Skip to Content
Tally logo

Got a Job Offer? How to Factor in the Cost of Benefits

Generous employer benefits can make a big difference in overall compensation. But how do you calculate the value of a job offer benefits package?

December 16, 2021

When searching for a new job, most of us consider the salary offered before anything else. And of course, salary is very important — but it's not the only factor to consider. 

We often overlook other important job perks in our job searches, such as the benefits package.

Benefits are an important factor to consider when accepting a job offer or deciding between multiple options. At the same time, benefits can be difficult to evaluate and quantify. How much is a job offer benefits package really worth?

This article will explore how to evaluate a job offer while factoring in the value of a benefits package so that you can make the best decision for your career. 

Benefits package basics 

For most salaried positions (and even many hourly roles), employers offer what is known as a comprehensive employee benefits package. 

This benefits package is generally considered separately from the salary — so many employees may have the same or similar benefits package while having drastically different salaries. 

Benefits packages can include:

  • Health insurance

  • Dental insurance

  • Vision insurance

  • Life insurance

  • Disability insurance (short-term and long-term)

  • Paid time off (PTO)

  • 401(k) or other retirement plans (often with employer matching)

  • Flexible spending accounts (FSA) for healthcare costs

  • Company stock options/company equity

  • Other perks, like free employee meals, discounts on company products, etc. 

Human resource (HR) departments manage company benefits. You’ll likely receive a pamphlet or document explaining the benefits package when offered a job. You can follow up with HR if you have any questions to ask before accepting a job. 

How to evaluate a job offer benefits package

Consider this scenario: You have two competing job offers, one from Company A with a salary of $50,000 and one from Company B with a salary of $54,000. Which do you pick?

The obvious choice would be to take Company B position with the $4,000 higher salary. 

However, weighing each company’s job offer benefits packages is wise, as a quality benefits package can easily be worth more than the $4,000 salary difference. 

Ask for details

Some job offers may be vague in their initial language regarding benefits. For instance, they may offer 401(k) and health insurance, but how good is the insurance, and does the company offer 401(k) matching? 

Follow up with the recruiter or the employer’s HR department to get specifics on the benefits offered for the position. 

Quantify what you can

Some perks are easily quantifiable — meaning that you can put a dollar amount on their estimated value. Here’s how:

Health insurance: Research the average costs for a private health insurance plan through your state’s healthcare marketplace. You may not know exactly how well the employer’s plan stacks up against the benefits of a private plan, but this’ll give you a rough estimate. 

  • Example: A silver-level plan from the marketplace may cost $350 per month, and a potential employer offers a comparable plan for $100 per month. Therefore, this benefit is worth roughly $250 per month, or $3,000 per year. 

Other insurance perks: Research the average costs for each insurance product offered by the employer.

  • Example: Comparable dental insurance plans cost $50 per month, vision costs $30 per month, and life insurance costs $25 per month. The job offer includes these for free, so these benefits are worth a collective $105 per month, or $1,260 per year. 

Paid time off: Take your salary offer and divide it by the total number of working days per year (there are 261 working days in the year, although your position might differ). This gives you your daily pay rate. Then, multiply the daily pay rate by the number of days off in your benefits package. 

  • Example: A job offer is for a salary of $50,000, and you work 261 days annually. The daily rate is $191.57. The job offer includes ten days of paid time off per year, making this benefit worth approximately $1915.70 yearly. 

Employer matching on 401(k): If the employer offers matching, calculate the maximum amount that the employer will contribute to your plan (if you also contribute the maximum).

  • Example: The offer includes 401(k) matching for 100% of contributions up to 3% of salary. At the $50,000 salary level, the potential employer would contribute up to $1,500 to my 401(k) if you contribute $1,500. This benefit is worth up to $1,500 per year. 

Stock options: If the employer offers stock options, calculating the value depends on whether it’s a publicly-traded company or not. If it’s publicly traded, you can use a calculator to estimate the future value of your options. If it’s a private company or startup, there’s no real way to measure option value. If the company never goes public or is acquired, the options may not be worth anything at all. 

Other benefits: Other benefits may be more difficult to quantify, but you can estimate. For instance, free employee lunches might save you $5/day (assuming you pack a lunch), and an FSA may save you ~$200 in taxes each year.

Consider what each benefit is worth to you

If you’ve calculated the raw value of each benefit, now it’s time to get more personal. What’s each benefit worth to you? 

For instance, a vision insurance benefit isn’t helpful if you have perfect vision. If you have excellent health insurance through your spouse, then a health insurance perk through your new job doesn’t add much value. 

Add up the total estimated value

Next, take the estimated value of each of the perks in the job offer benefits package, and add them up. This will tell you the approximate value of the entire package. 

You can use this figure, combined with the salary offered, to evaluate the true value of the job offer you have received and compare it to other options you may have. 

The value of total compensation

Navigating the job search can be tricky, but it’s important to consider all your options. Instead of just looking at the salary figure, calculate the total compensation package based on your own estimates of what the benefits are worth to you. 

Want more help navigating your career? Check out some helpful articles from the Tally blog:

If paying off debt is on your financial to-do list, check out Tally†. Tally is a powerful personal finance app that helps qualifying Americans tackle their credit card debt more efficiently. 

†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. Based on your credit history, the APR (which is the same as your interest rate) will be between 7.90% - 29.99% per year. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.