Wyatt earns $[tex]$65,000[/tex] per year, receives 15 days PTO, $[tex]$6 \%[/tex] retirement matching, and receives $[tex]$60 \%[/tex] employer subsidized health insurance which totals $[tex]$10,000[/tex]. Calculate the benefit rate.
Employee Benefits
Health Insurance: $[tex]$60 \%[/tex]
FICA: $[tex]$7.65 \%[/tex]
Paid Vacation (PTO): 15 days
Retirement Matching: $[tex]$6 \%[/tex]
[?] $[tex] \%[/tex]
Round to the nearest percentage point.
Answer (2)
Calculate employer's health insurance contribution: 0.60 × $10 , 000 = $6 , 000 .
Calculate retirement matching: 0.06 × $65 , 000 = $3 , 900 .
Calculate PTO value: 260 15 × $65 , 000 = $3 , 750 .
Calculate FICA taxes: 0.0765 × $65 , 000 = $4 , 972.50 .
Calculate total benefits: $6 , 000 + $3 , 900 + $3 , 750 + $4 , 972.50 = $18 , 622.50 .
Calculate benefit rate: $65 , 000 $18 , 622.50 × 100 ≈ 29% .
The benefit rate is 29 % .
Explanation
Understanding Wyatt's Benefits Let's break down Wyatt's benefits and calculate the benefit rate step by step. This will give us a clear picture of the total value of his compensation package beyond his base salary.
Calculating Health Insurance Contribution First, we need to calculate the employer's contribution to Wyatt's health insurance. The employer subsidizes 60% of the total health insurance cost of $10,000. So, the employer's contribution is: 0.60 × $10 , 000 = $6 , 000
Calculating Retirement Matching Next, let's calculate the value of the retirement matching. Wyatt receives a 6% retirement match on his $65,000 salary. 0.06 × $65 , 000 = $3 , 900
Calculating PTO Value Now, we need to determine the value of Wyatt's 15 days of paid time off (PTO). We'll assume there are 260 working days in a year (5 days a week \times 52 weeks). The value of his PTO is calculated as: 260 days 15 days × $65 , 000 = $3 , 750
Calculating FICA Taxes We also need to consider FICA (Federal Insurance Contributions Act) taxes, which are 7.65% of Wyatt's salary. 0.0765 × $65 , 000 = $4 , 972.50
Calculating Total Benefits Now, let's add up all the benefits to find the total value of Wyatt's benefits package: $6 , 000 (Health Insurance) + $3 , 900 (Retirement) + $3 , 750 (PTO) + $4 , 972.50 (FICA) = $18 , 622.50
Calculating Benefit Rate To find the benefit rate, we divide the total benefits by Wyatt's annual salary and multiply by 100 to express it as a percentage: $65 , 000 $18 , 622.50 × 100 = 28.65% Rounding this to the nearest percentage point, we get 29%.
Final Answer Therefore, Wyatt's benefit rate is approximately 29%.
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 the better overall compensation. Consider a scenario where Wyatt is comparing his current job with a new offer. By calculating his current benefit rate at 29%, he can compare it to the benefit rate of the new offer to make an informed decision about which job provides the most value.
Wyatt's benefit rate, calculated by determining the value of his health insurance, retirement matching, PTO, and FICA contributions relative to his salary, is approximately 29%.
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