How to Choose Between Job Offers
Your phone rings, and you get the news. You got the offer! You take a moment to celebrate with the bottle of bubbly your roommate bought you. Then, you are left to decide how to decipher exactly what is being offered to you. If you’re lucky enough to have two offers, you may also need to decide how to choose between job offers.
While it may be tempting to focus primarily on the differences in base pay, it’s important to look at the WHOLE picture.
Your offer is not just your base salary. When choosing between job offers, weigh the whole package.
Let’s use an example to illustrate this. Danielle has two offers. One offers a base pay of $65K. The second is for a base pay of $62K. At first glance, it seems like offer one is the better deal. However, on top of the base pay, Employer two offers a 6% 401K match. That means if Danielle puts at least 6% of her salary into the 401K, Employer two will contribute $3.7K (6% of $62K) to her retirement every year. Employer one offers NO match. All other things being equal, the second offer is actually offering you annual compensation of $65,720 while the first offer is for $65,000 flat. Do the math! An offer is more than the first number you see.
Some of the factors to consider when choosing between job offers are:
Health care: Can you join on day one? Some plans have a 90-day waiting period; others allow you to join on day one. What types of benefits do they offer? Do they offer coverage for mental health? Fertility?
401K: As noted above, a 401K match can be worth thousands of dollars every year. What is the vesting schedule of the 401K match (aka how long do you need to stay to be able to take that money with you)? How much is the match?
Bonus compensation: Does your offer include a bonus? If yes, how much is the bonus and what are the factors that determine if you will receive it? If you can talk to current employees, feel out how often the bonus pays out. At some companies, bonuses are almost never missed. At other companies, it’s rare to receive a bonus. It may also vary based on the division you’re in. Whatever the case, do NOT build a budget or rent an apartment based on a bonus since these are NOT guaranteed.
Vacation: How much paid time off do you receive? Do you receive sick days on top of vacation days? What about company holidays? Look past the topline number. If you’re comparing two jobs one in retail and one in tech, the retail job may offer the same number of paid days off but may require work during the holiday season. If being able to unplug with family and friends during Thanksgiving is important to you, then the retail job might not be a good fit.
Stock: If you work for a publicly traded company, they may offer you the chance to buy company stock at below the market rate through something called an Employee Stock Purchase Plan. Some tech companies or start ups may also offer you equity in the company as part of your compensation. Equity can take a LOT of different forms. If this is part of your offer letter, make sure to ask HR questions to understand what you’re receiving. You can also ask for more equity as part of your negotiation.
One-off pay: Are you receiving a signing bonus or money to relocate? Signing bonuses are becoming more and more common as the labor market heats up. However, like a relocation bonus, they are just paid ONE time. You also may need to give them back if you don’t stay in a role for 60 days. While one-time bonuses are great, if you’re planning to be at a job for 3 years, it may be worth taking a job with slightly higher base pay but no bonus.
Parental leave: Is this included in your compensation? Some companies will cover 5 months of paid maternity leave. Other companies offer none. If you’re planning to become a parent soon, this could have a big impact. If you’re not planning to become a parent for 5 years, this might not be important to you yet.
In summary, there are many factors that impact your total compensation. When choosing between job offers, look at the whole picture not just your base. This means taking the time to understand all the different clauses in your offer letter so you make the best decision. If you don’t understand something ask. They’ve invested the time in you to make you an offer. They want you to join and become a long-term, productive member of the team. Taking the time to read through and understand your offer letter will not only help you choose between job offers, but will also help you take advantage of relevant perks once you start.
If you want more details, you can watch my whole conversation with the Generation Hired team here. Wait until the end for some information on how to decode your paycheck as well.
Spoiler: your monthly take home pay is not just your base pay divided by 12. Taxes, health insurance, 401K contributions and many other things in your offer letter may also play a factor.
About Eryn Schultz
Eryn Schultz is the Founder of Her Personal Finance. Her mission is to demystify personal finance and to help women take charge of their financial futures. She teaches financial classes designed to make learning about money easier and more accessible. If you can learn to code in your pajamas, why not also learn how to invest in your 401k? You can follow her on Instagram for daily financial tips here.
