How to Calculate Compensation and Benefits Into Your Raise
Original post by Matt McGew of Demand Media
Employment compensation may include both monetary wages and employee benefits such as health insurance, pension or 401K contributions and various other perks. When an employee is given a raise, accurately calculating the effect of that increase on overall earnings requires factoring in monetary and non-monetary compensation. By accurately calculating raise percentages, the employer and employee can accurately evaluate the raise based on industry averages and raises given to other workers within the same organization.
Determine the value of the employee's salary and benefits package before the raise. The benefits package includes employee benefits paid by the employer, such as medical insurance, 401K contributions and meal plans. For example, if an employee received wages totaling $50,000 and a benefits package valued at $5,000 prior to the raise, the employee's total compensation was $55,000. The human resources department at your company can provide you with the monetary value of the benefits package you receive.
Determine the value of the employee's salary and benefits package after the raise. For example, if an employee earns wages of $52,000 and benefits valued at $6,000 after the raise, the gross compensation ($52,000 plus $6,000) is $58,000.
Divide the amount of the raise received by the total compensation earned prior to the raise. Using the above example, $58,000 total compensation divided by $52,000 (compensation prior to the raise) is 1.115.
Subtract 1 from the result obtained in Step 3. Continuing the same example, 1.115 minus 1 is .115 or 11.5 percent. This figure represents the percentage of the employee's raise taking into consideration both monetary and non-monetary benefits compensation.
- "Human Resources Management"; Wendell French; 2006
- "The Essential HR Handbook: A Quick and Handy Resource for Any Manager or HR Professional"; Sharon Armstron et al; 2008
About the Author
Since 1992 Matt McGew has provided content for on and offline businesses and publications. Previous work has appeared in the "Los Angeles Times," Travelocity and "GQ Magazine." McGew specializes in search engine optimization and has a Master of Arts in journalism from New York University.