Understanding an Offer

One of the toughest decisions a person makes is choosing which employer offers the most appropriate opportunity for starting their career. You are the ultimate judge of what constitutes the best balance for your particular situation.

The meaning and personal fulfillment that can come from work are factors that many find to be among the most important when considering an offer. It's impossible to translate these considerations into purely monetary terms; they are the intangible characteristics associated with working in a particular company or with a particular group of people. These factors will need to be evaluated above and beyond your evaluation of the compensation package. Setting yourself up for long-term professional success is likely to have long-term financial rewards, which should be taken into account.

A fair evaluation of multiple employment offers also involves examining the details of the compensation package. Not all of the employer contributions can be easily predicted or translated into monetary terms, and intangible factors such as cultural fit and personal comfort also need to be taken into account. Most professionals look for the compensation package to move them toward three basic objectives: financial success, professional success, and an improved standard of living.

ALL BENEFITS ARE NOT CREATED EQUAL

The compensation packages accompanying the employment offers you receive will probably come with a wide range of structures and options (as sown in more detail on the graphic below). The things that make up a compensation package are pretty much the same for most companies, and the differences tend to be in the relative emphasis each company places on the various pieces. There are seven basic compensation categories:

  1. Base salary
  2. Retirement plan
  3. Insurance
  4. Time-based benefits
  5. Profit sharing
  6. Money-based benefits
  7. Professional support benefits

Click on the image above to enlarge


BASE SALARY

This is your take-home monetary compensation. While base salary plays a very important role in your standard of living, it is not the only factor to consider. If you receive offers from several different geographic areas of the country, you will also need to adjust each base salary to reflect its real purchasing power equivalent.

RETIREMENT PLAN

Young people just starting their careers often fail to realize the extraordinary importance and value a strong retirement plan has in assuring financial success. The two things that affect a retirement program's success most are the amount of the monthly retirement contribution and the employee's years of participation.

Say you are a single person, age 25, earning $4,000 a month and receiving a 15 percent retirement contribution from your employer; that amounts to $600 of additional tax-free income from your employer ($108 more than you would have received if your employer included this in your base salary rather than providing a retirement contribution). Annually, this adds up to nearly $7,200 that, if not saved, could otherwise disappear pretty easily in small expenses here and there. You will have also deferred paying $1,296 in taxes per year.

Interest makes this situation even better! If you invest this money, and it earns 10 percent interest, that equates to $720 additional dollars accrued over the following year. Of that, $130 is interest on money that you otherwise would have paid in taxes. That's four sources of additional income for you: employer contribution, tax savings, interest on employer contribution, and interest on tax savings (and we didn't even talk about compound interest).

INSURANCE

Health insurance is essential to maintaining your physical health and well-being. As health insurance costs continue to soar, some employers are scaling back their coverage and/or requiring some level of financial participation by the employee. Carefully review the details of any health care plan offered because the differences in cost, coverage, and accessibility can be dramatic.

TIME-BASED BENEFITS

Another important consideration is time-based benefits. These include paid time off (PTO), vacation, sick days, holidays, hours worked daily and weekly, etc. Some employers offer PTO, which allows each employee to choose the days they want to take off each year; some offer a set number of days for vacation and sickness. Some employers observe holidays and others do not. Some employers have flexible in-office hours, while others require that employees are in the office during set hours. It is important to examine which time-based benefits are important to you.

PROFIT SHARING/MONETARY BENEFITS

Profit sharing and other monetary benefits (for example, parking/transit subsidies, signing bonuses, and relocation expense reimbursements) can also have significant effects on your standard of living. Some of these, like profit sharing, are recurring benefits while others are one-time events, such as signing bonuses and relocation expense reimbursements. You should, therefore, judge the relative value of these different benefits proportionately.

PROFESSIONAL SUPPORT BENEFITS

Employers are essential to creating opportunities through their investments on your behalf in the learning environment and culture they maintain for their employees' benefit. Your employer has more control than anyone else over the range of project types and professionals you will have the opportunity to work with. These opportunities become the foundation that will frame your professional judgments and extend your network of professional colleagues and resources. Your employer can influence the number and quality of professional development opportunities that are afforded to you by investing in such things as internal and external training, post-graduate educational opportunities, and even travel expenses necessary to get you connected to work opportunities and other professionals outside of your local geographic area.