(Editor’s note: Part two of this series digs deeper into salary negotiation for freelancers and full-time employees.)
According to a 2016 Fidelity study, millennials are willing to take a $7,600 pay cut (on average) in exchange for a greater work-life balance. A pretty telling figure, wouldn’t you say?
If you’re looking to get more out of life than simply the ability to pay your bills, don’t be fooled by the figures on your pay stub. You need to look at the big picture and maximize your total compensation.
Full-force Compensation for Full-time Employees
Two jobs may have the exact same salary, but shockingly different total compensation once you run the numbers.
This is why you need to negotiate when looking at new opportunities! It’s a relatively short period of time that can net you years of a more contented job experience. Our in-house experts say their typical negotiation has two rounds, time well spent.
What is there to negotiate? Let’s break it down!
You know this one: it’s the figure most people focus their negotiating on. First step in ballparking your base salary is knowing what others in a similar position are making. A salary guide can help you calculate your role in a similar city. But salary is called a “base” for a reason—you should build on it. So don’t stop here!
Here’s where things get interesting: depending on your seniority, the company, and how hot your position is right now, a bonus might not even be on the table. If it is, fantastic. You’ll want to find out whether it’s going to be based on your performance or the company’s performance, two very different metrics. Things may get a bit trickier when a company decides to do departmental bonuses.
Other bonuses, like signing bonuses, restricted stock options, and RSUs (restricted stock units), do come with strings attached along with potential tax implications. Employers may require you to stay at their company for a period of time. For signing bonuses, you may actually have to pay the money back if you leave before that agreed upon date. Stock is, well, a gamble. As we saw in the mortgage crisis and the dotcom crash, publicly traded stocks can be incredibly volatile. Many times a company who can’t pay fair market price for your awesome skills may sweeten the deal with stock options. But you should look at the offer very carefully before trading your skill equity for company equity.
Depending on where you are in your life, you may not actually think these apply much to your bottom line. That might be true for a single income earner living in a low-cost city, but if you have a family, are thinking of starting one, or live in a city where tech workers are living in their cars (ahem), it’s worth looking at benefits as a serious part of your offer. Benefits, unlike bonuses, are consistent over the lifetime of your job at a company. Everyone knows healthcare is expensive—according to 2019 Milliman Medical Index, the cost of healthcare for a hypothetical American family of four covered by an average employer-sponsored preferred provider organization (PPO) plan is $28,386—so, make sure you know how much your employer contributes to your monthly premiums.
Choosing the right plan makes a difference as well. Does the company offer a variety of choices, like HMO, PPO, high deductible, etc.? Each choice will affect how much you pay out of pocket (which is really your salary).
And healthcare isn’t all about getting your teeth cleaned every six months or visiting the doctor every year. Depending on your stage of life, you’ll want to consider the costs of line items such as hospitalization, emergency room visits, naturopathy, infertility treatment, acupuncture, etc. Other factors to consider: how much of your health plan is covered by the employer? How high are your co-pays for office visits? For prescriptions (remembering that maintenance drugs can add up)?
Don’t forget you can use pre-tax benefits to lower your wage footprint (so to speak). These are benefits companies offer, such as flexible spending account (FSA)/health savings account (HSA), dependent care assistance, long-term care insurance, and many others that are subtracted from your paycheck before your taxes are calculated. So if you make $40,000 per year and you put $2,500 into an FSA to pay for your kid’s braces, you’ll only owe taxes on $37,500 instead of the full $40,000. (Better yet, you’re paying for those braces little by little all year long, so you’re not pummelled by a $2,500 bill all at once.)
For a good side-by-side comparison of FSAs vs. HSAs check out this 2017 NerdWallet post.
401(k) and retirement plans
That pension your grandparents relied on doesn’t exist anymore for the majority of workers. Without a doubt, the most popular form of employee-sponsored plan in America is the 401(k) plan, and most larger companies offer one. You deposit a set amount of your pay, choose the type of account you want to invest in, and over the years that money turns into your retirement windfall.
If no one has told you yet, an employer match is essentially FREE MONEY an employer gives you for putting away cash for retirement. If you put in 4%, they’ll put in 4%. The most common match is 100% of the first 6% you put in. Those dollars add up, especially when you consider the money will continue to compound until retirement.
If you’re really serious about retirement, ask how long it takes for you to contribute to the retirement plan. Many companies opt for a six-month waiting period before allowing new staff to start contributing. Some extend it to a year, which is the maximum permitted by law.
In tech hub hotbeds you may find your new employer bringing you into town by bus or van. For most of us though, companies might offer to pay a percentage of our parking or public transportation. Options such as transportation FSAs allow you to put pre-tax dollars into an account to pay for expenses such as train and bus fares, parking expenses, subway tickets, and yes, water shuttles (sorry, Nebraska).
Education and career development
While your offer for low cost education may not be as sweet as Walmart’s, which allows its employees the opportunity to attend college for only $1 a day, getting an education and career development paid for by your new employer is a deal you want to put on your offer ledger. Whether you’re looking to upgrade your technical skills, build business acumen, or even take the angles out of your soft skills, check out whether your offer includes educational reimbursement, free courses, or training. It’s a perk that not only affects your bottom line today, but an investment that pays off in future dividends.
If you’re caring for children or parents, many companies can offer some very nice expense offsets: childcare FSAs, elder care benefits, special needs coverage, and even onsite childcare save you a significant amount of money over the years you are on staff. And for those with fur babies, some companies even offer pet insurance.
Savvy companies will offer attractive benefits that can improve your happiness, health, and sanity. Flexible schedules that allow you to commute during off-peak hours, unlimited PTO, four-day workweeks, and remote working days are just some of the options you might put on the table for consideration.
Though certainly not as strong a player as any of the above, do consider those other perks offered, like gym membership, wellness benefits, corporate cell phone discounts, and certainly free lunches can add a few bucks to your weekly take-home pay.
When you know what’s important to you, and take a little extra time to negotiate for it, you’ll enjoy your work so much more. The ball is most definitely in your court. So heed the wise words of CAKE Publishing’s founder Ashley Stahl, “Stop leaving dollars in the employer's pockets, and ask for what you’re worth. If you don’t, you certainly can’t expect anyone to do it for you.”
Be sure to check out part two of this series for negotiation tips for freelancers and professionals who want to stay in their jobs.