Compensation

RTmarc · December 2012

My buddy and I were having a discussion about this topic a few days ago and I'm interested in the input of others. What does the collective think about compensation these days? Do you want a straight (higher) salary or would you accept / prefer lower salary but with added benefits? For example stock options, profit sharing, performance bonuses, company vehicle, special equipment (chair, computer, phone), etc. Another question is should potential employees start expecting or asking for such added benefits?

EDIT: This is purely a hypothetical conversation and does not apply to me or anyone else.

Tackle · December 2012

Since I'm already with the company, I'd opt for a higher straight income. I can't pay bills with a fancy chair.

If it was a job offer, considerations would be made, but most likely I would still opt for higher salary.

paulgswanson · December 2012

I'd rather just have higher income, our modified benifits are arse (but still better than nothing).

prtech · December 2012

More money hands down. I'd rather have more money to buy a car than get a company car that I'd have to return once I leave the job.

networkjutsu · December 2012

I'd consider stock options if I feel that it has great potential to get good money out of it or great dividends.

dave330i · December 2012

Prefer compensation. Less taxes to deal with.

kgb · December 2012

More money is a strong factor when you don't make enough of it. I'm in that category myself

If you are already making "enough", then the other stuff matters.

I don't care what anyone says, if you can't pay your bills, etc, money matters.

networker050184 · December 2012

Show me the money! Besides health and retirement I'm not looking for any other benefits.

networkjutsu · December 2012

dave330i wrote: »

Prefer compensation. Less taxes to deal with.

Less taxes? What do you mean? Gains (depends if it is short term or long term) and Dividends are taxed at 15% if I am not mistaken. Salaries are taxed more, 25% - 28% for most household.

Edit: Forgot the taxes you need to pay when you exercise the option. Dont know the rate on that one. I remember paying taxes on stock options that I purchased.

ptilsen · December 2012

networkjutsu wrote: »

Less taxes? What do you mean? Gains (depends if it is short term or long term) and Dividends are taxed at 15% if I am not mistaken. Salaries are taxed more, 25% - 28% for most household.

I think he more means that tax returns become more work the more you have to report. In an unrelated note, dividend taxes are almost certainly going up next year.

I like to assign a monetary value to my benefits. Ultimately it comes down to how much money it is, but having matching 401(K) and employee stock purchase plans are huge. I get a 50% 401(k) match and 15% stock purchase match. Those are big to me. The 401(k) is limited to 6%, IIRC, but even putting away 3% (4.5%, after match) is going to be plenty for retirement. The stock option is huge, just huge.

As far as perks, which are different from benefits, they are nice and can help keep an employee happy, but they don't translate as well to direct compensation. If one company only lets you get the last-gen iPhone, for example, that's not a big deal compared to getting the latest or having your choice of any phone (or not getting a phone, etc.). What I do expect is to be given the tools I need to do my job effectively. In the absence of those, I'll probably leave regardless of compensation, or make sure there is no expectation that I do my job effectively.

dave330i · December 2012

networkjutsu wrote: »

Less taxes? What do you mean? Gains (depends if it is short term or long term) and Dividends are taxed at 15% if I am not mistaken. Salaries are taxed more, 25% - 28% for most household.

Edit: Forgot the taxes you need to pay when you exercise the option. Dont know the rate on that one. I remember paying taxes on stock options that I purchased.

Like to keep my AGI low. I had 1 company that matched 10% of my gross income into my 401k. I was earning 6 figures, so they were giving me $10k+ "bonus" each year that won't be taxed until I withdraw from my 401k.

Iristheangel · December 2012

Depending on the company and the product, I *might* take a lower salary if it's a pre-IPO company and I get stock options, but I'd have to be pretty sure that there's a decent chance of a larger payout later

blargoe · December 2012

I'd take 10K less for more flexible work hours or partial telecommute as an option. Aside from that, all I really care about is health, retirement, and time off.

paul78 · December 2012

I have a fairly complex compensation package which includes a base salary and a variable portion. The variable portion of my compensation can make up to 50% to 150% of my total compensation. And includes a bonus which is calculated based on revenue targets, operating profit, and individual performance ratings. I am also granted both restricted stock and options. Other benefits include employee stock purchase plan (at a discount), 401k contribution matching. I also have the option for deferred compensation as a tax reduction strategy.

