Making Cents of Compensation

Not all job offers are created equal - and evaluating compensation packages can be like comparing apples to oranges. Despite complex layers of base salary, stock options, bonuses, and benefits, it is indeed possible to approach (and conquer!) this feat strategically. The CWM team is here to demystify the common threads you should look for when evaluating an employer's compensation package.
Making Cents of Compensation

Everyone will have unique values and circumstances that factor into their job offer considerations and financial planning. Our overarching philosophy at CWM is “Live Intentionally. Live Richly.” By effectively asking questions that help evaluate and compare job offers, we hope to empower you to take into account both lifestyle and financial goals, ultimately allowing you to make intentional decisions that bring you closer to your own definition of success.

Three Tips for Evaluating a Job Offer

So, you’ve secured the job offer, but how do you decide whether the compensation and benefits will support your financial goals? We recommend evaluating three key components when reviewing an offer to understand the full picture – beyond just salary:

    1. Total potential earnings – The base salary is a critical component of any job offer, and it’s important to take into account the cost of living in your area and the median market salary for the position (here is a cost-of-living calculator to help you compare). It’s also important to consider earning potential, meaning the opportunity to grow your cash earnings in that role through bonuses, promotions and stock options – which can add some complexities to the evaluation.

    2. Other cash benefits – These include 401(k) matching programs or 401(k) profit-sharing contributions (and sometimes even both!) that support employees’ retirement planning.

    3. Other company benefits – Sometimes referred to as “fringe benefits,” company benefits refer to any employer-sponsored health plans and Health Savings Accounts (HSA); life and disability insurance coverage; paid time off; maternity and paternity leave; transportation stipends; gym memberships, and many more. For younger and/or healthier employees, the company health plan(s) may not be as important a factor in their final decisions compared to those with chronic conditions or medical concerns that tend to develop later in life. For employees who fall into the second category, a job with better health insurance coverage and lower potential cash earnings may be more aligned with financial and lifestyle goals.

Let’s take the example of Kim, a software engineering manager who is in the fortunate position of receiving two job offers from different organizations, Companies A and B. While both offers share some similarities, Company A is offering a lower base salary but more benefits than Company B. The base pay and signing bonus of Company B remain tempting to Kim, who is still paying off a mortgage and saving for her children’s college education.

Across industries – and particularly in tech – stock options have become a popular component of employers’ compensation packages. Since 2004, when the Financial Accounting Standards Board passed a new regulation around accounting expenses for traditional stock options, the most common form of a stock benefit has been given through Restricted Stock Units (RSUs). RSUs are a benefit granted to employees as part of a company’s promotion and retention structure. The key appeal is that employees do not need to purchase RSUs and need only stay at the company for an allotted period for their future selves to benefit from the shares’ potential accumulated value. 

Total Earnings Potential

Kim consults with her CWM financial advisor, and together they evaluate the competing offers based on the three outlined criteria. At first glance, when evaluating potential earnings, Company B seems much more appealing with a potential base earnings difference of more than $25,000 annually. However, when considering overall earnings potential, we also must take into account the stock options, which are only offered at Company A.

If Kim goes with Company A, the RSUs are set up to vest, meaning that she would earn shares over a pre-determined distribution schedule (usually one to five years), with the stipulation that she remain part of the company until that time period ends to access the RSUs and accrue the full benefit. In Kim’s case, Company A is offering 1,000 RSUs on a five-year vesting schedule. So, after one year of employment, Kim will receive 200 shares; the following year, she will receive another 200 shares and so on. For simple math, let’s say those thousand shares have a market value of $100,000, or $100 per share. At the current price, those RSUs are worth $20,000 per year in additional compensation for the next five years.

Upon vesting, she will have to decide whether to hold onto the shares or sell, based on their market value at that time. Kim doesn’t feel confident that she has the time or expertise to track and determine the right time to sell, how long to hold shares, examine the tax consequences – including capital gains related to the timing of any sale, how much of her net worth she should have in company stock, etc. so she will need to work with her financial planning team to develop a strategy.


While owning stock in your company can yield future long-term benefits, it’s important to consider the projected economic outlook of the business, and how it may or may not align with your goals and risk tolerance. In addition, over time it may be necessary to sell concentrated positions in company stock to improve diversification. Note also that you’ll be required to pay taxes on those shares at the time of vesting (in the case of RSUs), and your company will offer details about how that process works – most commonly, you may end up surrendering some shares back to the company to cover the taxes. If you decide to sell the shares at the time of vesting or later down the line, you’ll also need to consider the cost of the capital gains tax. I like to remind clients that taxes are a symptom of profit. Paying taxes may feel like it hurts, but in the wider context it means you earned more than you were planning for.

Incentive stock plans can be complex and managing them incorrectly can leave money on the table or increase your costs. Partnering with a well-versed Certified Financial Planner™ practitioner or financial planning team can help you navigate these nuances, taking into account your entire financial picture, to create a well-thought out and intentional strategy for your specific situation.


Total Potential Earnings Plus Other Cash Benefits

It’s also important to evaluate total potential earnings plus other cash benefits. Both companies offer 401(k) matching programs, while Company A will allow Kim to maximize her retirement planning with a slight advantage. By allocating 5% of her salary, or $8,000 per year, this amount will be doubled by her employer for a total of $16,000 annually. Compare this to the 3% match at Company B, where she would put aside $5,550 per year, totaling an $11,100 annual 401(k) contribution.

Since Kim analyzed her expenses with her financial planning team and decided to maximize her savings strategy for retirement as early as possible, Company A is more appealing— not accounting for annual salary raises, future RSU, and the power of compound interest.

Total Potential Earnings Plus Other Cash Benefits Plus Company Benefits

Finally, we analyze total potential earnings, plus other cash benefits, plus other company benefits like health insurance coverage. Company B has a slight advantage in this regard, covering 20% more of the employee premium on health insurance and minimal co-pays. In addition, Company A’s health plan requires a high deductible, potentially leading to more out-of-pocket expenses if a medical need arises unexpectedly. Given that Kim doesn’t have significant health concerns, in combination with the added savings she gains from her 401(k), she decides this difference isn’t as critical to her goals, and ultimately views her earning potential as higher with Company A.

The Final Decision

In the end, Kim decides to accept the job offer with Company A. Together, she and her CFP® professional concluded that the higher retirement savings and stock options promise a slightly higher income per year (around $900) and will likely provide more opportunities for long-term growth. Since Kim and her family are in good health, the additional health benefits are not as important to her. In addition, Company A offers more paid time off, which will enable Kim to do more traveling—one of her favorite hobbies.

Remember, each job offer contains a multitude of nuances, recognizing any decision also depends on where you are in your career, from entry level to top executives, and taking into account your desired lifestyle.

We also encourage our clients to view job offers as negotiations. If a compensation package looks close to appealing but doesn’t quite fill all your needs or expectations, negotiating additional paid time off or base salary increases can bridge that gap while propelling your career growth.

If you have questions about a job offer and how to evaluate if it will be right for your lifestyle and financial goals, reach out to a CWM financial advisor. 

We’re committed to partnering with you to help you navigate your path to live intentionally and live richly. Please connect with us by filling out this contact form or giving us a call at (425) 778-6160.

< Return to News

Related Insights

Buying Down Mortgage Rates
Goals & Planning
Buying Down Mortgage Rates
Home Buying Strategies for High Interest Rate Environments
Read More
View All

Plan Intentionally

Schedule a complimentary, no-pressure phone call with a CWM financial advisor to learn if our breadth of consulting services and purpose-driven approach aligns with your needs.