What Is That Job Really Worth?
August 28, 2013Imagine you are in the market for a new job, and you came across the following two job opportunities in the want ads:
Job 1
Great job with great benefits!
Retirement, health, dental, insurance
Starting salary: $60,000
Job 2
Great job with great benefits!
Retirement, health, dental, insurance
Starting salary: $55,000
Which job do you think most people would be more interested in? Well, if it wasn’t obvious, I wouldn’t have asked the question, but it brings up an important point which is this: when it comes to evaluating the value of a job, most of us go immediately to the salary. In and of itself. there is nothing wrong with considering the wage it pays when evaluating the value of a job, but that is only the beginning. Here is a breakdown of what you may want to consider as you evaluate the value of your job:
Retirement Benefits
Even in the wake of the Great Recession, most employers still offer some form of a retirement benefit. According to a white paper by the Transamerica Center for Retirement Studies, 82% of employers are sponsoring a 401(k) plan. Even so, not all plans are equal.
Let’s say Job 1 offers a 401(k) without a match, but employees are eligible to participate in a cash balance pension plan where the employer contributes 1% of salary per year to the plan. That equates to $600 (1% of $60,000) of additional compensation.
Job 2 has no pension benefit, but it does come with a matching 401(k). If the match at Job 2 is $1 for $1 up to 6%, that’s equivalent to $3,000 ($50,000 x 6%) of additional compensation, assuming you contribute at least 6% to get the full match.
Health Benefits
According to the U.S. Bureau of Labor Statistics, 86% of full-time workers have access to health benefits, but just as with retirement benefits, health benefits come in different forms.
Let’s say Job 1 offers a non-subsidized traditional health insurance plan with a $1,000 deductible and a coinsurance out-of-pocket maximum of $2,000. For a family plan, the average premium is around $1,250 a month. Even if no medical services are performed, this is costing you about $15,000 a year.
Job 2 offers a $5,000 high-deductible plan with a $200 a month contribution to a health savings account (HSA) and a monthly premium of only $800. Even if the family incurs enough usage to meet the annual deductible, the most paid out-of-pocket would be $12,200 a year ([$800 x 12] + $5,000 deductible minus [$200 x 12] in HSA contributions).
Life and Disability Insurance
Large employers (those with 100 or more employees) typically offer life, disability, and other benefits to their employees, but according to LIMRA, less than half (47%) of small businesses offer these benefits to their employees.
Let’s say Job 1 offers life insurance as a voluntary, employee-paid benefit and no disability insurance, while Job 2 offers employer-paid life and disability insurance. An employee that accepts Job 1 may have to pay up to $1,000 a year out-of-pocket for personal policies just to have the same level of coverage as an employee that accepts Job 2. (Regardless of which job is accepted, employees should review their level of employer-provided coverage and consider purchasing supplemental insurance if the coverage is not adequate.)
Fringe Benefits
Food and drinks in the cafeteria, discounts for products and services, commuter and legal benefits; the little things add up.
Let’s say Job 1 offers coffee and vending machines, free parking, and an employee assistance program (EAP) with some access to legal help, while Job 2 provide snacks and beverages, orders lunch for its employees often, has a tax-free commuter program, an EAP, and offers a prepaid legal benefit. Depending on how much an employee uses any of these benefits, it could save up to $1,000 or more a year.
The Bottom Line
Let’s revisit both jobs and count the savings and the cost:
Job 1
Starting salary: $60,000
Retirement benefit: +$600
Cost for health insurance: -$15,000
Cost for life/disability insurance: -$1,000
Value of fringe benefits: $0 (negligible)
Total value of job = $44,600
Job 2
Starting salary: $55,000
Retirement benefit: +$3,000
Cost for health insurance: -$12,200
Cost for life/disability insurance: $0
Value of fringe benefits: +$1,000
Total value of job = $46,800
This is an oversimplified way to evaluate competing job offers, and the information I provide is for illustrative purposes only, but hopefully you can see the point. Not everything boils down to an hourly wage or a monthly salary—you must consider the big picture. There are certainly other financial and non-financial factors to consider as well, such as the distance to the job, time spent getting to and from work, the hours spent on the job, travel and other time away from home, the stress of the job, and a handful of others. As the economy slowly improves, you may someday find yourself looking at multiple offers. Use this to help make your decision.