Generally speaking, I am a strong proponent of having my compensation include a large portion be based on variable components.

As for perks, I have an expense account which is the only thing that I usually care about as a perk. Other employers in the past have offered parking which is great if you work in a city.

ptilsen · December 2012

paul78 wrote: »

Generally speaking, I am a strong proponent of having my compensation include a large portion be based on variable components.

As for perks, I have an expense account which is the only thing that I usually care about as a perk..

Big agreement here. Performance-based pay is extremely motivating to me. While I get some satisfaction from simply knowing I add value, actually having a financial stake in the value derived from my own work is huge. Whether it's a performance-based bonus or commission, stock, or both, I think it ends up being mutually beneficial to the employer and employee. Even if they are paying me a lot more as a result, it also means I'm going to create a lot more value.

Expense accounts are nice perk. I save a lot of money on food when I travel, and frequent flyer/hotel/car rental programs are nice as well.

PurpleIT · December 2012

paul78 wrote: »

I have a fairly complex compensation package which includes a base salary and a variable portion. The variable portion of my compensation can make up to 50% to 150% of my total compensation. And includes a bonus which is calculated based on revenue targets, operating profit, and individual performance ratings. I am also granted both restricted stock and options. Other benefits include employee stock purchase plan (at a discount), 401k contribution matching. I also have the option for deferred compensation as a tax reduction strategy.

Generally speaking, I am a strong proponent of having my compensation include a large portion be based on variable components.

As for perks, I have an expense account which is the only thing that I usually care about as a perk. Other employers in the past have offered parking which is great if you work in a city.

I would love a compensation package like that, but it isn't for everyone, particularly those who are new to the workforce or have tight budgets.

As a government employee I have given up a lot of perks; most notably raises for the last 4 years or so, but the very good health insurance and 100% match on my mandatory 10% contribution to the retirement plan (fully refundable with interest should I choose to roll it over into an IRA when I leave) help.

Hypntick · December 2012

I left a position that had an amazing office, for example my butt was parked in a $1600 chair daily. Quite possibly the most comfortable chair ever in fact. There were regular team lunches, free drinks in the office (soda, high quality water, keurig coffee, etc.), there were bonuses available as well. I left for a position, that is very similar, although with more of a security slant vs. general admin type stuff. The main reason I left? I got a 58% increase in base pay. The office isn't as nice or new, the chair is certainly not on the same level, and I buy my own cokes now. However with that increase in base pay, I can also afford to buy that $1600 chair if I really want one, I couldn't have done that before. So yeah, long winded but, base pay hands down.

Mrock4 · December 2012

It depends. I value experience a LOT, and small things like the ability to work remote, various perks, support for training, etc- I would happily take a much lower salary if all of those things were there.

But, if there's none of those extra perks, bad insurance plan, and no support for training, I'd demand a higher salary up front.

kriscamaro68 · December 2012

Salary, health, retirement, and time off are the only things I care about. It sucks when my health insurance is taking $200 a month away from my paycheck. I am sure some of you have it much worse than I do and it sucks. I worked for the state at a University here and the health and retirement where awesome. Where I work now not so much but I make $17000 more a year.

ptilsen · December 2012

Mrock4 wrote: »

It depends. I value experience a LOT, and small things like the ability to work remote, various perks, support for training, etc- I would happily take a much lower salary if all of those things were there.

These are great examples of perks that you can put a direct dollar value to.

Determine the value of your time based roughly on your de-annualized salary (ie salary divided by number of hours actually worked yearly) if not paid hourly. Determine the rough cost per-mile driven (total costs over lifespan of the car divided by anticipated lifespan in miles). Determine your car and time savings from not commuting. Note that you will need to increase the car number to account for taxes, as car expenses are paid with after-tax money (on that note, don't forget tabs and other automative taxes!).

