How to accurately calculate a pay raise?
April 26, 2020 6:30 PM Subscribe
I received a job offer for a position to start mid-May, and I'm trying to determine the actual percentage raise from my current earnings. Seems straightforward, right? But I'm having a really difficult time figuring it out. Maybe it's coronabrain. Maybe I'm super overthinking it. I need to figure this out by tomorrow. Halp!
When determining a percentage raise, do you use current base salary vs. base salary at new job, or total compensations (base + bonus)? And when the job transition is mid-year, at what point in time is the percentage most accurate?
I received a job offer that, based on base salary alone, is a 14% raise from my current base salary.
If I use current total compensation (base + bonus) vs. new total comp, it's 15%.
But, if I compare numbers at the end of this year, I would've gotten a 3% raise at my current company, plus a bonus, and I'd probably only have received the base salary (no raise, no bonus) at the new company. If I compare those total compensations, it's only a 3.5% increase.
If I compare the projected total compensations for the end of 2021, by then I would've gotten a raise/bonus at the new company in addition to old company, and when I compare those total compensations I get 11%.
Which situation/percentage should I use when assessing this offer?
When determining a percentage raise, do you use current base salary vs. base salary at new job, or total compensations (base + bonus)? And when the job transition is mid-year, at what point in time is the percentage most accurate?
I received a job offer that, based on base salary alone, is a 14% raise from my current base salary.
If I use current total compensation (base + bonus) vs. new total comp, it's 15%.
But, if I compare numbers at the end of this year, I would've gotten a 3% raise at my current company, plus a bonus, and I'd probably only have received the base salary (no raise, no bonus) at the new company. If I compare those total compensations, it's only a 3.5% increase.
If I compare the projected total compensations for the end of 2021, by then I would've gotten a raise/bonus at the new company in addition to old company, and when I compare those total compensations I get 11%.
Which situation/percentage should I use when assessing this offer?
Well... To make it more complicated a lot more than that goes into TC - 401K match? RSUs or stock options? The % of benefits they pay? If you want to go outside TC you can also consider things like if commute costs are different (actually commuter benefits might be worth considering also).
Also, are the bonuses guaranteed? Are the raises? There's a lot of assumptions and unknowns in this calculation.
But - ignoring that there's no real right answer to this. "Next 12 months" is an ok benchmark if you just want to compare directly. Honestly so is "next 5 years" with a LOT of assumptions about room for promotions/etc. "Next month" is also a not-wrong way to look at it if you just want to know what's going to be in your bank account in 45 days.
The question is really "what are you trying to maximize for?" And figuring it out from there.
posted by brainmouse at 7:19 PM on April 26, 2020 [3 favorites]
Also, are the bonuses guaranteed? Are the raises? There's a lot of assumptions and unknowns in this calculation.
But - ignoring that there's no real right answer to this. "Next 12 months" is an ok benchmark if you just want to compare directly. Honestly so is "next 5 years" with a LOT of assumptions about room for promotions/etc. "Next month" is also a not-wrong way to look at it if you just want to know what's going to be in your bank account in 45 days.
The question is really "what are you trying to maximize for?" And figuring it out from there.
posted by brainmouse at 7:19 PM on April 26, 2020 [3 favorites]
As you pointed out, it looks like more or less compensation proportionally depending on the scale of time you are looking at.
I think it is valuable to consider all of the above situations, as well as even further down the road. In 5 or 10 years, what do you want to be doing? Does one of these positions offer you more or less opportunities that could help you reach that goal?
Also, I think you should consider your happiness as well as your mental, emotional, and social well-being. Assuming you are quite pleased with the state of these things, and changing jobs will not impact them (not likely), then the above (what do you want to do in 5-10 years) can be basically actions towards self-actualization or higher level needs. It all depends on where you are in your own journey. These factors may be more important than compensation. "There are some things money can't buy." Of course it is hard to accurately assess how a transition will affect all these things, but we can do our best.
I would also be curious to know how you feel on a day to day basis in your current position and how you felt when interacting with those that you presumably interviewed with and who extended the offer to you (and you would also presumably be working with to some extent). I think that would be a good place to start when making this decision.
posted by Zanthir at 7:53 PM on April 26, 2020
I think it is valuable to consider all of the above situations, as well as even further down the road. In 5 or 10 years, what do you want to be doing? Does one of these positions offer you more or less opportunities that could help you reach that goal?
Also, I think you should consider your happiness as well as your mental, emotional, and social well-being. Assuming you are quite pleased with the state of these things, and changing jobs will not impact them (not likely), then the above (what do you want to do in 5-10 years) can be basically actions towards self-actualization or higher level needs. It all depends on where you are in your own journey. These factors may be more important than compensation. "There are some things money can't buy." Of course it is hard to accurately assess how a transition will affect all these things, but we can do our best.
