Vincent earns $60,000 per year, receives 15 days PTO, 8% retirement matching, and receives 70% employer-subsidized health insurance which totals $10,000. Calculate the benefit rate.
| Employee Benefits |
| :------------------ |
| Health Insurance | 70 % |
| FICA | 7.65 % |
| Paid Vacation (PTO) | 15 days |
| Retirement Matching | 8 % |
[? ]%
Round to the nearest percentage point.
Answer (2)
Vincent's benefit rate is calculated to be 25%. This includes the contributions from health insurance, retirement matching, and the value of his PTO. This percentage reflects the total value of benefits he receives relative to his annual salary.
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Calculate the employer's health insurance contribution: 0.70 × $10 , 000 = $7 , 000 .
Calculate the retirement matching amount: 0.08 × $60 , 000 = $4 , 800 .
Calculate the value of PTO: 260 $60 , 000 × 15 ≈ $3 , 461.54 .
Calculate the benefit rate: $60 , 000 $7 , 000 + $4 , 800 + $3 , 461.54 × 100% ≈ 25% .
Explanation
Understanding the Benefits First, let's break down the problem. We need to calculate the total value of Vincent's benefits and then express that as a percentage of his annual salary. The benefits include health insurance, retirement matching, and paid time off (PTO).
Calculating Health Insurance Contribution The employer-subsidized health insurance contribution is 70% of $10,000. So, we calculate: 0.70 × $10 , 000 = $7 , 000
Calculating Retirement Matching Next, we calculate the retirement matching amount, which is 8% of his $60,000 salary: 0.08 × $60 , 000 = $4 , 800
Calculating Daily Rate Now, let's determine the value of Vincent's 15 days of PTO. We'll assume there are 260 working days in a year (52 weeks \times 5 days/week). Vincent's daily rate is: 260 days $60 , 000 ≈ $230.77 per day
Calculating PTO Value The total value of the PTO is: 15 days × $230.77 per day = $3 , 461.54
Calculating Total Benefits Now, we sum up all the benefits: $7 , 000 (health insurance) + $4 , 800 (retirement) + $3 , 461.54 (PTO) = $15 , 261.54
Calculating Benefit Rate To find the benefit rate, we divide the total benefits by the annual salary: $60 , 000 $15 , 261.54 ≈ 0.2544
Converting to Percentage and Rounding Finally, we convert the benefit rate to a percentage and round to the nearest percentage point: 0.2544 × 100% = 25.44% ≈ 25%
Examples
Understanding benefit rates is crucial in 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. Suppose Company A offers a $50,000 salary with a 10% benefit rate, while Company B offers the same salary with a 20% benefit rate. Company B's total compensation (salary + benefits) would be significantly higher, making it a more attractive offer, assuming the benefits meet your needs. This calculation ensures you're making an informed decision about your financial well-being.
