In the recovering American economy some people are just glad to have any job.

But in certain sectors of the economy — information technology being one of them — unemployment is incredibly low. That leads to many candidates receiving multiple competing offers that must be compared to each other.

Whether you are looking for your first job offer, trying to leave your current job, or need to compare multiple offers, there are some points about compensation you must be aware of before making a decision.

Your Salary is Only Part of Your Compensation



The biggest point that most people get caught up on is the salary.

Salary, obviously, is very important. What you are paid by your employer impacts how much take home pay you have, what tax bracket you fall in, and what your standard of living can be without going into debt.

But the dollar signs you see on the offer letter aren’t the only important factors to consider. There are a large number of other factors that get thrown into the mix before you should accept a job.

How to Calculate Your Total Compensation

Here’s how to calculate the total compensation of your current job, or of multiple job offers you are considering.

Health, dental, and vision insurance premiums

Health insurance is such a critical need for Americans that the government wrote a controversial law that requires you to have it.

Many employers offer their employees access to group health insurance which has lower premiums than if you purchased healthcare insurance on your own.

So how much of your health insurance costs should you add to your total compensation number?

Is it the premium the company pays for you?

Maybe.

But you might have problems getting human resources to divulge that number to you. The other problem with calculating the premium the company paid for you is that you might not be able to get that insurance rate on your own. Consider researching what an individual or family health plan would cost if you purchased it on the healthcare marketplace rather than through your group plan. Add that number to your total compensation.

Vacation, personal, and holiday paid days off

Paid vacation days are not just free money thrown in on top of your salary amount. This can be quite deceiving, but follow the math.

If you make $50,000 per year with two weeks of paid vacation, you’re getting 2 weeks of $961.54 in pay without having to work for it. That means your real salary is actually less than $50,000 because you’re not working the full 2,080 hours in a 52 week year. You are working 2,000 hours and getting 80 hours for free. This means your salary is really $48,076.92 and you’re getting $1,923.08 in paid vacation on top of that.

This sounds backwards, but having your true salary number dip down a bit is fine. You probably aren’t going to complain for having two weeks paid off and your total compensation is really $50,000 by adding the vacation days back in.

This becomes important if you are considering a role that doesn’t include vacation or is paid by the hour (like a contract role). You should be asking for more than $50,000 in that situation because without paid time off, those two weeks you take off are on your dime. You won’t get a paycheck, so the other checks need to be slightly larger to compensate.

The easiest way to calculate what the difference needs to be is to look at the hourly rate.

For a $50k job over 2,080 hours (you’re getting 2 weeks paid vacation included in your total compensation), the hourly rate is $24.04 per hour. For a job with no paid time off — meaning if you work 2,000 hours and don’t get the 80 hours free — the hourly rate jumps to $25 per hour. Over the first 2,000 hours of the year the $25/hour per job earns more compensation: $50,000 vs. $48,076.92. But then the last 80 hours of the year the $25/hour job earns $0 and the paid vacation provides $1,923.08 in benefit for a total compensation of $50,000.

Personal days and holiday leave should be factored in just like vacation days. An offer without them is less valuable than an offer with them. You probably knew that, but be sure to calculate how much you would make from your company by not working. That number needs to be added to your total compensation calculation.

Retirement account matching

Companies with significant matching to your retirement contributions end up forking out a ton of cash to their employees as a benefit.

Calculate how much your employer’s match is worth to you: do they match 100% of everything you contribute? Or are they giving you 100% up to 4%?

If you contribute $10,000 per year and get a 100% match, you just got paid $10,000 in benefits. A 50% match is $5,000 in benefit to add to your total compensation.

Be sure to do the math on what you actually contribute rather than what you could contribute.

Company discounts

One big perk that many employees miss out on are corporate discounts.

Large organizations with many employees are able to leverage the number of people to earn a discount with retailers and service companies. You might be able to 15% off your cell phone bill each month or $10 off your gym membership.

These perks seem minor on the surface, but after working at that same employer for 5 years they really start to add up.

If you are considering switching companies, be sure to calculate what you are saving with all of the discounts available to you. If you can’t get the same — or better — at the new employer, you would be losing out if all other factors were the same.

Any paid perks

Does your company provide you a new cell phone every two years? Do you get catered lunch every Friday? These small costs add up over time to be a real benefit to you. Not having to spend $9 on lunch for 52 weeks is $468.

Final Thoughts

Before you make any decision on accepting a new job, factor up what your current total compensation is. Large or small, all of these items add up to some serious cash that goes above and beyond what your pay stub says every month.

Don’t make a critical money mistake by forgetting a big benefit your company provides you.

What else have you received as part of your total compensation?