What to consider when making a decision about a job offer or career change.
When you’re evaluating a career change, like taking a new job or becoming self-employed, it’s important to weigh your options carefully. There’s usually much more to an employment offer than just the face value of the salary or hourly wage. In fact, benefits other than gross pay can make up as much as 30% of a compensation package. If you’re thinking about working for yourself, you’ll need to factor in additional expenses that come with being your own boss. There are lots of financial and non-financial issues to consider before you make a final decision about your next career move.
How to Evaluate a Job Offer
Let’s begin with a situation where you receive a job offer from a new employer. The work and pay sounds great, but you feel torn because you get really great benefits from your current company and you like working with your boss. How do you make an “apples-to-apples” comparison so you’ll know which situation would be better for you in the long run? I’ll break down everything you need to review into six categories: income, benefits, expenses, time, career path, and environment.
Job Offer Consideration #1: Income
The base salary or hourly wage—plus commissions and bonuses—will obviously play a huge role in whether you want to accept a new job offer or not. Add to that amount any additional reimbursements or allowances that you’d receive for expenses, such as your training, auto mileage, cell phone, Internet, relocation, travel, and client entertainment. Company reimbursements are great because they’re generally not taxable—so the more of those you get the better!
Try to estimate your future potential income. Does one opportunity offer an income guarantee, an annual cost of living adjustment, raises based on performance, a growing customer base, or a more lucrative sales territory, for instance? Think about how those factors could positively or negatively influence your earning potential over the next few years.
Job Offer Consideration #2: Benefits
For some, a job’s benefit package is just as important as the size of the paycheck. Find out what insurances you’d be eligible for and how much they’d cost each month. Ask for details about what retirement benefits come with the job, such as:
a 401(k) or pension, and whether the employer offers matching funds,
Health Saving Account (HSA) contributions,
or any other type of savings or performance incentive.
Consider how long you have to be employed before you’re eligible for benefits and what the vesting schedule is. (Vesting is the length of time you have to stay employed before you fully own employer-provided funds, such as 401(k) matching or profit sharing.) Other valuable benefits might include the use of a company vehicle, cell phone, computer, or tuition reimbursement.
Since the value of benefits can be a substantial chunk of your total compensation, it’s very important to review the entire package carefully. Play it safe and ask to see a company’s benefits enrollment packet so you can review it and verify the details. Also, don’t assume that a big company will have a better benefits package than a small company. The human resources department should be willing to answer any questions that you might have.