All that might take a few minutes, but it gives you an idea of the value of telecommuting, and can be easily adjusted for partial telecommuting. It can also be applied towards changes in commute time, number of days worked, etc.

Training costs are more direct. Again, what is the pre-tax value of the money you would have spent on training materials if an employer didn't provide it?

It doesn't have to be exact, but adding up these types of things gets you an idea of your real after-tax compensation, combining perks, benefits, salary, and bonuses/commissions/incentives.

I turned down a job that would have had a $15K higher base based on some of these valuations. Between bonuses, stock purchase plan, 401(k), commute time, vacation and sick leave, occasional telecommuting and general flexibility, I determined that the higher-base job would have actually been close to $5K less in real take-home pay and significantly less pay for my time in terms of real time worked and commuting.

SteveLord · December 2012

I already pay nothing for family health insurance and too many other union/govt employee perks to name (which makes me a big target in economic uncertainty). For me I would request more money as 4 kids are not cheap.

paul78 · December 2012

PurpleIT wrote: »

I would love a compensation package like that, but it isn't for everyone, particularly those who are new to the workforce or have tight budgets.

As a government employee I have given up a lot of perks; most notably raises for the last 4 years or so...

Very good point. And that type of package is probably only typical of larger employers. While I've had variations of that type of compensation with smaller companies, the risk was a lot larger.

I suppose I should add that because of my compensation structure, I do not generally get raises, usually only a token amount of less than 1% or none at all.

I was trying to point out that variable compensation has it's place. And if a proper risk/reward analysis is done, folks shouldn't automatically assume that having a high base salary is the best financial scenario.

One other dimension to consider, if an organization that is doing poorly needs to consider a reduction-in-force, management may take into consideration the fixed-expense relative to employees who have high base salaries. So I generally prefer to work for a company that has some flexibility with their head-count expenses because compensation of the employees have a variable component. In company contemplating a layoff, I rather have a job with lower-compensation than no job.

KeithC · December 2012

I'll go with the it depends stance. For myself whose base salary has not moved since 2006

I have only received 2 "bonuses" and since 2008 have a 3% employer matched IRA.

I would still take into account location, hours, flexibility, PTO, raises . . .

I do plan on taking a pay cut just to get out of my current position but as long as I can pay the bills the other perks are . . . just perks.

networkjutsu · December 2012

ptilsen wrote: »

I think he more means that tax returns become more work the more you have to report. In an unrelated note, dividend taxes are almost certainly going up next year.

I am hoping that they'll have an agreement before the end of the year. Though, I am a little bit skeptical. I think Obama wants to keep the taxes on gains and dividends to be the same for middle class and below compared to household making $250K/yr.

I like to assign a monetary value to my benefits. Ultimately it comes down to how much money it is, but having matching 401(K) and employee stock purchase plans are huge. I get a 50% 401(k) match and 15% stock purchase match. Those are big to me. The 401(k) is limited to 6%, IIRC, but even putting away 3% (4.5%, after match) is going to be plenty for retirement. The stock option is huge, just huge.

It sucks that a lot of companies nowadays are not matching 100% for the retirement funds. I had employee stock purchase plan before but never really took advantage when the stock price was at $20/share. Nowadays, it is trading at ~$35/share with a history of over $50/share. Oh well.

As far as perks, which are different from benefits, they are nice and can help keep an employee happy, but they don't translate as well to direct compensation. If one company only lets you get the last-gen iPhone, for example, that's not a big deal compared to getting the latest or having your choice of any phone (or not getting a phone, etc.). What I do expect is to be given the tools I need to do my job effectively. In the absence of those, I'll probably leave regardless of compensation, or make sure there is no expectation that I do my job effectively.

My current employer offers a choice of work computer and phone. Before my first day, they asked me what laptop I wanted. Any laptop that I wanted to use and all the accessories. I picked all Apple products. After giving the specs and everything, I felt guilty for spending their money. My laptop cost over $2K (MBP 15" Retina with 16GB RAM), Apple monitor (over $800), Apple keyboard (over $60), Apple TrackPad (over $60), and apparently they added AppleCare. From what I was told by my colleague, the employees can ask every three years for an upgrade. Never been in a company that does that!

