Total compensation: how to calculate how much you actually earn

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So many factors go into deciding to quit your job, but the pay is a big one.

Even if money isn’t your top priority, it’s important to determine how much you actually receive from your current employer, because what you do is more than just your salary or wages.

Estimating your total compensation gives you a more accurate measure of what your employer is actually spending on you. And it will help you determine if a new job posting will work as well or better for you financially.

To make the comparison, include in your billing bonuses and other forms of incentive pay, the value of current benefits you are using as well as any offered benefits you could use in the future (for example, paid parental leave if you are considering to start a family).

Overall, your total compensation can be 25 to 40% higher than your salary or gross salary, according to compensation experts.

Crunch your numbers

Some employers make it easy for you to see your total compensation by providing a “total compensation statement”.

But if not, check your internal human resources website, which can provide an annual statement of benefits and annual salaries. Your annual W-2 is another resource to check, not just for gross salary, premiums and taxes, but also for information on your employer’s costs regarding your health coverage in box 12DD.

Also consider how your total compensation has changed over the past few years, as employer benefits and costs may vary.

” Tendency. Have your overall benefits increased or decreased? And what is it related to? Said Katie Manning, vice president, compensation and career strategies at Segal.

Here are some key benefits to include in addition to salary and bonuses.

Health coverage: Employers typically cover the lion’s share of your health insurance premiums – often 70 to 85 percent, according to 2020 data from the Kaiser Family Foundation.

But some employers may offer a lower subsidy if an employee chooses a family coverage plan, according to Rob DeNinno, director of Precision Benefits Group, which works with small and medium businesses.

If you participate in a health savings account, be sure to include what your business pays into your account.

Or if you don’t have an HSA, but you participate in a flexible and tax-efficient spending account for health or care expenses, take into account the contribution limit set by your employer and how much it saves you in taxes.

For example, if your employer allows you to contribute $ 2,500 per year, your tax savings are $ 550 if your highest federal tax bracket is 22% ($ 2,500 x 22%). Even though this is a federal government tax benefit, it is good to keep in mind that not all employers offer FSA or if they do, they can set a of contributions than your current business.

Also include your employer’s cost of providing vision and dental insurance.

Pension saving: Check your pay stub to see how much money your employer puts into your 401 (k) each pay period and multiply that by the number of paychecks you receive per year. Or get the total amount your business contributed in 2020 from your online account with your plan provider. If that isn’t available to you, do your own calculation based on the formula your employer uses to match your 401 (k) contributions, which should be available on your HR site.

According to Brightscope / ICI data, a common formula that employers use is a 50% match on your contributions up to 6% of your salary. Another is dollar-for-dollar consideration on your contributions up to 4% of your salary.

So if you earn $ 100,000 and save at least $ 6,000 per year in your 401 (k), your employer inject an additional $ 3,000 to $ 4,000 according to these formulas. And it’s money you don’t have to pay tax on until you retire.

Also, keep in mind that different companies may have different vesting schedules – the amount of time you have to work there before you can keep all of your employer’s 401 (k) contributions.

Some employers can contribute to your retirement savings through a profit-sharing plan. Their contribution may vary from year to year, depending on the performance of the company. But they will do their bit whether or not you put money aside in your 401 (k) or IRA.

Stock options: If you are fortunate enough to have the opportunity to buy your company stock at a reduced price and your options are about to vest, how much will your employer rebate save you? (that is to say the difference between your “strike” or “subsidy” price and the current market value)? Suppose you have 50 options at a strike price of $ 20 a share and the stock is trading today at $ 35. You could consider this $ 15 share price gain multiplied by your 50 shares as part of your pre-tax compensation in the year you exercise your options.

Paid vacation: Count the weeks of paid leave you have in a given year, whether or not you take all of them (for example, for vacation, public holidays, and sick leave). Then calculate what you would be paid for that period.

For example, if you typically earn $ 3,000 every two weeks and are allowed to take up to seven weeks off, it’s worth it $ 10,500.

Then do the same with other types of paid leave that you could use in the future, such as parental leave, bereavement leave, or family care leave.

Educational benefits: If your employer offers tuition reimbursement, student loan assistance, or pays for training or career development courses in full, add that to your pay, Manning said.

Less immediate but valuable benefits: Both disability insurance and life insurance are good to have. While it’s difficult to determine what your employer is spending on these, a good approximate range for the two types of coverage combined might be $ 300 to $ 800 per year, depending on your income and the design of the plan, DeNinno said. .

Well-being and assistance services: It also recommends evaluating the various wellness benefits offered by your employer (for example, discounts on gyms or nutrition counseling) and the services available to you through a program. employee assistance. These may include psychological, bereavement or drug addiction counseling, financial support, or legal assistance. Some EAPs may also provide help with child care or elder care, Manning said.

If you use any of these services, assess how much money you are saving by not paying for them yourself.

Difficult to assess but significant advantages to assess

Beyond total compensation, consider the benefits on offer that are difficult to set a fixed amount on but are very valuable to you, said Monica Martin, Head of Total Rewards at Willis Towers Watson.

Maybe your business allows you to work from home a few days a week.

Or what about career growth opportunities or mentoring programs that could lead to higher pay down the line?

For low-wage workers in particular, said Martin, even if a new employer is offering a higher hourly wage but skimping on the benefits you currently get, will this new offer really make you more money in the end? account that you are not currently earning?

“Think about the total package,” she said.


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