I would also be curious to know how you feel on a day to day basis in your current position and how you felt when interacting with those that you presumably interviewed with and who extended the offer to you (and you would also presumably be working with to some extent). I think that would be a good place to start when making this decision.
posted by Zanthir at 7:53 PM on April 26, 2020
Best answer: To your specific question, if I knew I was going to get a bonus and raise by the end of the year at my current company, I would take that into consideration for the compensation I was being offered at the new company. As far as you know you're getting that bonus and raise at your current company if you stayed, and if you continued working there you would have earned it. Therefore, I would use that as a comparison for the compensation I was about to step into and receive through the end of the year.
However, each company is on a different timeline when it comes to raises and bonuses so there is no one single point in time for making the comparison. You want to be thinking about the whole picture and the entire timeline and let that inform what you want to be asking for in both the shorter and longer term. Fortunately, it sounds like you're always better off at the new company. But also, you are allowed to make requests as part of your salary negotiation! Generally speaking, it is easier for a new company to give you X (whether that's salary or a specific benefit) in an equivalent or comparable form of compensation if you can say you are already receiving X at your current company. You don't need to mention that Y compensation is better at the new company than the old company, though. ;)
With the current financial climate, personally I might be leaning more towards requesting a higher base salary rather than focusing on future raises or bonuses. Future compensation such as raises and bonuses might end up frozen unless they are contractual obligations, so that's something to take into consideration.
Otherwise, think about 1. what factors are most important to you and 2. what you believe or can verify the company has the most wiggle room to bump in your favor. 1 and 2 may be mutually exclusive, but knowing both those things will be useful in nudging things in your favor.
And as mentioned earlier, Total Compensation is totally a thing. Is your commute much shorter in one job vs. the other (when commuting returns to being a thing again)? How about ancillary benefits or perks that reduce your expenses, provide quality of life improvements, or otherwise make you richer financially and otherwise?
When I recently negotiated compensation for my new job, I (politely) asked a lot of questions about various compensation and benefits. I recognize a lot of places don't do a good job of providing the full total compensation picture and so I need to put more effort into getting that information. If you can find a non-aggressive way to get more information, I highly recommend doing so. That way you are better positioned to compare and make reasonable inquiries if some part of the package feels lacking. Knowledge is power!
But yes, please do think about all the variables and what you really care about in addition to and outside of salary and bonuses. These might include things like new opportunities, mentorship, autonomy at work, and conference or educational stipends. Good luck!
posted by Goblin Barbarian at 8:30 PM on April 26, 2020
However, each company is on a different timeline when it comes to raises and bonuses so there is no one single point in time for making the comparison. You want to be thinking about the whole picture and the entire timeline and let that inform what you want to be asking for in both the shorter and longer term. Fortunately, it sounds like you're always better off at the new company. But also, you are allowed to make requests as part of your salary negotiation! Generally speaking, it is easier for a new company to give you X (whether that's salary or a specific benefit) in an equivalent or comparable form of compensation if you can say you are already receiving X at your current company. You don't need to mention that Y compensation is better at the new company than the old company, though. ;)
With the current financial climate, personally I might be leaning more towards requesting a higher base salary rather than focusing on future raises or bonuses. Future compensation such as raises and bonuses might end up frozen unless they are contractual obligations, so that's something to take into consideration.
Otherwise, think about 1. what factors are most important to you and 2. what you believe or can verify the company has the most wiggle room to bump in your favor. 1 and 2 may be mutually exclusive, but knowing both those things will be useful in nudging things in your favor.
And as mentioned earlier, Total Compensation is totally a thing. Is your commute much shorter in one job vs. the other (when commuting returns to being a thing again)? How about ancillary benefits or perks that reduce your expenses, provide quality of life improvements, or otherwise make you richer financially and otherwise?
When I recently negotiated compensation for my new job, I (politely) asked a lot of questions about various compensation and benefits. I recognize a lot of places don't do a good job of providing the full total compensation picture and so I need to put more effort into getting that information. If you can find a non-aggressive way to get more information, I highly recommend doing so. That way you are better positioned to compare and make reasonable inquiries if some part of the package feels lacking. Knowledge is power!
But yes, please do think about all the variables and what you really care about in addition to and outside of salary and bonuses. These might include things like new opportunities, mentorship, autonomy at work, and conference or educational stipends. Good luck!
posted by Goblin Barbarian at 8:30 PM on April 26, 2020
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posted by Kriesa at 7:18 PM on April 26, 2020