Total compensation

When you get a job offer, one of the things you'll likely hear about is your total compensation package. Remember when we discussed your salary and benefits? The total compensation package wraps all of that together. It includes not just your base salary, but also the hard benefits, which have a measurable monetary value, and any other financial perks and benefits you'd receive from the job.

Remember hard benefits? These are benefits that have a clear monetary value to them. Because they are expressed in dollar amounts, they can easily be added to your salary to get your total compensation package.

One of the most obvious and straightforward categories in the total compensation package is insurance benefits such as health insurance, life insurance, disability insurance, and any other type of insurance. These benefits are typically assigned a clear monetary value.

For example, let's say your employer provides health insurance valued at $\mathrm{\$}\mathrm{10,000}$‍ per year. In this case, you can directly add this amount to your salary to get your total compensation. So, if your salary is $\mathrm{\$}\mathrm{50,000}$‍, your total compensation with health insurance included turns out to be $\mathrm{\$}\mathrm{60,000}$‍ annually.

Retirement benefits, on the other hand, are often presented as a percentage. Your employer might add to your retirement funds by matching a part of the money you put into your retirement account (for example, a $4\mathrm{\%}$‍ match). To convert this to an actual amount, you need to calculate $4\mathrm{\%}$‍ of your salary. So, if your salary is $\mathrm{\$}\mathrm{50,000}$‍, then $4\mathrm{\%}$‍ of it would be $\mathrm{\$}\mathrm{2,000}$‍.

This $\mathrm{\$}\mathrm{2,000}$‍ is the money your employer is giving to you to keep in your retirement account. You then add these $\mathrm{\$}\mathrm{2,000}$‍ to your salary and the value of your insurance benefits to find your total compensation.

We should also keep in mind those monthly or quarterly extras that jobs sometimes offer, like covering your cell phone bill or providing professional development resources — they are part of your total compensation, too!

For example, your job may pay $\mathrm{\$}50$‍ every month for your cell phone bill. To understand how much that adds to your yearly earnings, simply multiply $\mathrm{\$}50$‍ by $12$‍ (the number of months in a year), which gives you an additional $\mathrm{\$}600$‍ each year.

The same method works for benefits received every quarter. Let's say you get $\mathrm{\$}500$‍ for every quarter. Multiply $\mathrm{\$}500$‍ by $4$‍ (since there are $4$‍ quarters in a year), and you get another $\mathrm{\$}\mathrm{2,000}$‍ in your annual total compensation.

So, it's all about converting all these benefits into yearly amounts to understand the full scope of your earnings from a job. Easy math to get a clear image of your total compensation!

Paid time off, or PTO, is time you can take off work while still getting paid. It's like a vacation, but with your pay still coming in. Normally, PTO is part of your regular pay, not extra money.

But here's a fun fact: some companies let you turn unused PTO into money. If you don't use all your PTO, you might get money instead at the end of the year. So, unused PTO could increase the money you get. It's good to know this when you think about your total compensation.

Let's say you are being offered a position that pays $\mathrm{\$}\mathrm{60,000}$‍ yearly. The offer also includes paid health insurance, retirement contribution, and a cell phone allowance.

Here is the offer:

Here is how we would find the total compensation offered:

As you can see, with additional benefits being offered, you'd be receiving a total of $\mathrm{\$}\mathrm{71,360}$‍ from the employer.

Understanding how much money you'll make (total compensation) and the extra perks (soft benefits) is important. This information can help you find the best job that not only pays well but also suits your personal needs and interests.