Henry earns $68,000 per year, receives 15 days PTO, 8% retirement matching, and receives 70% employer subsidized health insurance which totals $10,000. Calculate the benefit rate.
\begin{tabular}{|l|c|}\hline \multicolumn{2}{|c|}{ Employee Benefits } \\\hline Health Insurance & $70 \$\% \\\hline FICA & $7.65 \$\% \\\hline Paid Vacation (PTO) & 15 days \\\hline Retirement Matching & $8 \$\% \\\hline\end{tabular}
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Round to the nearest percentage point.
Answer (2)
Calculate the retirement matching: 0.08 × $68 , 000 = $5 , 440 .
Calculate the health insurance subsidy: 0.70 × $10 , 000 = $7 , 000 .
Calculate the PTO value: 260 15 × $68 , 000 = $3 , 923.08 .
Calculate the FICA value: 0.0765 × $68 , 000 = $5 , 202 .
Calculate the total benefits: $5 , 440 + $7 , 000 + $3 , 923.08 + $5 , 202 = $21 , 565.08 .
Calculate the benefit rate: $68 , 000 $21 , 565.08 × 100 = 31.71% ≈ 32% .
The benefit rate is 32 % .
Explanation
Calculate Retirement Matching First, we need to calculate the dollar value of each benefit. We'll start with the retirement matching. Henry receives 8% of his salary as retirement matching.
Retirement Matching Value The retirement matching is calculated as: 0.08 × $68 , 000 = $5 , 440 So, Henry receives $5 , 440 in retirement matching.
Calculate Health Insurance Subsidy Next, we calculate the value of the health insurance subsidy. Henry receives 70% employer-subsidized health insurance which totals $10 , 000 .
Health Insurance Subsidy Value The health insurance subsidy is calculated as: 0.70 × $10 , 000 = $7 , 000 So, Henry receives $7 , 000 in health insurance subsidy.
Calculate PTO Value Now, we calculate the value of the paid time off (PTO). Henry receives 15 days of PTO. We'll assume there are 260 working days in a year (5 days a week * 52 weeks).
PTO Value The value of PTO is calculated as: 260 days 15 days × $68 , 000 = $3 , 923.08 So, Henry's PTO is worth approximately $3 , 923.08 .
Calculate FICA Value Next, we calculate the value of FICA. Henry pays 7.65% of his salary towards FICA.
FICA Value The FICA value is calculated as: 0.0765 × $68 , 000 = $5 , 202 So, Henry pays $5 , 202 towards FICA.
Calculate Total Benefits Now, we calculate the total benefits by summing the values of retirement matching, health insurance subsidy, PTO, and FICA.
Total Benefits Value The total benefits are calculated as: $5 , 440 + $7 , 000 + $3 , 923.08 + $5 , 202 = $21 , 565.08 So, Henry's total benefits are $21 , 565.08 .
Calculate Benefit Rate Finally, we calculate the benefit rate by dividing the total benefits by the annual salary and multiplying by 100.
Benefit Rate Value The benefit rate is calculated as: $68 , 000 $21 , 565.08 × 100 = 31.71% Rounding to the nearest percentage point, the benefit rate is 32%.
Final Answer Therefore, the benefit rate is approximately 32%.
Examples
Understanding benefit rates is crucial when evaluating job offers. For instance, consider two job offers: one with a higher salary but fewer benefits, and another with a slightly lower salary but comprehensive benefits. By calculating the benefit rate, you can quantify the value of those 'extras' like health insurance, retirement matching, and paid time off. This allows you to make an informed decision based on the total compensation package, ensuring you're not just looking at the base salary but also the additional perks that contribute to your overall financial well-being. For example, knowing that a company offers a 32% benefit rate on top of a $68,000 salary means you're effectively receiving an additional $21,760 in value.
Henry's benefit rate, calculated from his total benefits (retirement matching, health insurance, PTO value, and FICA contributions) compared to his salary, is approximately 32% . This includes a total benefit value of about $21,565.08 based on his annual salary of $68,000 . Thus, Henry receives significant additional value beyond his salary from these benefits.
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