New Job Money Considerations

Here’s a question that pops up more often lately than it did during the Great Recession: “I’m interviewing for a new job, and the salary bump would be at least 15%. Are there any other money considerations I should think about?”

MoneyI’d love to say “ABSOLUTELY,” but I feel like that’s rather condescending. Still, when the economy is good, job hopping is more common, and companies can often toss around nice, shiny salary increases as the thing to lure people away. There’s more, of course, to any new gig, so we’ve put together a list of new job money considerations. Keep these in mind as you negotiate.

New Job Money Considerations

Since I’m being pretty transparent on this site, I’ll share a story of my own. Back in the 90s, I was so desperate to get out of an employer that I took the only thing offered to me. The pay bump was better than twenty percent – but the rest of the package was virtually non-existent. I didn’t care: had to make the break from a toxic workplace, so I took it.

You could be in that boat: something new and different is automatically better because it’s not where you are. You’ll need to weigh the psychological benefits against the monetary benefits. Maybe it’s not that big a deal to you. It wasn’t to me.

Times have changed quite a bit, and some of the things that weren’t even considerations for me in my 20s are huge now that I’m in my…late 30s (ahem).

We’ve put our discussion into three categories, and we’ve tried to gear it around the middle class folks that are likely to visit this site. Here goes:

1. Hourly vs. Salaried

From a dollars-to-donuts standpoint, this is potentially huge. And, given the direction society is heading – more on that at another time – you could be walking into a minefield in either case.

Example: Let’s say Mary is currently an hourly employee at XYZ Widgets and she makes an even $25 an hour. Her workweek is 40 hours, and she gets two weeks of paid vacation, holiday pay, all those things. Here’s the simple math.

  • 40 hours/week x
  • 52 weeks/year =
  • 2080 hours/year.
  • $25/hour x
  • 2080 hours =
  • $52,000 a year.

Mary’s currently negotiating to leave her XYZ post for a better opportunity at QRS Inc. QRS wants her on salary – she would be “Exempt” from being paid overtime. (N.B. There’s quite a bit of discussion these days around the rules for overtime pay, and what are considered “archaic” wage and salary numbers to limit who is eligible to receive overtime pay. CNN Money breaks it down at this link.) Since Mary’s negotiating for a 15% bump in salary, let’s round up and say the offer is for $60,000 a year.

Mary would be crazy to turn this down, right? Not so fast…here are a few things she should make sure jots down.

Does Mary currently get the chance to get paid overtime at the current job? Ooh, wait a minute. That could potentially be rather large. Overtime, at time-and-a-half pay, would currently get her $37.50 an hour, meaning that she needs to work an extra 213 hours (or so) to make up the difference. If XYZ does work that can be seasonal in nature, what if a big order comes in and it’s “all hands on deck” for a few weeks? What if the boss says “hey, anyone who wants overtime, we could use you 60 hours a week for the next month”? Yes, this could happen, and could make up the difference.

Will Mary be asked to – or plan on – working more than 40 hours a week at her new job? Honestly, some people are go-getters who are looking for new and better opportunities, and are willing to come early, stay late, and show their stuff to their bosses and their peers. Others? Just there for the paycheck, and the chair is spinning at closing time.

Mary – and you – could be somewhere in between, though. Everyone likes to make a good impression, but not everyone is at the job to work their way up to VP and the corner office.

The knock on those archaic overtime rules is that employers can take advantage – change the job description, or just use that “other duties as assigned” clause to ensure that they squeeze as much blood from the turnip that they can.

Finally, and this should be totes obvious with the Great Recession in the rear view mirror (but still leaving chemtrails of yuck for many of us), What are the chances her hours could be cut where she is now?

We saw stuff like this during the Great Recession: mandatory, unpaid shutdown. Say goodbye to a week’s pay ($1,000, using the above example). The move from hourly to salary. Even something as nefarious as a change from a 40-hour week to 37.5 hours a week. (That would be huge: 1950 hours in the year, vs. 2080. Drop for Mary from $52,000 to $48,750.)

