How to Evaluate a Job Offer

Every company has different ways of compensation. Some companies have amazing benefits, but lower pay. Some value equity over base salary. Some don’t offer a 401(k) and some do, but don’t offer matching.

You need to add up the following:

  1. Annual base salary
  2. Cash bonuses
  3. Value of stock options/RSUs (restricted stock units)/ESPP (employee stock purchase plan) based on the current stock price
  4. 401(k) matching (how soon does it vest?)
  5. subtract the cost of your health insurance premiums and your estimate of how much you would spend on co-pays/etc.
  6. subtract any 401(k) matching you would walk away from at your current employer
  7. value of other benefits such as free parking at work, lunch, dinner, life insurance policy, etc.

You should also add up the above over the same time period with your current employer.

How do the two amounts compare? Ideally, the amount with the new employer should be a step up from the amount with your current employer.

The catch whenever I try to play with the numbers is the amount of 401(k) matching that I would walk away from if I took a job with another company. Once my 401(k) matching has vested, that will be no longer a concern.

It’s up to you to decide how much an offer needs to be to switch companies. Personally, I would like to see my overall compensation go up by more than it has in the last few years, so probably around 10-20%. But when it really comes down to it, which product(s) would I prefer to spend my working hours improving?

(No, I am not looking for a new job, but I have been thinking lately about how exactly I would evaluate an offer for a different company.)

Readers, how do you evaluate competing job offers?


23 thoughts on “How to Evaluate a Job Offer

  1. You seem to have done a good job covering what I call the “quantitative” stuff. But, do you apply a ranking to any of these? I think most people just look at the $ compensation, bonus and any other cash benefits. I would actually weigh the HR benefits more heavily than the cash. Life insurance, long term disability, health insurance etc.

    There is also a whole list of intangible, or qualitative, things I think makes a big difference as well: who administers their 401k, what investment options do they have within the 401k, who administers their health plan, how much is your current employers management bothering you right now, does the new company’s management seem cool, do you get a desk with a window, are you current co workers bothering you, do the new co workers seem to be cool, what is the location of your current job, location of the new job etc

    I actually just took a job which was somewhat of a “pay” cut. While the salary was good, I don’t get a bonus until this december at the earliest, no life insurance, no long-term diability, health insurance is self-administered, horrible 401k options, vesting in the 401k etc. But, the location was key. We lived in a place we despised. We couldn’t take it anymore, so we moved to our “dream” location understanding all these trade offs. Even walking away from a vested pension. But, we couldn’t be happier.

    • I haven’t even considered the life insurance or disability insurance. I know that my current employer offers a base life insurance policy as a benefit that I really don’t need since I have no dependents. I do know we have disability insurance, but I haven’t looked into it. I really have no point of comparison for our health insurance, but I’ve been quite happy with it.

      Does the administrator of the health plan actually make a big difference? I can understand the 401(k) administrator being in consideration, especially if you end up with one with a ton of active funds.

      I would also say that taking a job with a specific company because I get a desk with a window is a terrible idea. I’ve moved desks so many times with my current employer. Sometimes I’ve had windows, sometimes I haven’t. Sometimes I’ve had cubicles, sometimes I’ve been in offices. So had I expected a window office when I started, I would have been sorely disappointed as we don’t even have that many window offices!

      One of the cool things about working for a reasonably large software company as well is that if I don’t like my current management chain, I can always transfer to a different part of the company after evaluating their management chain.

      As I replied to Nicoleandmaggie before, I wouldn’t even consider applying somewhere if I didn’t like the location of their offices or if I knew the work environment sucked. Networking is key for that type of thing :)

      That sounds like an awesome new job and location for you – congrats!

      • My new employer self administers their health insurance. Would you like to eat in the same lunch room as someone who knows what kind of birth control you are on, what other prescriptions you have, what kind of doctors you are seeing etc? Not only that, but their job is to lower costs, so you always have to argue with them over what is covered, what isn’t etc. I never thought it would be a big deal either, until I experienced it.

        I like my window, and it is something I consider.

        • Holy cow, I think that would be a deal breaker for me. It really isn’t relevant to my manager what kind of birth control I’m on or if I’m on birth control. Wow.

          I do like a window desk. I remember being in a lab with no cell phone reception in the basement of a building back in college and came out to an insane snow storm, with the school shutting down. That was pretty amusing.

  2. It is easier for a company to cut benefits than to cut salary, so that might go into the rankings of the different options.

    I agree on the intangibles. Work environment is very important. Are the employees generally happy, is it a productive place to be?

