Skill Level Intermediate
- Here's a lesson that I know I've learned the hard way. Before saying yes to a job offer, you really need to do the math on what the offer really entails. It's easy to skip that step. Especially when you're excited about the offer and keen to get started. So here's a few things to consider. When you're negotiating for or you've received a job offer. First is the idea of total compensation. We tend to look to the salary as the number that we focus on. But when you look at the benefits and terms, the number can change substantially.
For example, a 75000 dollar a year job with no benefits may actually end up giving you less in your pocket than a 60000 dollar job a year with benefits. How's that possible? Well, remember in most countries, the more salary you earn, the higher percentage of your money that may go to tax. Then when you look at benefits. A company paying your healthcare, retirement fund and transportation, for example, could save you thousands of dollars a year. So here's what you do.
Create a worksheet to get an idea of your total compensation. Ensure you list out everything that's either a direct or indirect payment. Do you get a subsidy for public transport? Does the company provide free lunch? Even those two things could add up to thousands of dollars saved in the cost of a year. An importantly, is there an equity component to the package? Where you'll get access to shares in the company. They can make a huge difference to compensation. Next comes the tricky part. Expenses.
Be brutally honest about what the new role will cost you. Extra transportation costs if you need to travel further. And the biggest one of all. Lifestyle inflation. A new job can feel like an opportunity to reward yourself a new wardrobe or car but please resist that urge. So go into the spreadsheet and add those additional costs over and above your current spending. Then when you subtract those from you compensation number, that's the number to consider. But we're not done yet.
One more thing to keep in mind are the terms of the offer. Read the fine print very carefully. How much notice do you need to give? Are you restricted from working in the same field if you resign? And what are the severance terms? Now there's one thing we haven't thought about. Assessing a public sector job versus a private sector job. In many countries, there's a lot of transparency around compensation in the public sector. And the giant benefit of a pension. A friend of mine who worked at a law firm joined the public service in her mid-40's because she did the math on the total compensation.
She evaluated how much she could earn for 15 years as a lawyer in private practice versus 15 years as a lawyer in the public service that qualified her for lifetime pension. She calculated there was no way she could save and invest enough money to generate her regular monthly income from 60 onwards. A savvy decision. Last, it's worthwhile getting a second opinion on your job offer from someone you trust. And if it's particularly complex offer, talking to an employment lawyer or your accountant could be a good investment.
You've worked hard to get where you are. Make sure that you're being compensated properly and don't forget to negotiate. Offers are often just the starting point.