How To Properly Calculate Benefits Into A Job Offer

Human resources executives call it “total compensation.” If you’ve never heard the term before, it refers to the overall value that comes with a job. It includes benefits, perks, vacation time, and anything else that goes over-and-above your regular wages. It could even include something as small as reimbursement for a gym membership. Most organizations can, and do, put a dollar value on the total compensation they provide to staff. You should too.

Most financial experts will tell you that total compensation matters a lot. Once you start to dig into things, you’ll notice that those two $50,000 a year job offers are much more different than you initially thought. According to the U.S. Bureau of Labor Statistics, benefits account for up to 37.7% of an employee’s total compensation. For example, paid health care benefits can alleviate a lot of financial stress. Likewise, pension contributions can add-up over time and pay off in the long run. Here is how you should calculate benefits into any job offer you receive.

Base Pay

Evaluating your base pay is not as easy as looking at your annual salary. When comparing job offers, you should convert your annual salary to an hourly rate and compare those figures instead. Be sure to add any hiring bonuses you are offered (or likely to receive) into your salary for the year. If that weren’t enough, most experts say that you should consider whether an employer will pay taxes on your behalf for things such as social security and Medicare.

Having those taxes paid by an employer can save you big bucks. Also keep in mind that you should be able to negotiate a higher starting salary by 10% to 15% above what an employer initially offers. Do the necessary math to determine how good your base pay really will be at a new job. If your job includes sales commissions, remember that they might not always be consistent throughout the year.

Paid Time Off

There’s a whole lot to consider when it comes to paid time off at your job. Vacation is just one type of paid time off provided by employers. What about time off for statutory holidays? Paid sick leave? Or bereavement leave in the event that someone in your family passes? For example three weeks of paid time off a year won’t mean much if you have to use it to cover sick days or time off with your family over holidays.

Most organizations start new employees off with a set number of vacation days each year (two or three weeks is most common). You’ll typically earn more days by staying with the company. You might get an extra weeks worth of vacation at the three or five-year mark. And maybe another one after ten years of service. Be sure to know all the details of paid time off for any job offer you receive.

Health Insurance

Not all health insurance is created equal. Some organizations can be vague when mentioning health coverage in a job interview. It might be because the plans they offer don’t provide great coverage. Or that the majority of the cost is paid by you, the employee. There are certain things you’ll want to inquire about when it comes to the health insurance offered. Some of the most obvious inquiries are does it include hospital stays, prescription drugs, dental care, and so on. You should also ask about your monthly premiums, deductibles, and co-payments. What percentage of the health insurance does the employer pay? What percentage will you end up paying out of your own pocket?

Keep in mind that a high monthly premium could take a big chunk out of your take home pay, even if the plan is better. It’s also worth asking about an employer provided healthcare spending account. How much is it worth and what sorts of medical costs can it be used to cover? Remember, a good health insurance plan that doesn’t cost you a ton of monthly premiums can be worth its weight in gold. However, a bad plan can be a financial albatross.

Life and Disability Insurance

Another common type of benefit is life insurance and disability insurance. It’s often included as part of the healthcare benefits. In exchange for monthly premiums (either paid by the company or yourself), you will receive some coverage in the event you suffer a serious disability or death. You will name a beneficiary to receive this benefit, usually your spouse, children, or another person you trust.

Life insurance is an excellent piece of mind if you don’t otherwise have any coverage. Similarly, disability insurance will pays a portion of your income if you can’t work for an extended period because of an illness, injury, or accident. There are two types of disability insurance: short-term and long-term. They depend on the severity and length of a disability. Keep in mind that this type of benefit usually also comes with coverage for critical illnesses.

Employer life insurance policies often come in a set amount. That’s unlike a third-party provider, where you can insure yourself for whatever amount you want, as long you continue to pay the premiums. An employer provided policy may be for a specific amount, say $25,000. It’s also commonly tied to your annual salary, providing anywhere from one-to-three years worth of wages as coverage. For example, if you earn $100,000 a year, then the death benefit of you policy might be two years of salary — so, $200,000.

