Reminder: Benefits are a Significant Portion of Your Pay

Yahoo reminds us that benefits can make up a significant portion of our annual compensation saying:

If you're a full-time employee, your company is quite possibly paying 30 percent more money than you see on your pay stub, according to the averages found by the Bureau of Labor Statistics. If you're a freelancer on the other hand, you might be able to raise your rates and still be cost-effective compared to a full-time employee.

They also list the benefits and what percentage they can add to your salary as follows:

• Health Insurance Benefits, + 11%
• Social Security, Medicare and Other Insurances, + 8%
• Retirement Plan, + 6%
• Vacation, Sick Leave, Personal Time, + 7%
• Other Less Common Benefits, + 1-10% (Stock Options, Company Cars, Gym Memberships, Lunch, Coffee, Snacks, Bus Passes)

This is why you should look at TOTAL compensation when considering a new job. If not, you may end up with a higher salary but actually making less in the end because your benefits are lower.

Once in my working career I had a job offer for "more money", but the benefits were significantly lower (plus it was a higher cost-of-living city), making the new job a good amount below the present one in total compensation. I explained this to various people at the company, but they just didn't get it (or didn't care.) They focused only on the salary portion and kept reiterating that I was making more working for them. Needless to say, I passed on the job.

Comments

[RB @ recessionsblow]

This becomes utterly obvious when your company goes from 100% coverage to making you pay for half of your benefits. This happened to me at the beginning of the year and seeing that extra come out of my paycheck to go towards benefits really illustrates the point you are making here.

[Visitor]

You might want to point out that these numbers are based off a national average salary ($20/hr or $42,000/year). The 11% health insurance isn't true if you are pulling in $25,000 or $80,000. Same with the stuff like gym memberships, bus passes, snacks, etc.

Also, I consider "travel time" to work a benefit too. I have factored in travel time to and from work to help me figure out how much money I was pulling in per hour. It helped me decide that driving an hour to a job that paid more actually pulled in less money per hour than a job I could walk to in 15 minutes.