2. Health Care Costs

Of course you’re prepared to analyze all of the various options being presented to you at the new job. HMO vs. PPO, in-network vs. out-of-network, and how much you’re paying a month to cover yourself (and maybe your dependents). Don’t forget things like co-insurance and co-pays, too.

Charts, graphs, spreadsheets, tables – whip those things up to figure out whether you’re getting a good deal. But don’t forget these things – they may seem little, but they can make a huge (and sometimes crippling) difference between a good offer and one that’s pretty meh.

Flexible Spending Accounts, paying money back, and whether you’ve hit the deductible. Things happen. People get hurt. Kids get sick. Guys break their pinky toe on the door jamb getting contact lens solution out of the closet in early February.

If your FSA has been blown through and it’s in the first half of the year, you will probably have to pay that back. Ugh. If you’ve blown through the deductible, you’ll need to ask the new employer how THAT gets handled when you switch plans and coverage. Another Ugh.

Eligibility at the new employer, and whether you’re stuck paying for COBRA. What if the new place wants you really badly, but they don’t want you badly enough to make you immediately eligible for the health plan instead of having a 30-day waiting period. (Because that would take an act of God, or at least a bunch of papers that would need to go to the company’s board.) Well, you’ve got to be covered, so you’ll have to pay for COBRA.

In my 20+ years in Corporate America – including a half-dozen working in the insurance industry – I’ve never once heard someone say “wow, COBRA is a really good deal!”

3. Retirement

I should probably have made this first on the list, and not third. But, let’s face it, most people think about the here and now as opposed to the later (or, if you’re young, much later).

Whether or not you think Social Security will be there for you (I’m sorta in the middle on that one – but were I in my early 20s vs. my late 30s (ahem), I would have a much different opinion), you will need to be prepared to manage most of your own retirement. Here are some considerations that might be huge down the road.

Is there a 401(k) match, and how big is it? Someone sent me to the web page of a company that they were looking to join. Immediate eligibility for the retirement program (this was a 403(b) instead of a 401(k), since it was a not-for-profit employer) and a 200% match. You had to put in 5% of your pay, and the company threw in another 10%. (There was a vesting cliff, so you had to wait three years to be vested in the plan, but, even if you darted for another employer after a year, you’d get one-third of the employer match, meaning you’re getting another 3.33% of your pay tacked on.) This is an insanely generous match.

Most employers aren’t THAT generous, and you may have to wait a little while to be eligible. But the old adage is that “IT’S FREE MONEY.” Thus, don’t ignore it.

The math behind a retirement match can be staggering – even at the pay grade of someone like Mary, above – and you can play around with numbers by using this handy calculator over at Bankrate’s website.

Pensions are dinosaurs, but they do still exist. Don’t believe it? Here’s a story that ran in the Washington Post last fall.

I worked long enough at one employer to be eligible for one; my wife also clocked in enough time at an employer to be eligible, too. It’s not a crazy amount of money we’ll get when we’re of retirement age, but it’s nothing to sneeze at, either.

The quick rule of thumb – and I’m not an actuary, but I did work with a few in my day – is that pensions will pay you annually around 1% of your pay for each year that you work. Let’s use Mary’s job offer from the above example, and plan on her putting in the five years that are normal for vesting.

  • Average Salary: $63,680 (assuming 3% salary increase each year) x
  • Number of years worked (5) multiplied by 1% =
  • $3,184 annually upon retirement

Again, this is a VERY ROUGH calculation – you’ll need to look at the plan specifics to make sure that this is accurate for your situation. And of course you need to be mindful of whether or not you plan on spending five years at an employer to take advantage. (I’ve watched acquaintances go through sheer Hell for the last year of a five-year stint, just to get to the point where they have extra retirement income.)

What’s beautiful about a pension: the employer does all the work (so if the market crashes, it’s their problem, not yours), and there is a government insurance program, the PBGC, that US employers are required to buy into. So if the plan becomes insolvent, you’ll get some/most/maybe all of what’s coming your way.

Do the math…

Okay, there’s a lot here, folks. We’ve focused on three aspects that some people might ignore – but they’re important, maybe even vital.

There’s more to that job offer than just a few extra dollars.