You might be able to decline these coverage if you have your own private life or disability insurance. However, if the company is paying most (or all) of the premiums, it never hurts to have a bit more coverage. On the other hand, if you have no existing life insurance at all, this can be a valuable perk of a new job offer. Be sure to know the details before you accept.

Retirement Savings

There are basically two types of pensions available in the workplace. A Defined Benefit plan that will pay you a guaranteed amount of money every month in retirement. It’s typically indexed to the annual inflation rate. A Defined Benefit plan is more akin to traditional pension, in that it pays you a predictable income in old age.

The second type of pension, and the one that is far more common in today’s workforce, is known as a Defined Contribution plan. This is where an employer contributes to a 401(k) plan (or RSP, for Canadian readers) on your behalf while you are working. If you leave the company, the contributions stop. However, you will still be able to manage the money yourself. If you move to a different company, you can continue to invest the sum. If you retire, you can use the money to pay your expenses.

It’s Also Your Money

Typically, companies offer a Defined Contribution plan as a matching benefit. That means you will be required to save some of your own money in order for the company to pitch in too. For example, some companies will match 100% of your contributions up to a certain percentage of your wages. That’s free money you should take advantage of. Although it won’t help you pay the rent every month, it’s worth thousands of dollars every year.

When you receive a job offer, ask if the employer includes any sort of retirement savings plan. While a Defined Benefit plan is generally considered more valuable, they are fairly rare these days. For a Defined Contribution plan, make sure you know how much the company is offering, and under what circumstances. Do you have to contribute 5% of your own money to receive the maximum benefit? Or is it 10%? Will the payments start immediately? Or do you have to wait for a six-month probation period to pass first? Use these answers to help evaluate any job offer.

Technology

The world runs on technology and it ain’t cheap. Many employers now provide all the technology you need to successfully do your jobs. Whether it’s a laptop, iPad, smartphone, software, or access to IT teams, some companies go above and beyond. At certain high level positions, you might even get a company car to drive around. But not all companies are the same.

Many employees in corporate America use a computer they paid for themselves. You are often responsible for paying your own monthly cell phone bill, even if you use it to answer work emails. Additionally, some employers will expect you to pay upfront for travel costs, and then reimburse you weeks later via an expense report.

These types of upfront costs can be expensive. Before taking a job, you should inquire about what the expectations are concerning technology and who pays for it. It would also be wise to know how much travel, if any, would be expected, and how it’s paid for. Sadly, many salaried staff are still treated like freelance consultants by the organizations they work for.

Other Benefits

Many organizations are getting creative with the benefits they offer. From regular catered lunches or running onsite daycare center, to paying for gym memberships or giving people Fridays off during the summer months, there is no shortage of the ways in which employers can enrich the experience of their employees.

These type of benefits can sometimes be difficult to quantify monetarily. How valuable they are to you will depend on your lifestyle and what’s important to you. An onsite daycare might not mean much to a single person, but it could save parents with a toddler more than $1,000 a month in childcare costs. Similarly, a gym membership may be really appreciated if you are trying to lose weight or enjoy working out at lunch hour. Of course, you can look at the specific cost savings of these types of benefits. However, the true value is often determined by how they improve your own personal situation.

The Last Word

Employees are starting to realize that they have more leverage than they previously thought. It’s commonly believed (and probably true) that it’s better to change jobs every few years in order to maximize your earning power. That’s the opposite of the previous generations, where staying with a single company for 40 years and retiring was a sign of loyalty and work ethic.

Employers are catching on, though. In an effort to retain a skilled workforce, more benefit are being offered than ever before. Whether it’s healthcare, life insurance, retirement savings, or just a free iPhone, most companies will try to sweeten the pot a little bit in order to stay competitive while hiring. The next time you’re comparing job offers, make sure you look past the black and white of the dollar figures. There may be some valuable benefits included that add up to a whole lot more.

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Devon Taylor

Devon is a Canadian-based writer and a father of three young children. He's simultaneously trying to build college funds and plan for an eventual retirement. He's been in online publishing since 2013 and has a degree from the University of Guelph.

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