Calculating Your Actual Pay (SPOILER: It’s Not Your Gross/Net Income)
When considering a job, most people take into account the employee benefit plan, however, most do not put it in a perspective of financial worth. This article is aimed to show the importance of including the employee benefit plan when calculating a complete package worth of a job.
Typical Job Package Breakdown
When accepting a job, most people should be asking questions similar to the following: (assuming they are not in the job description already)
- What is the pay rate?
- Is it salary or hourly?
- Are there any bonus or commission programs?
- What is the employee benefit plan?
While finding out what a job pays is pretty standard, I’ve found a large number of people do not ask about employee benefit plans such as health insurance, life insurance, retirement funds, etc. It’s important to find out all the benefits an employer covers or partially covers so you can figure out the complete package worth.
Typical Offer with Employee Benefit Plan Example
- Job Title – IT Technician
- Pay Rate – 30/hour ($62,400 yearly)
- Pay Type – Salary
- Medical + Dental + Vision (partial)
- PPO or HSA Low Deductible (Medical)
- DPPO Low (Dental)
- Low copay vision plan
- Life Insurance
- Supplemental Insurance Coverages
- Critical Illness
- Hospital Indemnity
- Short Term Disability
- Long Term Disability
- AD&D
- 401(k)
- EAP
- 4 Weeks PTO
- 8 Company Holidays + 2 Floating Holidays
I will start off by saying this is a good benefits package, and not generally common. This is especially true for IT Technicians unless you are working a startup that is trying to be extremely competitive. While you might be able to find a better offer, this is going to be a great start for someone that doesn’t have a lot of experience to warrant pushing for better benefits. Again, most people I’ve seen look only at the pay rate and maybe PTO, and then glance over the rest.
Putting a Dollar Value to the Employee Benefit Plan
Now that we have the employee benefit plan in partial form, we can put an estimated dollar amount to each item. Make sure you understand which benefit is paid from your own paycheck, paid half by the company, or paid in full by the company.
Once we’ve determined what is covered by the company, let’s put a dollar amount to the things that are covered. This is only an example based off of one of my previous jobs.
- Health Care – $680 a month
- Here they only covered individuals in full, not the family, which is pretty standard.1
- 401(k) matching – $100 a month
- Here the employee is only contributing $100 a month so the employer is matching his contribution with an additional $100.
- Vision/Dental – $16 a month
- This covers one exam a year plus frames or contacts under $80.
- PTO (4 Weeks) – $400 a month
- This is based on the total hours of PTO (160). Multiply the PTO hours by pay rate (30 an hour), and then divide across 12 months.
- Holidays + Floating Holidays – $200 a month
- Same calculation as PTO, floating holidays being 2 holidays you get to pick (generally used for birthdays)
- Professional Development – $50 a month
- One free consultation a month for professional development with a financial counselor/life coach. While most don’t use this, it is still being figured in.
- Virtual Personal Assistant – $120 a month
- This was one of the most unique benefits I’ve had. where you have a virtual personal assistant that will research items for you. I’m sure the company had a bulk pricing plan, but an equivalent package I can find online shows it around $120 a month.
Total – $1,566 a month.
Given a gross pay of $62,400, when I calculate the complete package worth, it comes out to $81,192.
What can we do with this information?
While there are a few advantages to having a great employee benefits plan for both the employer and employee, the main plus is that most often these benefits are not part of your taxable income. It also gives you an idea of total worth if you were to apply for jobs that have little to no benefits offered. Lastly, it is something to consider when deciding to become self-employed, although you may make the same gross amount you need to consider which benefits are a necessity (health insurance) and then calculate that into the amount you will have to make while being self-employed.
While this wasn’t the usual long article, this information was given to me by an army recruiter who was trying to convince me that it was actually worth joining the military (It would have been a significant pay decrease until you considered the benefits). While I didn’t join, the advice to look at benefits as part of the total pay has stuck with me a decade later.
So, whether you are job hunting, or re-evaluating your goals, take a moment to consider not just your gross pay, but the complete package worth when finding a new job.
Let me know what you think, or if this article has been helpful/not helpful. As a reminder, I am as unqualified as I can get and am not a financial advisor or life coach. You just might see some success in the things I am saying don’t work. I’m okay with being wrong but am always open and hopeful for friendly discussion or constructive criticism when I am.
Helpful Links (superscript number references, also known as sources)
- What Percent of Health Insurance is Paid by Employers – https://www.peoplekeep.com/blog/what-percent-of-health-insurance-is-paid-by-employers
Christoph is a technical integrations analyst who specializes in security infrastructure and coaching. He has found he thoroughly enjoys experiencing major market losses, falling for get-rich-quick schemes, learning about upcoming market trends, stocks, crypto, or anything related to investing and building income.
