What is the value of vacation?
March 13, 2016 2:48 PM Subscribe
The company I work for is being bought. My current company has lower pay, about the top of the lower quartile. But, it has extremely good vacation benefits, about double most other companies in the region. I realize the answer varies a great deal from person to person, but... In any negotiations, how should I value my vacation?
I'm a senior software engineer in the US. I have enough other opportunities that I feel comfortable negotiating with the new company.
The new company hasn't announced its salary and benefits plan yet, but, based on sites like glassdoor, vacation looks pretty anemic. Most benefits outside of vacation are about the same.
I personally value my vacation more than $(salary/52) per week, but I'm having a hard time putting a monetary value on it. Given my situation, how would you go about valuing the time off? Is there any research out there about it?
I'm a senior software engineer in the US. I have enough other opportunities that I feel comfortable negotiating with the new company.
The new company hasn't announced its salary and benefits plan yet, but, based on sites like glassdoor, vacation looks pretty anemic. Most benefits outside of vacation are about the same.
I personally value my vacation more than $(salary/52) per week, but I'm having a hard time putting a monetary value on it. Given my situation, how would you go about valuing the time off? Is there any research out there about it?
You're never going to escape the circularity. You can't quantify its value, so all we can do is ask you how much YOU value it. But you can't quantify its value. Etc.
Not everything can be reduced to crisp numericals. If it could, we'd have AI by now. Some decisions are crisply analytical, but many are purely emotional. You can't crisply factor emotional variables and analytical variables as if they were like objects. What you're trying to do can't be done.
So I'd suggest this: view the ENTIRETY of this offer through an entirely emotional perspective. Forgetting the particulars; is this a change that you, in your gut, feel compelled to make?
Now view it intellectually. Forget feelings; does the entire package, as a whole, strike you as a prudent decision?
If both tacks yield the same answer, you have your decision.
If not, you need to consider which aspect to ignore. Try to visualize yourself a year hence, unhappy with the decision. Will you be angrier with yourself if you short-changed the emotional consideration or the rational one? Favor the consideration that will leave future-you happier with your decision-making process.
posted by Quisp Lover at 3:12 PM on March 13, 2016 [5 favorites]
Not everything can be reduced to crisp numericals. If it could, we'd have AI by now. Some decisions are crisply analytical, but many are purely emotional. You can't crisply factor emotional variables and analytical variables as if they were like objects. What you're trying to do can't be done.
So I'd suggest this: view the ENTIRETY of this offer through an entirely emotional perspective. Forgetting the particulars; is this a change that you, in your gut, feel compelled to make?
Now view it intellectually. Forget feelings; does the entire package, as a whole, strike you as a prudent decision?
If both tacks yield the same answer, you have your decision.
If not, you need to consider which aspect to ignore. Try to visualize yourself a year hence, unhappy with the decision. Will you be angrier with yourself if you short-changed the emotional consideration or the rational one? Favor the consideration that will leave future-you happier with your decision-making process.
posted by Quisp Lover at 3:12 PM on March 13, 2016 [5 favorites]
I'd value it as non-negotiable. If they offer less, take the buyout.
posted by scruss at 3:30 PM on March 13, 2016
posted by scruss at 3:30 PM on March 13, 2016
I once had a choice between an offer with more job security vs. my current job where a buy out was happening, and I envisioned other disruptions in the future. I was asked if there was any way I would stay, and I said since it was a matter of taking a significant risk vs. job security, the only way I could stay would be if they gave me a very substantial figure that I would use as a buffer in case I was right. They said my number was impossible, I left, and it turned out I was right about my previous employer.
However, truth be told the staying at the original job probably would have been better from a career standpoint (contacts, training, geography, visibility, title) though I might not have survived all the disruptions. On balance if I had it to do again I probably would have made my number lower.
My 2 points: don't get tunnel vision on one particular aspect like I did, and factor into the equation "missed opportunity cost".
P.S. - I'm not an HR person, but I thought certain kinds of unpaid leave could affect your benefits eligibility, including health insurance. Don't trust my guess, it's just something to check.
posted by forthright at 4:03 PM on March 13, 2016 [1 favorite]
However, truth be told the staying at the original job probably would have been better from a career standpoint (contacts, training, geography, visibility, title) though I might not have survived all the disruptions. On balance if I had it to do again I probably would have made my number lower.
My 2 points: don't get tunnel vision on one particular aspect like I did, and factor into the equation "missed opportunity cost".
