5 Factors to Consider When Evaluating a Compensation Package

Learn how to determine the real value of a compensation package, including financial benefits, bonus perks, and development opportunities.
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  • Decide which benefits matter the most based on your lifestyle and preferences.
  • Look for opportunities for growth in addition to financial and other tangible benefits.
  • Perks such as paid time off and health coverage can improve your quality of life.
  • You can try to negotiate with an employer for added benefits like remote work days.

What is compensation? Many people believe it only refers to a worker's salary. However, according to the Bureau of Labor Statistics (BLS), salary accounted for only 69% of the average U.S. worker's compensation in 2021.

You need to consider the benefits, perks, and intangible bonuses of an employer's compensation package to understand its total value. A larger salary may seem great, but is a raise worth it if you need good health coverage and prefer the flexibility to work from home but your new job offer provides neither?

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Read on to learn how to evaluate compensation and benefits and figure out what matters most to you.

Paid Time Off (PTO)

Many employees prefer jobs that offer good work-life balance and ample vacation days. In a 2022 Financial Mobility Survey carried out by KeyBank, 62% of respondents said work-life balance is more important than a high-paying salary. And time off is especially important for many people with children. According to a 2021 FlexJobs survey, 82% of working parents said work-life balance is the most important factor when considering a new job.

When analyzing a compensation package, you can compare your PTO offer with the typical private sector company. PTO packages vary depending on a worker's industry and time spent with a company, but 34% of workers in private industry were awarded 10-14 days of paid vacation after spending at least one year with their employer, according to BLS data from March 2021.

You can calculate the value of your total benefits package a few different ways, depending on how you're paid:

Option 1:

Multiply the total hours you work in a year by your pay per hour. Subtract the hours of your PTO from your total hours. Divide the first number you found by the second number. This will help you consider the financial benefit of your PTO.

Example: John works 32 hours per week and gets paid $15 an hour. His company offers 2 weeks, or 80 hours, of PTO each year.


32 [hours per week] x 52 [weeks in the year] = 1,664 yearly hours worked

1,664 [yearly hours worked] x $15 [pay per hour] = $24,960

1,664 [yearly hours worked] - 80 [yearly PTO offered] = 1,584 hours

$24,960 ÷ 1,584 = $15.76

For every hour John works, he earns an additional $0.76 an hour in PTO.

Option 2:

Divide your annual salary by the number of working days in a year. The result is your daily pay, which equals what a paid day off is worth for you.

Example: Mary makes a base salary of $55,000 a year. She's offered two weeks, or 10 days of PTO, annually.


$55,000 [salary] ÷ 260 [yearly working days] = $211.54 [daily pay]

$211.54 [daily pay] x 10 [PTO days offered] = $2,115.40

Mary's PTO is worth $2,115.40 a year.

Health Insurance

The health insurance coverage an employer offers can affect the quality of life for you and your family. According to the BLS, in 2021, employers covered 78% of medical care premiums for single coverage plans and 66% for family coverage plans. This comes out to a significant financial benefit, averaging about $476 for single plans and $1,175 for family plans each month.

When you evaluate a job offer, consider contacting the company's HR department to learn more about coverage details and determine how much will be deducted from your paycheck to cover your premium.

Then, consider what kind of health coverage is important to you. If you need frequent medical care or the help of specialists due to underlying health conditions, check that your future employer's plan covers your specific requirements.

Potential for Growth and Development

What does compensation mean aside from tangible financial benefits? One of the more difficult factors to evaluate when considering a job offer is the potential for growth and development.

Though it's hard to accurately assess a company's commitment to employee development, you can check out training opportunities within the company, as well as other factors.

How many employees work in the human resources department compared to the total number of workers? Companies with understaffed HR departments may be less likely to support employees and help them grow.

If you want to further your education, ask your potential manager if the company offers tuition reimbursement programs. According to a 2019 survey conducted by the International Foundation of Employee Benefit Plans, more than 90% of employers offer some type of educational benefit. Benefits may include tuition assistance plans or student loan repayment benefits. If a company offers educational benefits that you plan on taking advantage of, factor these into your compensation package.

Retirement Benefits and Perks

Top employers who want to attract great talent may also offer additional benefits. These include retirement benefits (401(k) or pension plans), contributions to health savings accounts, employee discounts, and signing bonuses.

March 2021 data from the BLS' National Compensation Survey showed that 72% of civilian workers in the U.S. had access to some type of retirement benefit. If a retirement plan is part of your compensation package, ask the company for details.

Does the employer offer full or partial matching? At what percentage of your salary do they cap contributions? For companies that offer 401(k) matching, Vanguard reports that the median match rate was about 4% of an employee's salary as of 2021. Compare your offer against this baseline.

Other possible perks include a corporate car, access to a gym or wellness programs, a cell phone, and transportation costs. Calculate what these items would have cost you personally and factor them into your total compensation package.

Remote Work and Flexible Schedules

Remote work has become more popular than ever, especially among younger employees and working parents. Though some employees still enjoy an office environment, a 2021 GoodHire survey found that 68% of Americans prefer remote working options.

Before you accept a job offer, ask if partial or fully remote work is part of the company's definition of perks. Even if companies don't offer a work from home option, check to see if they offer flexible hours.

If you want a location-independent lifestyle or need to balance work with childcare, you may prefer a compensation package with a lower salary but greater flexibility in terms of work location and hours.

Additionally, check if there are restrictions for potential remote work before making a decision. Many companies still require remote employees to live in the country or state.

Frequently Asked Questions About Compensation Packages

What is in a total compensation package?

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A total compensation package includes a worker's salary, supplemental pay, and benefits like medical insurance and paid leave.

Companies that want to invest in their employees will often include retirement benefits, usually in the form of 401(k) matching or pension plans. Some employers may offer additional perks, such as training programs, disability or life insurance, flexible spending accounts, and tuition reimbursement programs.

If your potential job requires you to move, employers may also cover relocation expenses as part of a total compensation package. Many companies offer perks like flexible schedules or employee discounts. The breadth of the compensation package differs from employer to employer.

How do I negotiate a better benefits package?

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First, know which parts of your benefits package you can or cannot negotiate. Usually, you can't negotiate factors like 401(k) contributions and disability coverage because wider company policies or legal regulations prevent employers from changing these numbers.

For the benefits you can negotiate, like remote work days and transportation costs, research what the average company in your industry provides. After receiving a benefits package offer, you can use this industry research to ask for additional, reasonable benefits.

Does compensation mean salary?

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Though people often make this mistake, compensation does not refer only to salary. According to the BLS, benefits make up an average of 31% of an employee's compensation in 2022.

These benefits may include health insurance, retirement benefits, and other employee perks. The BLS also notes that supplemental pay, such as overtime pay and bonuses, makes up 3% of employees' total compensation.

When evaluating compensation packages, don't focus solely on the potential salary. If one employer's compensation offers a lower salary but has superior health coverage and 401(k) matching, you may prefer that job based on your priorities.

BestColleges.com is an advertising-supported site. Featured or trusted partner programs and all school search, finder, or match results are for schools that compensate us. This compensation does not influence our school rankings, resource guides, or other editorially-independent information published on this site.

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