INTRODUCTION

Salary is a very important factor in choosing a job, but it is not the only thing to consider in terms of your finances. Suppose you have a job making $40,000 a year or a job making $15 an hour. This is not your total compensation amount. Your wages are around 70% of your compensation and your benefits make up the other 30%. Therefore, it is important to know what benefits are available to you and how to take advantage of them. There are also other costs you need to consider when thinking about your job. 

You need to consider your personal costs when working. Does your job only provide vacation time during holidays and peak travel times? This increases the cost to you for taking time off and vacationing. Does your job require you to wear a certain type of wardrobe or uniform? If you purchase either of these yourself, this adds to your expenses. Does your job require training or certification? If they do not cover these costs, partially cover these costs, or require you to complete these prior to even being offered a job, these can greatly add to your expenses.

You need to consider how the location of your job impacts your expenses. If your job is physically located in an expensive area, lunches and socializing events could greatly increase your expenses. Your commute adds to your cost, so you need to consider direct travel expenses if you are taking public transportation or paying for tolls and indirect travel expenses such as the cost of your vehicle and the mileage you are putting on your car. The value of a high paying job could be wiped out by the costs to you for the mileage and wear and tear you put on your car that lowers the value of your car. If you decide to move for your job or your job requires you to relocate, any moving costs not covered by your job would add to your expenses. Is your job remote? Normally when you go into a job the necessities you need are paid for by your employer such as a computer, internet, printer, desk, and other costs. If you work remotely, having to pay for any of these costs yourself will increase your expenses. 

For some, you need to consider how you can add to your base salary with other compensation. This could be bonuses that increase your pay. Sales or other similar jobs may have commission that adds or lowers your pay. Overtime may be available to you to add extra pay. Holiday pay may be available to you if you work certain days. 

For some with non-paying jobs, the training and experience that goes along with the work may be factors you need to consider. This could be an internship or a low paying apprenticeship that gives you on the job training. This lack of proper compensation may be a necessary step in the field of work in order to access higher pay.

One benefit to consider is that your employer may pay towards your Federal Insurance Contribution Act (FICA) taxes. FICA taxes include Social Security and Medicare. The US government collects 12.4% in Social Security taxes and 2.9% in Medicare taxes from you. If you are self-employed, you are paying this entire 15.3% out of your income. If you work for an employer, you typically split this tax 50-50 with them. You pay 6.2% in Social Security taxes and 1.45% in Medicare taxes and they take care of the other half. 

As for your benefits beyond your salary, your total compensation package includes retirement plans, insurance, tuition reimbursement, paid time off, dependent care and other benefits. Although you may never see this money directly, your benefits can add up to tens of thousands of dollars in non-salary compensation.

Job Compensation Components