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Human Resources
Nov 1, 2015

What Is The Total Value Of My Compensation?

Sponsored Content provided by Dave Hoff - Chief Operating Officer and Executive VP of Leadership Development, EASI Consult

In my last Insights, I looked at compensation, including how it is determined (market rates), what salary ranges are, and how salary increases are determined (merit raises). I promised in this Insights that I’d take a longer look at total compensation, which I’ve found to be a difficult thing for many employees to calculate on their own.
 
Total compensation is the value of all the other things your employer provides outside of your base salary. It is typically overlooked by employees as having value. It also is typically undermarketed by employers, but it shouldn’t be. Total compensation costs them a lot of money.
 
There can be a lot of variability in the “other things” that an organization provides to their employees beyond salary, but for the purposes of this column I will focus on the “biggies” that most employers provide and what is more of a standard practice:

  • Health care
  • Vacation, holidays and sick days; some companies combine these into a single Paid Time Off (PTO) allowance
  • Bonus or deferred compensation
  • 401(k) or other defined contribution retirement plan
  • Tuition reimbursement
  • Training and development
To give you a numerical value of each of these benefits, I am going to use an employee making $50,000 as my example. Let’s call her Mary. Mary is married. Her husband Joe is self-employed so he doesn’t receive many of the things that Mary’s employer provides.
 
Health Care - Value: $6,000
 
Typically an employer will split the cost of health care with the employee. Roughly speaking, a standard PPO plan with low deductibles and office visit copays is going to cost (for employee and spouse) about $10,000 a year in premiums. In a 60/40 employer/employee plan, the employer is putting up $6,000. When I worked at Anheuser-Busch 100 percent of the cost of my health care was paid for by the company. I did not appreciate that one bit, until I left and had to pay 100 percent, or $10,000 per year, myself.
 
Paid Time Off - Value: $4,166
 
Traditionally, employers would provide paid time off for vacations, holidays and sick leave. Sick leave was paid time off for employees when they were sick, and if they didn’t use those days for illness, they lost the benefit of them. That meant that employees at some companies took “mental health” days at the end of the year to take full advantage of the benefit. To avoid that, many companies today just call everything PTO and let employees manage it the way they see fit. In Mary’s case, it assumes a total of 30 days.
 
Bonus or Deferred Compensation - Value: $5,000
 
This benefit varies widely across companies, and some don’t offer it at all. A person’s bonus or deferred compensation could be based on individual performance and be an additional 10 percent of base salary, for example. Or it could be deferred compensation and a percentage of salary if the company met its profit targets.
 
401(k) or Defined Contribution Retirement Plan - Value: $1,500
 
With a typical 401(k) plan, the employer will match the first 6 percent of salary that an employee contributes with a .50 contribution for every dollar saved. So in many plans, if you don’t contribute you don’t get the company match. In other words, you leave “free” money on the table. So in this example, the employee contributes $3,000, or 6 percent of salary, and the employer contributes $1,500.
 
Tuition Reimbursement - Value: $3,000
 
Many companies will reimburse you for credit courses that you take. This is an annual benefit so you can use it year after year. If you were at one job for several years you could get a significant amount of your degree paid for by your employer.
 
Training and Development - Value: $1,000
 
Many companies will advertise that they will pay to send you to a course or professional conference that will allow you to better do your job. You and your boss would agree on the course and the location it was being offered. The company would pay the bill. When I was at Anheuser-Busch I was sent to the University of Michigan to take a finance course. Another year I was sent to a course on public speaking.
 
So what is the total compensation for our employee being paid a base salary of $50,000?
  • Base salary - $50,000
  • Health care - $6,000
  • PTO - $4,166
  • Bonus - $5,000
  • 401(k) contribution - $1,500
  • Tuition reimbursement - $3,000
  • Training and development - $1,000
Total value of Mary’s compensation: $50,000 salary and $20,666 of additional compensation for a total of $70,666. The additional compensation is more than 40 percent of Mary’s base salary. I encourage everyone to look a little deeper at what is included in a job offer beside base salary.
 
EASI•Consult® works with Fortune 500 companies, government agencies, and mid-sized corporations to provide customized Talent Management solutions. EASI Consult’s specialties include individual assessment, online employment testing, survey research, competency modeling, leadership development, executive coaching, 360-degree feedback, online structured interviews, and EEO hiring compliance. The company is a leader in the field of providing accurate information about people through professional assessment. To learn more about EASI Consult, visit www.easiconsult.com, email 
[email protected] or call 800.922.EASI.

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