How to Calculate the Value of Work Perks
When you are considering a job offer, understanding the total value of the offered compensation package can be difficult.
We all know the basics like salary are important, but it pays to be mindful of other perks and benefits that could add value to the offer.
What Are Work Perks?
In simple terms, work perks are benefits in addition to a basic salary. They can be as simple as free tea and coffee, meals at work or fresh fruit – but they can also include health insurance, retirement plans, childcare payments and tuition fees.
On average, key perks are worth 30% of your salary overall
Benefits can be offered to full-time and part-time employees, but part-time employees may be offered fewer.
Employee perks are offered on top of a basic salary and add value to the workplace for you as an employee. This makes the job offer more enticing – but it is important to know and understand just how much your work perks are worth so that you can get an idea of the total remuneration you can expect.
What are the most important benefits to you as an employee?
You should consider what employers could offer; your own experience will determine which work perks are most important to you.
What Are Key Perks Typically Worth?
Some work perks do not necessarily have a dollar value, like flexible working or working from home, or have an insignificant dollar value, like fresh fruit or free tea and coffee.
However, these can often form part of a great working culture, so should be considered even without the cost-benefit.
For other employee benefits, it is advantageous for you to understand the monetary value of the benefit so you can see how much a job would be worth to you.
According to the US Department of Labor, key perks are worth 30% of your salary overall – but how that affects you will depend on what your would-be employer is offering.
For many Americans, a key employee perk would be health insurance.
Most employers take advantage of group discounts to provide single or family coverage for their employees, and this is a significant component of a comprehensive job offer that would be appealing to most applicants.
If an employer has 50+ full-time employees or the equivalent, then they are legally obligated to offer health insurance.
To calculate the value of this, it is worth noting that quality health insurance could cost an individual or family anywhere between $5,000 and $30,000 a year, depending on location.
Find out how much the value of the health insurance plan is at the company you are considering so you know what it will be worth to you. Some companies cover all the costs, while others make a significant contribution (around 70–80%).
Life, Dental and Disability Insurance
The full gamut of insurance coverage can save you money in the long run, so finding out if your employer offers other insurance options as part of the work perks package might help you make the decision.
Dental and disability insurance are not usually covered by any other health insurance offered by the company, so it is important to check if they also offer these.
For example, the accountancy firm Ernst & Young offers health insurance and disability insurance as standard for its employees, but dental insurance must be additionally added.
Dental, life and disability insurance can add up to more than $5,000 a year and can sometimes include vision checks, money towards any corrective equipment and support for long- or short-term disability leave.
It is well known that US firms are not obliged to offer paid vacation days, but most do.
The average is usually 10 days per year and sometimes these can accrue if not taken (to be paid at the end of the year).
The value of these can be found if you consider your hourly basic salary rate.
For example, working 8 hours per day is a 40-hour week, and over the course of the year, that is 2,080 hours.
If your salary is $50,000 per annum, then your hourly rate is a little over $24 per hour, making a day off worth a touch more than $190.
Depending on what you will be studying while you are working, tuition fees could be a valuable part of your job offer and total compensation.
For education costs, this could be worth anything from $5,000 to $80,000 per year (depending on qualification and location).
If your employer offers funding towards further education like an MBA, it could be a huge part of your total work package.
Whether you are just starting out in your career or not, thinking about the future is important.
A good job offer usually includes matched employer contributions to a 401(k) plan, which is worth 3–6% of your salary. 401(k) plans are useful because your money is invested pre-tax.
Some employers might offer a direct investment into a retirement plan too, which is something to consider.
Whether childcare is provided through onsite facilities, vouchers towards offsite options or matched employer contributions, offering childcare support could be potentially worth thousands of dollars a year.
According to the Cost of Care Survey from care.com, nearly 3/4 of working families spend 10% or more of their salaries on childcare.
As a work perk, childcare options could be particularly important to those who have, or are considering, a family.
The Federal Insurance Contribution Act (FICA) states that both employees and employers must contribute to supporting federal assistance programs like Social Security and Medicaid.
The employee’s contribution is a 7.65% deduction from their gross salary and bonuses. The employer must match this; it is illegal for them not to.
