When negotiating a salary or asking for a raise, many of us focus on the dollar amount of the pay. However, before you get too hung up on the amount you receive in monetary compensation, take a step back and think about the sometimes intangible value of your benefits.
“Benefits can be a big deal,” says John Rampton, the CEO of invoicing and time tracking startup Due.com. “You might be surprised at how much your total compensation package is worth, once you start considering all of your benefits.”
How much do you cost your company?
A couple of years ago, CNN Money reported that employees typically cost between 18 and 26 percent more than their base salaries. If you make $40,000 a year, you might actually cost your employer between $47,200 and $50,400 a year. In some companies, the cost might even be higher. When you stop to consider what your employer pays on your behalf, those numbers might not seem so far-fetched. Here are some of the ways you might cost your employer more than you think:
- Overhead costs for your workspace, including desk, phone (maybe even a company-issued smartphone) computer, break rooms and supplies.
- Employer portion of your Social Security tax. If you were paying taxes as a self-employed person, your Social Security tax would be twice as much. (Even the tax deduction for one-half of your self-employment tax can’t completely offset that amount.)
- Subsidized health insurance and life insurance.
- Paid holidays and vacation days.
- Paid personal days and sick days.
- Retirement contributions to your tax-advantaged plan.
- Fringe benefits, such as free or reduced child care, gym memberships, parking and tuition reimbursement.
While you might not receive all of the benefits listed above, there is a good chance that your employer is paying some of these costs, and it goes above and beyond your base salary.
What are benefits worth to you?
“Whenever you enter a salary negotiation, consider the value of the benefits package,” suggests Rampton. “It might be worth it to accept a little less money if you can get a few more paid vacation days or a better health insurance plan.”
One of the most valuable benefits you might receive from your employer is health insurance. As health care costs rise, good health benefits are an increasingly valuable part of your compensation. According to recent data from the Bureau of Labor Statistics, private industry covers about 68 percent of premiums for family medical plans. That means that if you are paying $250 a month for your health insurance, that means that your premium is actually closer to $368 per month. Your benefits save you $118 per month, or about $1,400 each year. If you choose a high deductible plan, and your employer makes matching contributions to your Health Savings Account as part of your benefits, the value to you might be even higher.
I know that I had grossly underestimated the value of benefits prior to experiencing a job with a health plan. After paying health insurance premiums out of my checking account for a decade, I was surprised at how much smoother the family finances were when the money was deducted before the paycheck. Suddenly, I didn’t have to worry about it or account for it in my monthly bills. Now, I have to go back to paying for my own insurance out of my own pocket, and I’m not looking forward to the added cost.
Other benefits, such as paid vacation and sick leave, as well as a matching contribution to your retirement contribution, only add to the value of your compensation package. Some companies offer you the use of a smartphone, even when you aren’t at work, saving you the cost of purchasing a phone and paying the monthly service cost. You might have access to child care and a company gym, or be able to obtain these services at a discounted rate because of your employment.
“Some benefits have value that is even less tangible,” points out Rampton. “Can you put a dollar value on a company that offers flexible hours and the possibility of telecommuting?”
Would you be willing to accept $5,000 less per year if you could arrive and leave earlier or later, depending on your schedule? What if you could choose two or three days to work from home instead of coming in? What if your employer cared more about results than hours spent in the office? As long as you meet your performance goals and project deadlines, perhaps your employer doesn’t count your working hours. That’s a benefit that might be worth far more than a bigger salary, since you might value your time more than money.
“Don’t assume that a bigger salary is a better deal when you’re comparing compensation options,” Rampton says. “Consider the value of your benefits and the flexibility they give you. Your benefits may be more valuable than you realize.”