Many individuals look to change their employment when they look to increase their income. In fact, many would prefer to go through the stressful process of changing jobs rather than petitioning their current employer for possible options to increase their total compensation. While it may be intimidating to approach an employer with a request for a raise or benefit options, it can be more prudent. Considering ways to increase your total compensation with your current employer, while potentially minimizing added expense to them, might allow you to stay where you are. Doing this might even provide added proof of your value to the company.
The emotions that are often tied to an employee's explicit pay tend to drive the decision to stay with a company, or leave for greener pastures. It is human nature to be influenced solely by what we see in our take home paycheck. This common mistake fails to recognize the overall total amount of compensation we are receiving.
When considering your total compensation, take into account several key elements in addition to salary. Consider benefits that can be essential to your future quality of life, including retirement planning. Does your employer offer a 401k (Traditional and/or Roth)? If your employer offers a matching contribution, some may consider that free money. What about Short Term and Long Term Disability? These policies protect a portion of your income should you have to take off work due to unforeseen health reasons. Do you have the option to enroll or select a Health Savings Account? These types of accounts can be used to pay for medical expenses with tax free dollars.
If you're a visual person, begin by making yourself a spreadsheet. Organize columns according to the benefits and salary offered through your current employer. Compare the data with your current employer to that of your future prospect. This will allow you to more easily compare what you have, versus what you stand to gain, or potentially lose if you switch jobs.
Pay Increase, Taxes, and Take Home Pay
Another important consideration is the tax implication of a raise in pay. An increase in pay could mean a move into a higher tax bracket. We may not realize this while we are focused on our gross income. In reality, if we knew how it might affect our bottom line, we might be willing to negotiate something different, and of greater benefit.
A pay increase will cost an employer more in taxes, in addition to impacting the company's operating costs. Before asking for a raise in pay, familiarize yourself with what the government calls Fringe Benefits and the exclusion rules. This information can help you financially by providing a persuasive argument for increasing your total compensation, but not costing your employer more in taxes. This shows your employer that you want not only what is best for you, but also what is best for the company.
Benefits Can Include Corporate Perks, Rewards, etc.
There are many more employee benefits that can factor in to your total amount of compensation, and quality of life. Make a list of other day-to-day items that might be important to you besides just the salary increase:
- Would you like more time off?
- The option to telecommute?
- Daycare costs partially or completely covered?
All of these items could have a different impact on your total compensation while your base pay might stay the same. These non-salary, based benefits could help stretch your take home dollars further.
You’ve heard the saying, location, location, location.
If you are on the path of changing jobs, be sure to consider how job location might affect your budget. To learn more about the cost of living and commuting in your area, in comparison with the location of your current employer and future prospective employer, search “cost of living" with your internet browser and you’ll be presented with several options like Salary.com. This allows you to do a quick check regarding what your job position might be worth elsewhere in the U.S, as well as the range where you currently live.
All too often we look at short term satisfaction rather than long term benefits. Savvy employers recognize that the cost of hiring and training a new employee is extremely high. Therefore, they know it would probably be cheaper in most cases to keep you and offer more benefits. Either way, you need to be sure to evaluate the true intangible benefits of your current employment so that you can make the decision that is right for you.
We've all heard the saying, “the grass always looks greener on the other side”. This is usually true, of course until you get there.
***This material was created for educational and informational purposes only and is not intended as tax, legal or investment advice.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.