Will earns $70,000 per year, receives 10 days PTO, 6% retirement matching, and receives 60% employer-subsidized health insurance which totals $10,000. Calculate the benefit rate.
| Employee Benefits |
| :---------------- | :------ |
| Health Insurance | 60% |
| FICA | 7.65% |
| Paid Vacation (PTO) | 10 days |
| Retirement Matching | 6% |
[ ? ]%
Round to the nearest percentage point.
Answer (1)
Calculate the health insurance benefit: 0.60 × $10 , 000 = $6 , 000 .
Calculate the retirement matching benefit: 0.06 × $70 , 000 = $4 , 200 .
Calculate the PTO benefit: 260 10 × $70 , 000 ≈ $2 , 692.31 .
Calculate the total benefits and benefit rate: $70 , 000 $6 , 000 + $4 , 200 + $2 , 692.31 × 100 ≈ 18% . The final answer is 18 .
Explanation
Calculate Health Insurance Benefit First, we need to calculate the value of each benefit separately. We'll start with the health insurance. The employer subsidizes 60% of the total health insurance cost of $10 , 000 .
Health Insurance Value The health insurance benefit is calculated as: 0.60 × $10 , 000 = $6 , 000 .
Calculate Retirement Matching Benefit Next, we calculate the retirement matching benefit. The employer matches 6% of Will's annual salary of $70 , 000 .
Retirement Matching Value The retirement matching benefit is calculated as: 0.06 × $70 , 000 = $4 , 200 .
Calculate PTO Benefit Now, we calculate the value of the Paid Time Off (PTO). Will receives 10 days of PTO. We'll assume there are 260 working days in a year. The value of the PTO is calculated as the proportion of PTO days to total working days, multiplied by the annual salary.
PTO Value The PTO benefit is calculated as: 260 10 × $70 , 000 ≈ $2 , 692.31 .
Calculate Total Benefits Now, we sum up all the benefits to find the total benefits value.
Total Benefits Value Total benefits = Health Insurance + Retirement Matching + PTO Total benefits = $6 , 000 + $4 , 200 + $2 , 692.31 = $12 , 892.31
Calculate Benefit Rate Next, we calculate the benefit rate by dividing the total benefits by the annual salary and multiplying by 100 to express it as a percentage.
Benefit Rate Percentage Benefit Rate = Annual Salary Total Benefits × 100 Benefit Rate = $70 , 000 $12 , 892.31 × 100 ≈ 18.42%
Round to Nearest Percentage Point Finally, we round the benefit rate to the nearest percentage point.
Final Answer The benefit rate, rounded to the nearest percentage point, is 18%.
Examples
Understanding benefit rates is crucial when evaluating job offers. For instance, if two companies offer the same salary but different benefit packages, calculating the benefit rate helps you determine which offer provides better overall compensation. This involves quantifying health insurance contributions, retirement matching, and paid time off to assess the total value beyond just the salary. By comparing these rates, you can make a more informed decision about which job truly offers the best financial advantage.
