Understanding Total Compensation Versus Salary

As graduation approaches, you may start to have job interviews. Job interviews may lead to job offers. Do you know the difference between total compensation and salary?

Now is as good a time as ever to familiarize yourself with these two terms, the differences between the two and what will add up to the right job offer for you.

What are salary and total compensation?

A salary is the fixed amount of money an employee earns in exchange for their work. In a job offer, this is typically expressed as an annual figure. That figure is gross salary, the amount before taxes and benefits are deducted to determine your actual take-home pay, or net salary.

Total compensation refers to the entire package the employer is offering, including salary, benefits and perks.

Why does it matter?

It’s common to focus on salary when considering multiple job offers. While this is a big part, it’s not the full picture.

When comparing job offers, take a look at the total compensation of each, including:

• Salary
• Healthcare coverage
• 401(k)
• Bonuses
• Flexible spending accounts
• Paid time off (vacation days, sick days, holidays, etc.)
• Other insurance benefits (disability, life, etc.)
• Education reimbursement

Total compensation can add significant value to an employee's earnings and benefits package, often constituting up to 40% of the overall compensation.

Comparing the total compensation of multiple offers also gives you the leverage to negotiate. Maybe you got a better vibe during the interview with employer A but employer B is offering a better benefits package. Now’s your chance to ask employer A for a bit more salary to make up for that lost compensation.

Looking at the big picture

While you may just be excited at the prospect of starting your career and getting into the workforce, it’s important for you to think about the big picture. While comparing benefits isn’t always apples to apples, there can be some other determining factors in making your decision:

• Is there a flexible work arrangement?
• How much will you have to travel?
• What will your commute be like? Will you need a car or can you rely on public transportation?
• Will the company provide training and continuing education or will you have to find that on your own?

Another big consideration is relocation. Are you looking at jobs that require you to move? If so, will your prospective employer pay for your moving expenses? What’s the cost of living in the new location versus where you live now?

No doubt, there is a lot to consider before you enter the workforce. Putting in time to educate yourself now and figure out what matters most to you will help you make an informed decision when those job offers start rolling in.

This article is provided for informational purposes only. The content is intended to offer general information on the subject matter and should not be considered professional advice, legal counsel, or financial guidance. While UW Credit Union strives to offer accurate and current information, we cannot guarantee the completeness, reliability, or timeliness of the content. Readers are advised to seek professional advice or consultation where appropriate.