    • I agree that that is especially important in an industry where many companies overwork employees like crazy and have bad work/life balance. An important piece that I left out is that through my network of friends, I would investigate whether I want to work at a company (environment-wise) before even talking to a recruiter, let alone getting an offer. So I wouldn’t even apply somewhere that I didn’t feel the employees were generally happy and working on interesting things with cool people.

  3. I didn’t really take any of these things except for pay and hours into consideration as I’m an almost new grad and my first job offered really good salary and hours.. other than that I get almost nothing (as a temporary employee).

    • Hours are pretty important if you’re looking for part-time work. I’m paid salary and my hours are flexible. I so love not filling out timesheets anymore!

  4. When I first graduated from college, I mainly thought about pay. I knew that my first pay level would be the most important and would most likely lead to higher pay later on.

    • That is so true. I didn’t negotiate my salary with my first job, which was a terrible mistake since all raises are now based on % increases from that amount, so my mistake is just compounded every year. Oops :(

  5. I agree with Michelle. When I was graduating from college, I was trying to choose between two jobs – one had $10K less in base salary but the possibility of a 16% bonus and the other one had no bonus. Ultimately, I decided on the one with the higher base salary – among other factors, I also knew that having a higher base salary would lead to higher salaries in the future. And now that I’m at my second job, I can say I definitely made the right choice!

    • I think I read your post on how you got to earning over $100k at 25. I agree that taking the job with the higher base salary was a good choice for you!

      Compound interest is pretty cool, but right now, compounding raises year-over-year is even cooler :)

  6. Yeah, when you’re young, get your money (and health insurance). Then, as you grow, you’ll increasingly have the luxury of focusing on your career / personal fulfillment. I feel I achieved this “minimum” level early enough in my career that I could start worrying about what I really need in the longrun: a defined benefit pension and generous parental leave package.

    • It’s funny that you say get your health insurance when you’re young because you incur way more health insurance costs when you’re older. (Kids go to the doctor a lot and I think you almost go to the doctor once a month when you’re pregnant, plus the hospital stay.)

      I think I’m pretty fairly compensated for my industry and experience now. It takes some time to find your niche within your industry and I think I’m getting a better grasp on that now, which makes the next job selection more difficult since I’m now pickier!

      Good luck getting a generous parental leave package in the States. Some employers tout TWO WEEKS as a good leave package. What’s so cool about a defined benefit pension? Doesn’t that require you to stay with the same employer for quite awhile?

  7. In the long run, a defined benefit plan is definitely more valuable for employees as the investing risk (and the investing decisions) is completely in the employer’s hands. The value (if you were to ever model the benefit :) ) is an exponential curve. That being said, it is only a good deal if you stay with the same employer for a long period of time, which is becoming less and less the norm, especially for our generation. Wait, am I still considered to be in your generation? :)

    That’s a good list of benefits to take a look at. I think the company itself, and the people you will be working with, is very important as well!

    • Haha, for that phrasing, I would say that you are considered part of my generation :)

      I definitely agree that the work environment is pretty important too. And the expectation of overtime!

    • I wouldn’t say the investing risk is completely in the employer’s hands with a pension. The employee is subject to risk as well. Pension funds have run short and have collapsed here in the US. PBGC will guarantee your pension, but it may not (read:probably won’t) be the amount you were “promised.”

      It also depends on what a “long period of time” is. With my ex-employer, I was vested in 5 years (US law is a 5 year cliff or phase in starting at 3 years). Age also plays a role, but that is another story. Why my benefit isn’t anything I could retire solely on, it is worth something in the mid 5-figures. So, nothing to sneeze at. And if you do sneeze at it, I can send you some account numbers to wire it on over.

  8. I agree all the numbers are extremely important. However, with most of my jobs I have found it is the intangibles that make or break the job: hours, vacation time, can you actually take the vacation time, co-workers you like and respect. I make sure my pay is in line with market rates, but after that I really look at the intangibles!

    • Vacation time is definitely super important! I have coworkers who had 5 weeks of vacation and then came to my employer and started with only 2 weeks. And there are definitely teams where you can’t actually take vacation time. Thankfully my manager lets us take our vacation time whenever – that would drive me nuts to not be able to take it!

      Have you looked at maternity leave at all when researching a new employer?

  9. I’ve never been lucky enough yet to have to evaluate competing job offers, but it was easy to go from my other job to the one I currently have for a number of reasons. My salary is decent but the benefits are phenomenal. Employer retirement plans and health insurance really add a lot to your pay.

  10. I was recently offered a job and frankly I had no idea what to be looking for to know if it was a good deal I mean I’d look at the paycheck and hours but that’s all I knew before I read this thanks for the great and informative info. Keep up the good work

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