forms
and sign up for benefits. In fact, many
had years of experience in other industries with multiple companies.
Yet, this session showed that when it comes to tax withholding and
benefits - which we all count on in some way - these otherwise very capable and
experienced people had little to no knowledge.
Yet these decisions have or will have a major impact on their
financial lives. And an in most
instances, they will find out just how good (or not good) their decisions were
when they need these things the most.
Think about when you were hired at your current employer. How did you make these decisions about taxes
and benefits?