For phone, I "ported" my personal phone to their plan and they dont like paying for early upgrade so I am stuck with my 4S for now. Though, my colleagues who had iPhone 4 were all upgraded to iPhone 5 if they want. Everyone opted for an upgrade. For all 4S users, we're stuck until the next phone comes along. I believe every two years they replace phones if you opt for it.

Do I care any of these? Not so much but I gotta say I don't like using craptops issued by a lot of companies. That's why when I was given the freedom on what I wanted to use, I gave them the specs. I hated my laptop at one of my companies I worked for. Hand me down laptop that had 1GB RAM. I had to make a "drug deal" with a desktop guy to give me an extra 1GB RAM to make it bearable. But then, when they deployed this software the keeps track of the software updates and stuff it made it really slow that I was really ready to smash it.

dave330i wrote: »

Like to keep my AGI low. I had 1 company that matched 10% of my gross income into my 401k. I was earning 6 figures, so they were giving me $10k+ "bonus" each year that won't be taxed until I withdraw from my 401k.

401K and dividends and gains are not the same though. I thought we're talking about that.

Gotta say, your 10K bonus each year to your 401K is awesome! Isn't it capped to 15-17K nowadays for the 401K?

I worked for an employer who matched employees contributions and multiple it to $3.xx (depending on their profit and capped to 2%). For several years, it was always over $3 so people who were there for more than 15 years or so were lucky (there were lots of it too)! Then when 2008 hit, everything started to go down. Went to minimum of $2 plus whatever their performance is and by the time I left they were only offering only 100% contribution up to whatever 6% I believe.

ptilsen wrote: »

Big agreement here. Performance-based pay is extremely motivating to me.

Thought I'd share this video - The surprising truth about what motivates us.

ptilsen · December 2012

networkjutsu wrote: »

I am hoping that they'll have an agreement before the end of the year. Though, I am a little bit skeptical. I think Obama wants to keep the taxes on gains and dividends to be the same for middle class and below compared to household making $250K/yr.

I think any agreement is going to likely include an increase in dividend tax. Even taxing at ordinary income would make dividend tax more expensive for the vast majority of stockholders. Not that it's really that big a change to after-tax income, but it's something to think about.

networkjutsu wrote: »

Thought I'd share this video - The surprising truth about what motivates us.

Very interesting. I still find performance-based pay motivating, but perhaps not in as direct of a sense as I thought.

jmritenour · December 2012

Generally speaking, I'd rather have higher salary. Benefits can change for the worse over time. For example, when I first started as a public school employee, I paid about $0 out of pocket for health insurance, and paid I think $10 a month for dental as an add-on. And my coverage was pretty good - $10 co-pay on pretty much everything, $500 (I believe) deductible, $1500 max out of pocket per year. But we went through a few budget cuts, had a few years where rates went up, and when I left 6 years later, I was paying $70-ish a month for health and dental, with a $25 co-pay for most stuff, but a $50 for specialists, $100 for ER/urgent care, and a $2000 deductible. There were better plans available, but nothing as good as what I had when i started.

So yeah, give me the higher base salary. I could see some benefits influencing my decision, but not totally driving it.

PurpleIT · December 2012

jmritenour wrote: »

... There were better plans available, but nothing as good as what I had when i started.

So yeah, give me the higher base salary. I could see some benefits influencing my decision, but not totally driving it.

I'm not disagreeing with your point, but I think you can generalize that a company with above average benefits will still have above average benefits even if they aren't as good as they once were - that type of thing seems to be part of the company culture and even with hard economic times they will try to stay true to their principals and that's what I read into your story. Almost every one's benefits cost more now than they used, I know mine do, but they are still a lot better than I would get a lot of other places and hopefully when I start my move/job hunt in the spring I will have to look at some of this really closely as I compare offers.

Some of the real fringe benefits (not in the dictionary sense, more in the, 'Oh, wow" sense) such as custom computers, expensive chairs, Google lunch room, etc sound nice and I wouldn't mind having to deal with those as well, but like you, I don't think they would be driving factors in a decision.

Compensation

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