Benefits packages are a key part of salary negotiations but are often taken for granted.
It’s easy to fixate on salary when negotiating a job offer. Employees often see benefits as perks rather than compensation. However, because they do ultimately equate to money a company is spending on an employee, the dollar value of benefits should never be overlooked.
Placing a value on your benefits package
Benefits typically contribute to an employee’s ability to do their job or make their life easier, thereby boosting performance. For example, while time off might seem like a gift, vacation time improves productivity and helps prevent burn out. Like most benefits, vacation days come at a cost worthy of consideration. The following four common benefits deserve financial respect when extending a job offer:
- Paid time off. Let’s pick up where we left off – calculating the cost of everything from sick days to paid holidays and vacation days is a straightforward The number of work days each year can vary from 260 to 262 – you’ll also need to factor in which holidays your company observes. Determining this cost is simply a matter of dividing salary by the number of work days and multiplying the quotient by the days being offered as paid time off.
- Payroll and unemployment taxes. Payment of Social Security and Medicare taxes (FICA taxes), in whole, or partial, are often included in benefits packages. In addition, the employer usually covers state and federal unemployment insurance. The FICA tax rate is 15.3% of income, and while state unemployment taxes vary, federally, they’re calculated as the product of 6% times the employee’s taxable wages. Both of these can lead to sizable contributions.
- insurance. Offering health insurance to employees and their families can help keep them healthy and focused on their job – it’s also expensive. Health insurance can range from hundreds to thousands of dollars each month!
- Retirement contributions. Once upon a time, retirement contribution packages came in two flavors: company match and defined benefit plans. Today, company matched 401(k) plans have almost completely taken over. While not all employees will take advantage of matched savings plans, the open-endedness of this benefit should still be considered when evaluating the value of a job offer package.
Don’t neglect the recruiting power of your benefits package
The dollar value of benefits packages can be substantial: sometimes tens of thousands of dollars each year. But they also help define your company culture. Benefits lead to a sense of being cared for, and that employee wellbeing is important to upper management. Guardianship creates loyalty and a strong emotional investment – it’s also attractive to recruits.
Before diving into a benefits package, always take into consideration standards of the specific industry you’re hiring in. After nearly 25 years in recruiting, Mankuta | Gallagher can help bring clarity to crafting a competitive benefits package – and that’s only the beginning.
For more information on how Mankuta | Gallagher can help your company stand out in today’s competitive candidate market, connect with us online today!