P.S. - I'm not an HR person, but I thought certain kinds of unpaid leave could affect your benefits eligibility, including health insurance. Don't trust my guess, it's just something to check.
posted by forthright at 4:03 PM on March 13, 2016 [1 favorite]
Taxes are one consideration. If you're a high-earner in the US, then your average tax rate is probably around 25%, but your marginal tax rate may be 40 or even 50%. So, to work an extra marginal week, you need to make 15-25% more than your average pay for a week of work in order to keep your post-tax earnings per week constant.
Your spouse's work is another consideration. If your spouse is in a job where working extra hours results in directly increased pay, and you aren't, then clearly you want to let them work as much as possible.
Companies have very different cultures when it comes to vacation time. If you have to take a day off every time the plumber has to fix something in your house, or your kid gets sick, or there's a massive blizzard, then that adds up pretty quickly. If you can just work from home or make up the time later on those days, then you can save vacation days for actual vacations. So a lot of it depends on what the company really means by "vacation."
Oh, one other thing -- you could ask for the difference in vacation time to be unpaid time off (every company has to be able to do that for FMLA, military leave, etc.). That way you can negotiate on salary, and then separately negotiate on unpaid time off. Unpaid time off wouldn't accrue, so the company should be more willing to give it (since paid time off is a liability on their balance sheet).
posted by miyabo at 4:56 PM on March 13, 2016
Your spouse's work is another consideration. If your spouse is in a job where working extra hours results in directly increased pay, and you aren't, then clearly you want to let them work as much as possible.
Companies have very different cultures when it comes to vacation time. If you have to take a day off every time the plumber has to fix something in your house, or your kid gets sick, or there's a massive blizzard, then that adds up pretty quickly. If you can just work from home or make up the time later on those days, then you can save vacation days for actual vacations. So a lot of it depends on what the company really means by "vacation."
Oh, one other thing -- you could ask for the difference in vacation time to be unpaid time off (every company has to be able to do that for FMLA, military leave, etc.). That way you can negotiate on salary, and then separately negotiate on unpaid time off. Unpaid time off wouldn't accrue, so the company should be more willing to give it (since paid time off is a liability on their balance sheet).
posted by miyabo at 4:56 PM on March 13, 2016
I personally value my vacation more than $(salary/52) per week, but I'm having a hard time putting a monetary value on it.
That's close to a bottom line, but it underestimates the actuarial value of vacation slightly because you earn vacation time while on vacation. Another way to think of the offer is $salary/(weeks at work). At the extreme end, going from 50 weeks of vacation to 51 a doubling of pay =) But it's not much worth considering unless you have European levels of vacation accrual, but it gets us in the right mindset to think like financiers and economists. Those people think in terms of options. So lets frame this as a choice between two general options: an extra day of vacation, or an equivalent bump in salary (spread across the year).
If your employer allows generous unpaid leave, the difference is minimized. If you the take the salary bump, you have the option of buying a vacation later, or not, while the vacation day locks you in. So you'd prefer extra salary. But you don't get generous unpaid leave. Being forced to take vacation days instead eliminates that option value, and you should raise the monetary value of your vacation accrual by some number.
Other financial factors to consider: how liquid is vacation? does it carry over? is it payable upon separation? is last years carryover payable at this year's salary? Are you restricted in how you spend vacations?
The final bit of this is leave at all, whether paid or unpaid. This is the tough bit. There's some value in being able to randomly interview with other employers in an ad-hoc manner, but it's been longstanding practice to use sick days for that. What we're talking about is relaxing, unwinding, and reduction in stress. Being able to take the family somewhere for a week, and then recuperate from that. So if you have vacation to spend, and the means by which to use it productively (travel money, a Christmas dinner at the family farm, etc), you should value it higher than some single dude with nothing better to do (*sigh*).
In total, the value of vacation leave is the sum of being paid, the value of opting not to go, plus the value of not working. If being paid is the base multiplier of x1.0, then I figure the option value and psychological value to each be x0.5, for a grand total of x2.0.
posted by pwnguin at 5:11 PM on March 13, 2016 [2 favorites]
That's close to a bottom line, but it underestimates the actuarial value of vacation slightly because you earn vacation time while on vacation. Another way to think of the offer is $salary/(weeks at work). At the extreme end, going from 50 weeks of vacation to 51 a doubling of pay =) But it's not much worth considering unless you have European levels of vacation accrual, but it gets us in the right mindset to think like financiers and economists. Those people think in terms of options. So lets frame this as a choice between two general options: an extra day of vacation, or an equivalent bump in salary (spread across the year).
