What to consider in a job offer

Allen Wastler

By Allen Wastler
Allen Wastler is a former financial journalist with over 30-years of experience, including time at CNBC, CNN, and Knight-Ridder Newspapers.
Posted on May 24, 2019

You’ve applied, interviewed, and, perhaps, tested. Or you’ve been recruited. However it came about, it’s now here: a job offer. The question is, do you accept this job offer or perhaps wait for a better one somewhere else?

The answer, of course, depends in large part on your present situation and your aspirations. If you are out of work and this job offer is the only prospect, and it’s at least approximately in your area of interest, the answer seems pretty straightforward.

But if you currently have a job or have competing job offers, the answer gets a little trickier. You need to compare a variety of data points and career goals, from overall compensation to workplace demands to likely job satisfaction.

Most people base the majority of their employment decision-making on pay — the salary or immediate wage they will be making. Generally, the notion is that the higher the direct compensation, the better.

But there are economic considerations beyond the take-home pay that actually affect the overall compensation you may be receiving.

“The benefits are significantly important in the decision-making process,” said J. Todd Gentry, a financial advisor with Synergy Wealth Solutions . “In fact, especially for senior executives, we model the impact of benefits along with direct pay in compensation offers to assist our clients in the decision or negotiation process.”

Common items to consider in a job offer include:

  1. Bonuses

  2. Health and wellness

  3. Life and disability income insurance

  4. Stock options or awards

  5. Retirement plan

  6. Perks

  7. Time off

Of course, fulfillment and professional growth are important too. But such intangibles are a little harder to quantify and will differ from person to person.

And, depending on company size, industry practices, geographic location, and other factors, not all of these elements might be part of a compensation package. It is still important that you are aware of them and know what to consider when evaluating them.

Bonuses

Typically, information about an annual or quarterly bonus is communicated with the job offer, but if it isn’t, you should ask if the company offers them.

Bonuses of this nature are typically calculated from a formula weighing your individual job performance (like hitting certain production targets or sales quotas) along with divisional or company performance targets. You should ask and understand how the formula works and, importantly, how often the company hits 100 percent or more of its targets.

If a company is consistently hitting its targets and paying out bonuses as a result, that should factor into your appraisal of the overall compensation. But if not, then probably less so. Also, bonus payments sometimes have conditions about repayment should you leave the company. And, of course, there’s the question of the personal targets that will be set for you (which likely were touched on during the interview process).

Companies also sometimes offer signing bonuses, usually to highly-qualified or high-demand candidates. Such bonuses are usually communicated in the job offer and they often come with provisions about staying with the company a certain length of time. Remember that the signing bonus is a one-time payment. Negotiating an increase in starting salary could be a better option if you foresee staying with the company more than one year.

In addition, there can be a variety of merit bonuses offered by the company in conjunction with job-performance, peer recognition, or community service programs. You may want to learn about those and consider them as well.

Health and wellness

The value of medical insurance cannot be underestiimated. And the inclusion of dental, vision, and psychological coverage makes it that much more valuable.

Indeed, the cost of health care for a typical American family of four covered by an average employer-sponsored plan is $28,166, according to an analysis of 2018 data by actuarial service firm Milliman.Employers typically pick up a good portion — often more than 50 percent — of that cost.

No wonder, then, that nearly 6 in 10 middle class workers feel more financially secure because of the benefits they receive at work, according to a recent MassMutual Workplace Benefits Study.

Make sure you understand what health insurance is offered and how much your potential employer would pick up. Compare that with how much such coverage would cost you and, if pertinent, your family, independently. That’s value that should be considered when weighing a job offer.

Additionally, look to see what kind of support your potential employer offers in financial planning and management.

“Financial education and financial wellness programs are a very strong indicator that a company cares for all the right reasons,” said Gentry. “Strong financial wellness makes for more productive employees. And while financial wellness programming manifests itself in many iterations, and is hard to measure, it’s a valuable asset for any individual.”

Life and disability income insurance

Life and disability income isurance are also valuable benefits that should not be overlooked in a job offer.

Typically, the life insurance offered by an employer is a group policy. Because the policy covers the group as a whole, rather than individuals, the premiums can be substantially lower than what you might find for comparable coverage on your own.

