Job Compensation: What to Know—and Why

On the job, you exchange your time, skills, and knowledge for compensation—typically in the form of salary and benefits. Understanding these compensation factors and how organizations calculate them gives you two forms of power in the job search:

• The power to assess a compensation package and how it aligns with your priorities.
• The power to negotiate for a better package or look elsewhere for compensation that better aligns with your needs.

Direct Compensation: Money Matters

Organizations set salaries based in part on four external factors:

• The availability of qualified workers
• Standard market rates for the position
• Regional costs of living
• The skills and education that the job requires

Further, many organizations set internal annual staffing budgets for each permanent, full-time position to help managers plan staffing resources in relation to available funds. Each position often has a set quartile as well—that is, a four-layer salary pay band that increases from the lowest to the highest available pay for that role.

Where you enter the quartile determines both what you’re paid and how much money in raises is available to you. It also establishes a pay ceiling; once you advance to the highest quartile, increasing your pay typically requires a promotion to a higher position and a new quartile.

Benefits: Your Quality of Life

Most organizations offer full-time employees at least a basic benefits plan:

• Medical and dental benefits
• Retirement plans
• Paid vacation, sick days, and family leave policies

Some organizations offer more comprehensive benefits, which might include any or all of the following:

• Wellness programs
• Stock options
• Flex time and remote work options
• Tuition reimbursements
• Generous retirement matching funds
• Generous personal and family leave packages

From Knowledge to Power

Understanding compensation factors can help you to better assess, ask about, and negotiate offers.

Assessing Salary

Many job descriptions include the salary range. If not, it’s a fair and expected question to ask in the initial stage of the interview process.

Once you know the range, consider the following two factors:

• Your priorities and needs
• Pay ranges for similar jobs in your area

You can search for average salaries by position and region on job sites such as Indeed and Glassdoor. Knowing the salary average will help you to gauge the salary range and a specific salary offer once it’s on the table.

Given what you know about your own skills and experience and the offered salary, you should have a clearer idea of how much room and power—if any—that you have to negotiate for higher pay.

Assessing Benefits

Benefits often depend on an organization’s size and culture. Some organizations offer average salaries but above-average benefits; for others, the opposite is true.

Whatever the case, it’s wise to weigh and understand particular benefits in relation to your current life phase and anticipated needs. To start this process, consider the following:

• Your priorities: Are retirement benefits your top priority, or are family leave and remote work crucial? Thinking about each benefit, your ideal scenario, and what you’re willing to compromise on can help you to evaluate packages and discuss possible changes to the offer.
• Quality of life: Benefits packages that include wellness programs, education benefits, and flexible time off may not be readily monetized, but they often add up to greater day-to-day enjoyment of your job and your life outside it.
• The bottom lines: What is the employer match on 401K plans? How long before you’re vested in retirement plans and stock options? Studying these and other benefits for the numbers involved might seem tedious, but understanding the bottom line on various benefits can help you calculate and compare packages—as well as how they’ll benefit you in the future.

Other Considerations

In addition to salary and benefits, compensation can also come in the form of experience, opportunities, and a great work environment. And sometimes a job with lower pay and fewer benefits might have interesting projects that can set you up for your dream position down the road.

In assessing job offers, compensation is just one factor; for others, see Good Job or Bad? Green Flags in Your Search for Employment and Good Job or Bad? 3 Red Flags to Watch For When Job Hunting.