If your employer allows generous unpaid leave, the difference is minimized. If you the take the salary bump, you have the option of buying a vacation later, or not, while the vacation day locks you in. So you'd prefer extra salary. But you don't get generous unpaid leave. Being forced to take vacation days instead eliminates that option value, and you should raise the monetary value of your vacation accrual by some number.
Other financial factors to consider: how liquid is vacation? does it carry over? is it payable upon separation? is last years carryover payable at this year's salary? Are you restricted in how you spend vacations?
The final bit of this is leave at all, whether paid or unpaid. This is the tough bit. There's some value in being able to randomly interview with other employers in an ad-hoc manner, but it's been longstanding practice to use sick days for that. What we're talking about is relaxing, unwinding, and reduction in stress. Being able to take the family somewhere for a week, and then recuperate from that. So if you have vacation to spend, and the means by which to use it productively (travel money, a Christmas dinner at the family farm, etc), you should value it higher than some single dude with nothing better to do (*sigh*).
In total, the value of vacation leave is the sum of being paid, the value of opting not to go, plus the value of not working. If being paid is the base multiplier of x1.0, then I figure the option value and psychological value to each be x0.5, for a grand total of x2.0.
posted by pwnguin at 5:11 PM on March 13, 2016 [2 favorites]
Money is good for buying stuff (but if you're a senior engineer, you're likely past the threshold where it really affects happiness already) and retiring early, but you only have one shot to get out and enjoy life while you're (hopefully) youngish, healthy, and energetic; one shot to spend time with kids when they're little and elderly relatives before they pass. If these things are important to you, as you have the ability to be picky, you can value vacation time highly.
If you're interested in retiring early, the ballpark figure of what savings in the stock market will do in the ~20 year timeframe you're looking at before retiring is quadrupling including factoring in inflation, if historic rates hold. If you need to replace $80,000 of income to retire early, you'd need to be making an extra $20,000 now to do so. If you're already maxing out your tax sheltered accounts, that figure needs to be higher to factor in taxes.
Personally I choose to have a lot of leave and make about 75% of what I could at a company with less leave. YMMV.
posted by Candleman at 5:26 PM on March 13, 2016 [1 favorite]
If you're interested in retiring early, the ballpark figure of what savings in the stock market will do in the ~20 year timeframe you're looking at before retiring is quadrupling including factoring in inflation, if historic rates hold. If you need to replace $80,000 of income to retire early, you'd need to be making an extra $20,000 now to do so. If you're already maxing out your tax sheltered accounts, that figure needs to be higher to factor in taxes.
Personally I choose to have a lot of leave and make about 75% of what I could at a company with less leave. YMMV.
posted by Candleman at 5:26 PM on March 13, 2016 [1 favorite]
I've found that companies that are unwilling to negotiate on salary have been amenable to giving me extra vacation days. It's happened more than once. It has never really made sense to me, I guess they come out of different buckets when calculating cost?
posted by phil at 7:53 PM on March 13, 2016
posted by phil at 7:53 PM on March 13, 2016
You should go work at a company that you love that has unlimited remote work and vacation time. That's totally possible now. Based on your other question here, you know the pitfalls of the field.
Apart from that, when I talk to people about job offers, they generally put cash, equity and benefits on separate scales. A lightness in one that matters less can compensate for another that is more important. It's also possible to get unanticipated trade-offs with offers. (Asking for more equity can result in a counter-offer of more vacation, for instance.) So, to my point, the value is entirely personal and your values will IN NO WAY line up with your employer's, and in fact will likely misalign in surprising and perhaps amusing ways. A lot of companies work really hard to provide some options because some workers think those are worth something, for instance, when in fact they usually are not. :) And yet, asking for more of it may result in more cash, instead of more equity.
So make your own buckets, be aggressive, and push where you think you can get what you really want.
posted by RJ Reynolds at 8:57 PM on March 13, 2016 [3 favorites]
Apart from that, when I talk to people about job offers, they generally put cash, equity and benefits on separate scales. A lightness in one that matters less can compensate for another that is more important. It's also possible to get unanticipated trade-offs with offers. (Asking for more equity can result in a counter-offer of more vacation, for instance.) So, to my point, the value is entirely personal and your values will IN NO WAY line up with your employer's, and in fact will likely misalign in surprising and perhaps amusing ways. A lot of companies work really hard to provide some options because some workers think those are worth something, for instance, when in fact they usually are not. :) And yet, asking for more of it may result in more cash, instead of more equity.
So make your own buckets, be aggressive, and push where you think you can get what you really want.
posted by RJ Reynolds at 8:57 PM on March 13, 2016 [3 favorites]
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posted by Ruthless Bunny at 3:11 PM on March 13, 2016 [1 favorite]