However, keep in mind that being part of a group means that you lose some individual choice. The policy may have limitations and lack portability. It may also lack features, such as cash value or the possibility of dividend payments, that other types of insurance offer. (Learn more: Is group life insurance enough? )

Also, while employers will often subsidize coverage up to a certain amount, it may fall short of what you actually need. And the rates for purchasing additional coverage through the work plan could be substantial compared with options elsewhere, either at another employer or a private insurer. ( Calculator: How much life insurance do I need? )

Some companies offer to pay for life insurance as a kind of executive bonus plan, as well. (Learn more: Section 162 plans )

Similar to life insurance, employers regularly offer some kind of disability income insurance program. And companies will often subsidize or cover the cost up to a certain level of coverage. Again, that level of coverage may not be enough for your circumstances and the cost for purchasing more coverage could vary between employers or direct providers. (Calculator: How much disability income insurance do I need? )

All of which is to say that insurance plans are valuable. But that value changes depending on the type of insurance, the terms of coverage, and the cost of additional coverage. You need to take all that into account when evaluating a job offer.

Stock plans

Many companies, especially those in highly competitive industries, offer stock ownership plans to employees.

Such plans may offer employees the chance to buy company stock at a discounted price or grant options, which give employees the right to buy shares of company stock at a certain price, within a certain period of time or at some point in the future. The terms of such stock plans, from vesting periods to portability, can vary widely.

A stock plan, especially if you can participate in it shortly after your hiring date, can add to the value of a job offer, depending on the terms. But keep in mind that many companies offer such plans in lieu of paying top dollar in salaries and bonuses, in hopes that talent will work for them now in expectation of a large payout at a later date.

Retirement plans

Many employers offer retirement programs. The most common is a 401(k) plan, although other types of plans that operate in much the same way exist for certain types of organizations and industries.

A 401(k) is a type of workplace retirement savings plan that allows employees to contribute a portion of their income with pretax dollars into their own retirement investment account. (Learn more: Understanding 401(k)s )

A key feature to consider here is that companies sometimes make matching contributions, which will help your retirement savings grow more quickly. For example, a company may contribute 50 cents for every dollar you contribute up to 6 percent of your salary. So, if you contribute 6 percent of your pay, then add the company match to your contribution, your contribution amount is effectively increased to 9 percent.

This feature would obviously add value to a job offer, so investigate your prospective employer’s retirement plan and matching practices. If you have multiple job offers, see who is offering a better match.

“For a typical employee, the match on the retirement plan is a key indicator of the commitment level of an employer to long-term employee satisfaction and retention,” said Gentry.

Perks

A whole host of additional perks and job benefits may be available, depending on the employer. These can range from free meals and snacks to subsidized internet and cell plans to discounted gym memberships and travel services. In addition, some companies offer employee discounts for their own goods and services, or negotiate discounts at other companies they do business with.

On the executive level, there also may be programs to support continuing education and tuition, as well as assistance for moving expenses or mortgage financing in the case of relocations.

How much value such things add to your job offer will depend on your individual preferences and circumstances. But they shouldn’t be overlooked.

Time off

A large part of the employment agreement is time. Essentially, an employer is paying you to make a large commitment of it to their enterprise.

So, conversely, know how much time is dedicated to you. A job offer from an employer expecting you to be on the job almost all the time may not be as attractive as one from an employer that, while perhaps paying a little less, is more generous with time off.

So check out vacation and sick day allowances, as well as the company’s policies on parental leave, sabbaticals, and the like.

Conclusion

After you’ve collected all this information (tactfully, of course), consider what these different factors add to the ultimate value of a job offer. It could be that a job offer with an eye-popping salary doesn’t measure up to other situations offering less in pay but more in benefits.

And, as mentioned, there are other considerations as well. Many career coaches will argue that fulfillment and professional growth should take precedence. And then, there are considerations like the future prospects of the company as well.

In the end, having an idea of the total value of the compensation being offered, and not just focusing on the immediate pay, will help with a large part of the decision.

Learn more from MassMutual …

Career change: Can you afford it?

Long distance jobs and costs

A financial checklist for your first job

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 1 Milliman, “2018 Milliman Medical Index,” May 21, 2018.

The information provided is not written or intended as specific tax or legal advice. MassMutual and its subsidiaries, employees, and representatives are not authorized to give tax or legal advice. You are encouraged to seek advice from your own tax or legal counsel. Opinions expressed by those interviewed are their own and do not necessarily represent the views of MassMutual.