Are You Leaving Money on the Table? A Checklist for Evaluating Job Benefits
A higher salary does not always mean you're getting a better job offer. Use this checklist to calculate the value of your noncash compensation and compare the full package.
Most people ask one big question when evaluating a job offer: What's the salary?
While that single number tends to get all the attention, it only tells part of the story. According to the Bureau of Labor Statistics, benefits account for nearly 30% of private-sector employers' total compensation costs on average.
Yet, as a financial professional, I regularly see clients overlook that value, either by underusing their current benefits or comparing job offers based on salary alone.
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An extra $10,000 in salary would get your attention. The same amount in benefits should, too.
Here's how to evaluate your full compensation package, whether you're reviewing a new offer or making sure you're getting the most from your current benefits.
1. Calculate the value of your health benefits
Health insurance can be one of the most valuable parts of a compensation package: After all, according to the KFF Employer Health Benefits Survey, insuring a family in the U.S. now costs nearly $27,000 a year.
But the complexities inherent in the U.S. healthcare system can make putting a number on it challenging. To evaluate your benefits, compare the health plans available to you based on the employer contribution, premium, deductible, out-of-pocket maximum and provider network.
A plan that saves you $100 a month in premiums, for example, could still cost more overall if its deductible is $2,000 higher and you expect to use enough care to reach it.
Also review preventive care options, fitness incentives and wellness programs that could add value.
2. Capture the full value of your 401(k)
While the employer match for a 401(k) is maybe the most obvious form of noncash compensation, many fail to maximize its value.
In my practice, annual employer retirement contributions have ranged from about $3,000 to $30,000 — a difference that can become enormous over a career.
Contribute enough to receive the full match, consider automatic annual increases and check for nonelective or profit-sharing contributions.
3. Understand what equity compensation is really worth
Equity compensation, such as stock options and company shares, can create a significant wealth-building opportunity. That doesn't mean you should take the number listed in the offer letter at face value.
Review when the award vests, when taxes may be due and whether you could lose unvested shares or face a deadline to exercise options if you leave the company.
4. Put a dollar value on paid time off
Most people know to ask how many vacation days they will receive. Far fewer calculate what those days are worth.
For an employee earning $100,000, 15 days of paid time off represents almost $6,000 worth of paid time (based on roughly 260 working days per year).
Consider paid holidays, sick leave, parental leave and caregiving leave, as well as what happens to unused time:
- Does it carry over into the next year?
- Is there a cap on how much you can accumulate?
- Will accrued time be paid out if you leave?
5. Review employer-paid life and disability income insurance
Life and disability income insurance are easy to overlook because you might not use them for years, if ever.
For disability income insurance, review the percentage of income replaced, the waiting period before benefits begin and how long payments can continue.
For life insurance, determine whether the employer-provided benefit would be enough for your family's needs or whether you'll need additional coverage.
6. Remember commuter and other tax-advantaged benefits
Some benefits look small but still add up.
Commuter benefits, for example, may allow employees to pay eligible transit or parking expenses with pretax dollars. That is particularly valuable for workers in bustling cities like New York.
Other benefits may include flexible spending accounts (FSAs), health savings accounts (HSAs), tuition reimbursement, student loan assistance and professional development funds.
Crucially, the value of these benefits depends in large part on whether you'll actually use them. A tuition benefit may be worth thousands to one employee and very little to another.
Look at the complete picture
At the end of the day, this is a simple math exercise.
Add up the salary, health benefits, employer retirement contributions, equity compensation, paid leave, insurance and other benefits each position offers. Then consider what those benefits could be worth across the five or more years you might remain with the employer.
A bigger salary is appealing, but there is far more to building a financially secure life than what lands in your checking account every two weeks. A lower-paying job could ultimately provide greater total compensation — if you know how to value its benefits correctly.
While this discussion summarizes, for your convenience, certain information about employee benefit plans, it is not an official explanation or discussion of these programs, and any information provided directly by your employer will prevail.
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