Consider Total Compensation When Evaluating Job Offers

Here are some thoughts from the book The Net Worth Workout: A Powerful Program for a Lifetime of Financial Fitness (see my rating for details) on considering total compensation when you are evaluating job offers:

A client of mine was considering moving to Atlanta for a management job. The hiring firm offered her the same amount of money -- $100,000 -- saying that "the cost of living in Atlanta is significantly less than in New York City." However, at her current firm, my client receives 5 percent 401k match, as well as a 10 percent credit to her pension every year. The latter represents another $15,000 free and clear, something she would not receive from her new suitors.

Here are my thoughts on this issue:

1. Employers will come up with all sorts of great ideas/excuses for why they should pay you as little as possible and why you should be happy with it. Don't listen to them. Crunch your own numbers and be sure to include everything. My past experience is that they'll try to discount your current compensation with excuses such as "we don't do that." Fine, then if they don't do one thing, then they can make it up with another. Remember that you'll never have more leverage in salary negotiations than before you accept a job. Use that leverage to your advantage.

Twice in my career I've had a company try to low-ball me on total compensation for one reason or another. In the first case, once I laid out my reasoning, they upped the offer to one that I finally accepted. In the second case, they tried to explain to me why what they were offering was all they could offer/what they were allowed to offer. This had zero to do with my worth in the marketplace, so I broke off negotiations with them (in a respectful manner, of course. It never pays to burn bridges.)

2. Comparing costs of living differences between one city and another is a valid calculation and should be considered part of your overall number. It can have such a big impact that you can receive a substantial pay increase but still be going backwards financially if your new city has a much higher cost-of-living.

Comments

[Lord]

Costs are certainly much different in these places. Vesting schedules are also a necessary consideration. The most important reasons to accept a new position are it's an advancement and it's where you want to go and what you want to do.