Wyatt earns $65,000 per year, receives 15 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) | 15 days |
| Retirement Matching | 6% |
[?]%
Round to the nearest percentage point.
Answer (2)
Calculate the employer's health insurance contribution: 0.60 × $10 , 000 = $6 , 000 .
Determine the value of PTO: 260 $65 , 000 × 15 = $3 , 750 .
Calculate the retirement matching: 0.06 × $65 , 000 = $3 , 900 .
Find the benefit rate: $65 , 000 $6 , 000 + $3 , 750 + $3 , 900 × 100 = 21% . The benefit rate is 21 .
Explanation
Calculate Health Insurance Contribution First, we need to determine the value of each of Wyatt's benefits. We'll start with the health insurance. The employer subsidizes 60% of the total health insurance cost of $10 , 000 . So, the employer's contribution is:
Health Insurance Calculation 0.60 × $10 , 000 = $6 , 000
Calculate PTO Value Next, we calculate the value of Wyatt's paid time off (PTO). Wyatt receives 15 days of PTO per year. To find the daily rate, we divide his annual salary by the number of working days in a year (assuming 5 days a week for 52 weeks, which is 260 days). Then, we multiply the daily rate by the number of PTO days:
PTO Calculation 260 days $65 , 000 = $250 per day $250 per day × 15 days = $3 , 750
Calculate Retirement Matching Now, let's calculate the retirement matching. Wyatt receives a 6% retirement match on his salary:
Retirement Matching Calculation 0.06 × $65 , 000 = $3 , 900
Calculate Total Benefits Now, we sum up all the benefits to find the total value of benefits:
Total Benefits Calculation $6 , 000 ( He a lt h I n s u r an ce ) + $3 , 750 ( PTO ) + $3 , 900 ( R e t i re m e n t ) = $13 , 650
Calculate 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:
Benefit Rate Calculation $65 , 000 $13 , 650 × 100 = 21%
Final Answer Finally, we round the benefit rate to the nearest percentage point, which is 21%.
Examples
Understanding benefit rates is crucial when evaluating job offers. For instance, if two companies offer the same salary but different benefit packages, knowing how to calculate the benefit rate helps you determine which offer provides greater overall value. Consider a scenario where Company A offers a $60,000 salary with a 15% benefit rate, while Company B offers a $65,000 salary with a 10% benefit rate. By calculating the total compensation (salary + benefits), you can make an informed decision about which job is financially more advantageous. This calculation ensures you're not just looking at the base salary but also the additional value provided through benefits.
The benefit rate for Wyatt, taking into account his health insurance, PTO, and retirement matching, is 21%. This is calculated by summing the total benefits of $13,650 and dividing it by his annual salary of $65,000. The final result, expressed as a percentage, shows that 21% of his salary represents additional employee benefits.
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