Complexities of Compensation

Understanding your “Full Package”

When many of us talk about comparing salaries we often miss much of the iceberg that goes into our compensation.  Yes, your compensation is more than your salary.  It’s tempting to only look at the numbers you get back on your paystub and think someone else’s grass is greener, but is it?  Compensation is far more complex than many people think.  Salary, medical benefits, retirement, paid leave, and several other factors are a part of your compensation, or at the very least the value of your position.  You can find few articles that wish to wade into this murky category because it quite often becomes a game of comparing apples to oranges.  Still it pays to really think about what a compensation package is.

The thing we all have on our pay stubs is Social Security and Medicare. Both of these government programs require your employer to pay a percentage of your paycheck.  Typically the cost of these programs is split between the employer and employee.   The higher your salary, the higher your employer’s contribution to these programs. After these two programs things can look a lot different depending on what sort of employment you have.

Health Insurance Policies

Health Insurance Policies

Those of us enjoying full-time status and a few others have health insurance.  What our employers contribute towards this health insurance, and its value, are not equal.  For some employers the contribution may be only 50% while others will cover 100% of the cost.  An employer may also decide to provide single plus dependent or family insurance through their benefit package or simply a plan with a lower deductible.  This is one of the largest and most expensive benefits provided by an employer and depending on how it is compensated the value towards a full package can vary quite a bit.  For example an employer might decide to provide 100% of a single family plan while another pays for 70% for that benefit.  In the same example the first employee may make $2,000 less on their salary but, with insurance benefits, still has a larger full-package than the employee who may have a higher salary but lower benefits.

Some employers will also offer other types of health and medical benefits.  Dental, vision, and disability insurance are some such examples.  These benefits have a dollar value, though they can be a bit harder to compare.  Often these types of insurances can have reduced premiums because the benefit is offered as a part of a group. The more people in the group, the more it can drive down the premium.  The exact cost of that premium to a specific member of that group can also vary.  The behavior of those in the group can also affect premiums.  Still, these all have a value and not every employer will offer it.



In some positions you may be offered a 401 K, IRA, pension, and other post-employment benefits.  The value of these packages can vary quite a bit.  The tricky thing about these types of benefits is that you don’t really get to see the value of it until you retire.  If your employment package is offering a significant retirement benefit it may not seem like much simply due to the fact that you really don’t get to “see” the results until down the road.  When you retire the benefits of these forms of compensation become very apparent.

Then there are the benefits with a less concrete monetary value.  Those being the paid leave, vacation, travel reimbursement, continuing education, and other various features that can contribute to an enjoyable employment but may not always have a clear dollar value.  You may enjoy good pay, for example, but seldom be able to take a day off or are always on-call.

Not directly related to your paycheck but an often overlooked factor is cost of living.  The cost of living in particular places varies and a lot of this can be seen in home value.  It’s not unusual for properties in rural America to be as much as a third of the cost of a similar property in an American city.  The cost of various city and local taxes can also contribute to substantial differences in cost of living.  Just because a salary of a position in one location is not equal in dollar value to the same position in a different location, does not mean it provides the same standard of living.

In addition to these factors there is also something that can be said for job stability, dependable pay, secure hours, vacation, work schedule, on-call assignments, equipment/supply access, resources, and other aspects of your job.  If you are a sales person you may get your pay based, in part, on what you are able to sell.  This is subject to various natural fluctuations that you won’t always be able to control.  Those working for the health care industry may enjoy highly secure positions with dependable pay but have to work holidays, weekends, or other undesirable shifts.  Some positions offer tenure and continuing contract rights, offering a high degree of stability in employment and dependable pay.  These are factors that can be difficult to compare with a concrete dollar amount but are important to consider.

The point of all of this is that there are many factors that go into someone’s compensation.  A great deal more could be written about this topic and nuances involved. It would be difficult to avoid applying our personal bias, values, and perceptions to these comparisons.  So if you are looking at your own compensation or someone else’s compensation, remember that your compensation package and your salary are not the same thing.

To illustrate how this can get complicated and to make it a little less abstract, I will provide a few comparisons.  These are only meant as examples and are only meant to illustrate the complexity that goes into compensation.

Compensation Package Breakdown

Compensation Package Breakdown

A starting teacher here in Elgin/New Leipzig makes $36,750 for their salary.  They also receive insurance, TFR, and some smaller benefits.  When you compline these items the teacher’s salary (with single insurance) only comprises 67% of their compensation.  This makes a total package of $55,053.11.  So how does this stack up against a job that all of us would consider a good quality job?  If you take a starting wage for a nurse in Elgin their salary is 84% of their compensation.  That salary amount is $53,040.  Included in a local nurses compensation package is single insurance, and retirement.   These benefits stack up to just below $10,000 in value.  This brings the total compensation to $63,023.76.  This number is higher compared annually but how does this stack up per month?  Teacher contracts run for 9 months and the salary amount I used was for a 12 month nurse.  This would mean a nurse has a compensation value of $5,251.98 per month while a teacher is $6,117.01.  Does this comparison compare total compensation packages?  No it does not.  To do that you’d have to also go into leave, work schedule, and other factors.  These items don’t have a simple dollar value but my point is that comparing compensation is much more complicated than many people would lead you to believe.

Another example is how our salaries’ compare against larger cities.  So how does this stack up against Mandan? Mandan offers 72% of a health insurance policy and 100% on long term disability, life insurance, dental, and vision.  This sounds like a lot but the dollar value paid out on those benefits is less than covering 100% of a single insurance.  Mandan does not contribute more than the employer’s share of TFFR.  This means 75% of their compensation package is salary.  When you calculated this to a full package offer it comes in at between $60, 536.80 and $61, 127.80.  That sounds like it’s a healthy bit higher than what Elgin/New Leipzig is offering, doesn’t it?  Once you calculate this out, one should really factor in cost of living.  Some resources state that Mandan has as much as 27% higher for cost of living and you can find ones down at 17% (This is primarily due to home values). For the sake of this article we can use 17%.  If you apply that amount to the ENL salary package the adjusted amount to have the same standard of living in Mandan would be $61,300.61.  Could you argue against this math?  Certainly.   Again the point is that salary is only one aspect of an employee’s compensation.  There are other aspects of compensation that can be assigned a dollar value and others that have value but assigning a dollar amount is difficult.

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