Why you Need to Put a Monetary & Qualitative Value on your Employee Benefits
A few weeks back, I asked you all to vote on what employer sponsored benefit was your favorite. Out of 238 votes, the first place benefit was rather clear: medical, dental, and vision insurance. Here are the poll results:
As you can see by the bold lettering, I personally voted for 401k match. I’ll highlight why in a little bit.
I was honestly a little surprised that health insurances were voted to the #1 spot by almost double the second choice (401k).
How to Put a Value on the Employee Benefits that you Receive
I see two different ways to valuate how much any job’s employee benefits are worth:
- Monetary (quantitative) value
- Qualitative value
Monetary value is pretty simple. Every one of these benefits, with the exception of ‘the people you work with’ can be assigned a monetary value.
Qualitative value is a much harder to measure metric. For instance, it’s hard to argue that stock options have much more than a monetary value. Vacation days, on the other hand, do have a monetary value (per day you receive off), but are almost always highly regarded for their qualitative value.
Monetary (Quantitative) Values of Employee Benefits
- Health Insurance: I was quickly able to find a number of good PPO plans with low deductibles and small co-pays for $100 and less per month. Plans range from around $60 to $150 for twenty-somethings. Taking an average of $100 per month, we can calculate the annual worth of a medical plan of $1,200.
- 401k: The dollar amount that your employer matches per year.
- Vacation: The number of vacation days multiplied by your daily wages.
- Bonuses and options: These are much harder to put a monetary value on because they are often not guaranteed. The only thing you have to go on is the past, which doesn’t always foreshadow the future.
Qualitative Value of Employee Benefits
Qualitative benefit valuations are not the easiest to measure. They can vary per person. For instance, health insurance coverage may be much more heavily weighted by an employee with many pre-existing conditions. I am not at all surprised that medical benefits came in first, because they cover the most primitive human need: our health. There is a lot of security in that. The third place finisher, vacation time, provides a ton of value in the ‘quality of life’ area. Makes sense, right?
Why I Chose 401k
My employer gives a 50% 401K match on up to the maximum allowed 401k contribution. That equates to $8,250 in 2009, far more than the $1,200 value on medical insurance. Additionally, it also provides a ton of future qualitative value in the hopes that it will lead to an early and/or higher income retirement. Stock options came in dead last for me, and very few of you picked them as your top choice, because they offer little guaranteed monetary value, and just about zero qualitative value.
What does this Mean for you?
My recommendation here is that when you evaluate your current job, negotiate for raises/benefit changes, or are accepting a new job, try to place monetary and qualitative values on all of the benefits. For example, for a healthy twenty-something, it may not make much sense to accept a job with health insurance (because it offers health insurance) over a job that doesn’t offer health insurance but does offer a salary that is $3,000 higher.
Employee Benefit Discussion:
- What kind of monetary value do you place on your benefits?
- What kind of qualitative value?
- Do these valuations change your ranking of these benefits?
- What are your top 5 benefits after applying values to them?