How Much Are Benefits Worth? Moving from Part-Time to Salary
Most people who are working a minimum wage/part-time job receive no benefits. Moving to a salaried job with benefits sounds good, but is it really better? To compare a job that includes benefits with one without benefits, you have to consider the “total compensation” for each position – not only the salary or hourly wage but the value of the benefits one job offers. So, what are benefits worth, and how do you calculate them? Glad you asked!
Comparing Hourly vs Salary Positions
It is not as easy as it might sound, because every job is somewhat different. However, you can get a good idea of how the two positions compare overall. And, spoiler alert: thanks to the hidden value of PTO (paid time off) benefits are usually worth much more than you might think.
Here are the key numbers to compare. Make two columns on a piece of paper and label them Job A (without benefits) and Job B (with benefits).
It is easy to compare pay
Let us assume that the two jobs are both 40 hours a week, one salaried and one hourly. In addition to being a steady job, the salaried position may pay more. Even if it does not, you receive benefits in addition to your salary.
Every Job Has Some Benefits
By federal law, money is automatically taken out of your paycheck for FICA (Social Security and Medicare insurance contributions). The current rate is about 15.3%. This is your contribution, and if you were self-employed you would have to pay all of it. But, since you are an employee, your employer is required to pay half. You benefit by, in effect, saving 7.65% of your pay. This is true whether you work full or part-time, so the amount you save applies even to jobs with “no benefits.”
Your employer is also required to pay your federal unemployment insurance contribution, somewhere between 0.3% and 1.5% of your salary.
Most Benefits are Voluntary
This is where it can get harder to compare jobs that both offer benefits because every company does things differently. Things such as health insurance and retirement plans are common, yet others vary widely.
Health insurance. Some companies pay all or part of the premium for you, so you are saving that amount of money. Even if you have to pay the full premium, you end up saving money because group plans cost less than individual insurance. Along with medical, many employers also offer other health-related insurance such as:
- Short-term or long-term disability
Retirement savings. Many employers offer 401(k) plans, making it easy for employees to save money through regular withholding. This is a benefit because it is automatic – you can’t “forget” to make your contribution or spend it on something else. In addition, many employers will match your contributions up to a certain level, say 3% of your salary. So every time you contribute 3%, you are actually saving 6% – extra earnings that go directly into your retirement fund, where they will earn interest.
The new employer you are considering might also offer benefits such as:
- Wellness programs or gym memberships
- Tuition reimbursement
- Student loan repayment assistance
- Financial planning education
- Commuter transportation or parking assistance
Every time your employer pays for something on your behalf or arranges a discount for you, you are saving money. You are getting more compensation for the salary you earn.
Generally speaking, these benefits you receive are not taxable. So you benefit financially from the full value of those benefits. (If the company simply increased your salary by that amount, you would lose a significant percentage of it in payroll and income taxes.)
Paid Time Off Is a Biggie
If you are an hourly employee, you only get paid for the hours you work. Taking time off – for a holiday, vacation, or to visit the doctor – actually costs you money, because you lose the income you would have earned. With a full-time, salaried position, you can receive paid time off, or PTO. Holidays, sick days, vacation days, personal days – this can be the most significant benefit of all, because it enables you to live your life more comfortably.
Think of it this way: An hourly employee would have to work 40 hours a week every single week in order to make the same amount of money as a salaried employee being paid the "same amount of money" per hour. In fact, every week of PTO is worth almost 2% in value, and PTO plus other benefits typically add up to more than 30% of the total salary.
We Offer PTO at The Connection
If you are looking for a great job with both benefits and a future, look here. We offer PTO plus medical, dental, life insurance, and other benefits. We also offer a positive work environment, ongoing training, and promotion from within – things that will make your job more fun and productive now and build your resume for your future career. Talk about benefits!