The employer is liable for unemployment insurance contributions of 1–3% of the employee’s salary – meaning that if you become unemployed for reasons outside of your control, you can claim support from the government until you find more work.
This is a legal requirement almost everywhere. However, it should still be considered in any comparison of overall benefits.
Why Might an Employer Offer Perks?
Although some of these perks can cost employers more than others, even smaller companies may offer impressive perks and benefits that will improve the job offer.
The total compensation package, including typical in-office freebies like tea, coffee and meals have a cost to the employer.
These may be significant when considering that some employers, including tech giants like Google, offer things like:
- Company away days
- Team building events
- Breakout rooms with the latest gaming consoles
- Chef-created lunches
There are reasons this cost is worth it...
Employee perks are about more than just the financial benefit to the employee.
Providing a supportive work environment that offers employees more than just a ‘basic’ salary encourages the best applicants, and providing them with a satisfying work-life balance encourages them to stay.
Happy employees are also more productive. This mitigates the cost to the employer as the benefit to the organization's bottom line can be huge.
Attracting the best candidates for a role needs to be the main aim of any recruitment process – and comprehensive packages offer so much more than just a basic salary.
Why Calculate the Value of Employee Perks?
If you are still in job search mode, you will likely have an idea of the minimum salary you require – still, taking into consideration any employee perks and benefits could make what appears to be a smaller salary worth it in the long run.
If you are in the lucky position to be choosing between two (or more) roles, then assessing each salary package using all the available information will help you to decide.
If you like to make logical decisions by listing pros and cons, then adding any ‘extras’ that you will get from each job can help you decide which one is worth more (see below for an example).
For example, if you already have a life insurance policy in place, then it might not be a perk you are interested in – but they might have comprehensive group health insurance that covers your family too.
While this role might be less in salary, the value of health insurance could make the compensation package worth more overall.
How Should You Calculate the Value of Your Employee Perks?
So, to decide how much your perks are worth, you can start by considering whether they have any monetary value.
For some things, this can be simple to ascertain (for example, the cost of health insurance) whereas other perks like flexible working or away days might not be so easy to value.
In some job postings or offer letters, there might be a value for some of the perks given, but if not, then you can reach out to the hiring manager and find out.
If this is not an option, then try and gauge how much the relevant benefit would cost if you were paying for it out of pocket.
For those perks that do not have an obvious dollar value to you as an employee, consider how much of an impact they might have on your day-to-day working life.
If you are interested in taking part in away days and team building, this might be an important benefit – while for others, the opportunity to work from home might be more relevant.
Value of Employee Perks Example
Here is a simplified pros and cons style list between two fictional positions, considering some of the employee benefits that might be listed in a job offer:
|Job One||Job Two|
|Health Insurance||$8,500 (single)||Health Insurance||$18,500 (family)|
|Paid Holidays||$2,110 (10 days)||Paid Holidays||$1,730 (10 days)|
|FICA||$4,125 (7.5%)||FICA||$3,375 (7.5%)|
|Retirement||$1,650 (3%)||Retirement||$1,350 (6%)|
|Tuition Fees||N/A||Tuition Fees||$5,000|
|Childcare||$10,000 (onsite)||Childcare||$10,000 (onsite)|
This is an oversimplified example that does not consider perks without a clear monetary value.
But you can clearly see the total value of perks and benefits offered is worth more in Job Two than Job One – despite the starting salary difference.
This is mainly based on the tuition fees perk. If you are looking to continue education, then Job Two will be much more appealing – whereas if you are not going to be getting a degree then Job One may be better.
In terms of retirement plans, Job One might have the highest employer contribution in dollar amount, but the percentage rate is better in Job Two. This means that the more you earn, the more will be heading towards your retirement 401(k).
When you are contemplating a job offer, it is always beneficial to see what the value of work perks is for you. The benefits on offer might not be relevant to your personal situation but being aware that there are other parts to the full compensation could make it more likely that a seemingly lower salary role is worth more in total compensation.
What this should show you is that no matter what your salary expectations are, there may be other benefits that might have more of an impact on your day-to-day life than just wages.
Do not base your decision solely on the offered salary; you could be missing out on valuable perks that have more than monetary benefits and could make a real difference to your life inside and outside of the office.