When marketing analyst Kirstin Stone received a job offer in 2018, she initially turned it down, even though it included a 20% pay raise.
Two months later, she reconsidered after comparing the total compensation package to her current job.
“That 20% wasn’t enough to pull me over the first time,” Stone says. “A lot was decided in large part due to benefits.”
With the unemployment rate sinking below 4% for more than a year, companies are having to do more to woo employees. That means benefits are becoming as valuable as a paycheck, according to Alison Norris, an advice strategist for SoFi.
Trying to figure out what your compensation package is worth compared to another job offer? We’re here to help you add it all up.
7 Factors to Consider When Evaluating a Compensation Package
When you get a job offer, your first instinct is probably to look at that salary number. But benefits account for 37.7% of an employee’s total compensation, according to the Bureau of Labor Statistics.
“Compensation encompasses so much more than just salary,” Norris said. “Choosing a position [because of] your overall compensation will often be far more financially advantageous than focusing on the one that just has the higher base salary.”
But how do you compare the number on a paycheck to benefits like paid dental insurance? Here are seven areas to consider when evaluating job offers.
1. What’s Your Base Pay?
If you’re looking at compensation packages, be sure you’re looking at comparable dollar amounts, Norris advised.
“If you’re having trouble and really want to compare apples to apples, looking at your hourly rate — even if you’re salaried — is often easier,” said Norris, who added that hiring bonuses should be included when calculating the base pay.
Choosing a position [because of] your overall compensation will often be far more financially advantageous than focusing on the one that just has the higher base salary.
And if you’re comparing a freelance position to a staff one, don’t forget to factor in employer contributions and taxes you’ll owe as an independent contractor, Norris warns.
“If one position is a W2 position and the other is an independent contractor, you should add in the taxes your employer would pay on your behalf, which can be huge,” Norris says. “Employers pay 7.65% of your income in social security and medicare taxes.”
2. Factor in Paid Time Off
One way to assign a dollar value to paid time off is to incorporate it into your hourly rate.
Multiply the total number of hours in your work year by your pay rate, then divide that number by total work hours you’ll actually work by subtracting the paid time off.
For instance, the number of workday hours per year for a 40-hour workweek is approximately 2,080 hours (40 x 52).
If Job A offers $20/hour and a week (40 hours) of paid time off, calculate $20 x 2,080 = 41,600 / (2,080 – 40 = 2,040) = $20.39/hour.
If Job B offers $19/hour and three weeks (120 hours) of paid time off, calculate $19 x 2,080 = 39,520 / (2,080 – 120 = 1,960) = $20.16/hour.
Don’t forget to include paid holidays, volunteer days and sick leave — three weeks of vacation isn’t nearly as generous if you have use up days for Christmas or the flu.
3. Categorize Taxable Benefits
After determining your base pay, it’s time to start categorizing benefits according to whether they’re taxable.
Pre-tax benefits allow you to enjoy the perk counting it toward your compensation.
“One dollar worth of pre-tax benefits — ones that you receive without having to pay income taxes — nets far better than $1 of additional salary raise or a taxable benefit,” Norris said.
Some examples of pre-tax benefits include:
Norris pointed out that one trendy new benefit, student loan repayment, may not be as valuable as it seems since employees are still responsible for paying the taxes.
4. Evaluate Health Insurance Options
When Stone received a job offer, among the initial benefits that caught her attention was her eligibility for health insurance after 30 days of employment. She decided to dig a little further to determine its actual worth.
“I contacted the HR department and I said, ‘I see that I’ll be eligible for insurance — can you send me the details on what that actually is and what the cost is to me out of each paycheck?’” Stone said. She determined that the cost of her insurance premium per paycheck was lower than her current employer, which meant more take-home pay for her.
Norris agreed that you should ask the recruiting or human resources department for details that go beyond a company’s sometimes vague offer of health insurance.
“Normally we find that those policy documents are only provided at the request of the job seeker,” Norris said.
When comparing two offers, factor in your monthly premium, plus deductibles and co-payments for a clear idea of how much the health insurance will save you — or cost you.
“If they have a high-deductible health insurance, do they also have a health savings account that they contribute into?” Norris suggested asking.
5. How to Place a Value on Professional Development
A benefit that people often overlook, largely because it has no clear-cut monetary value, is a company’s commitment to professional development.
“Sometimes it can be seen as a luxury item, so know how committed the organization is to training and development or tuition reimbursement,” said Anna Bray, executive career coach at Jody Michael Associates. “Is there a training department — that can be an indicator. Or is it like a two-person HR department for 1,000 employees?”
If a company has a learning stipend or tuition reimbursement program, ask for a specific amount to include in your appraisal of the compensation package.
6. Determining the Value of Other Benefits
Companies are getting more creative about the benefits they tout to prospective employees, from onsite child care to cooking classes to Amazon’s indoor rainforest. (Get it? Amazon rainforest. Yeah.)
After you have assigned a monetary value to the benefits package, it’s time to evaluate how much each is worth to you.
“You shouldn’t just take [the company’s] word at face value,” Norris said. “You should determine how it will actually change your life personally and which benefits are helpful for you.”
7. Subtract Non-reimbursed Expenses
Although the excitement of a job offer may leave you seeing only the positives, you should also calculate the expenses associated with a job.
“What people often forget are the costs of the position,” said Norris, noting that if you need to pay for parking or “buy a whole wardrobe,” you should subtract that amount from your compensation package.
Although employers may be reluctant to divulge these costs, it’s important to ask about them.
“You really cannot be too over-informed,” Norris said. “We find that employees are very excited when they hear an employer wants them and a little bit reluctant to tip the scale.
“But you’re showing interest by asking questions, and you should really dive deep and then project how that will impact you over time.”
Be Ready to Negotiate a Compensation Package
OK, you’ve stacked up a new offer to your current job or compared competing offers. Now what? Don’t skip this crucial step: negotiate.
Prospective employers should not be surprised or offended by it. But what components of a compensation package are most negotiable?
“Salary, paid time off, training and development — those seem pretty wide and varied,” Bray said.
And once you’ve compared all of the tangible benefits, Bray stressed that there are aspects of the job that have no place on your ledger.
“Assuming the jobs are equal and it will provide career advancement, think about the company culture and the mission,” she said.
That’s what sealed the deal for Stone.
“The change in the style of management was a big factor,” said Stone, who noted she reached out to employees to ask about the company culture. “Knowing that I was going to be able to better balance work and life — that was a big, big deal for me.”
Tiffany Wendeln Connors is a staff writer/editor at Codetic. Read her bio and other work here, then catch her on Twitter @TiffanyWendeln.