Q: How much are benefits actually worth? For example, if someone is willing to take a pay cut for more vacation days, how much is each vacation day worth? What are some additional perks and benefits a candidate could negotiate for aside from a higher salary?
A: There are two kinds of benefits: objective, and subjective. Each has its own yardstick. Subjective things are assessed relative to your values. For instance, you might take less money in exchange for the ability to work from home. You might want to do that to save expenses such as wear and tear on your car, or it could be valuable to you as lifestyle freedom. These are not measured to performance of the business or a compensation package, which are more objective.
One example is a person who has adopted a child and wants to be there for her, but also needs to work to “pay the rent.” For that person, it is important to have the ability to work from home to be around for the child. That’s worth maybe tens of thousands of dollars to this candidate. Or maybe the time it takes you to commute to a higher-paying job doesn’t work out in terms of gas expenditure and the additional wear and tear on your car compared to a job with a lower salary that is closer to home.
Objective things would include stock options, bonuses, retirement contributions, severance, health benefits — items that can very easily be quantified into dollars. Here you need to calculate the best-case and worst-case scenarios and you’ll know your short- and long-term compensation. If stock options are worth one percent if the company is sold, you get one percent of whatever the selling price is. You can then calculate the potential selling price so you have some idea of what that means to you. You can make the same sort of calculations with bonuses, healthcare, etc.
Next week’s question: Did I sabotage my chances for this position because I disclosed my past salary and it was too high?