Hannah earns $52,000 per year, receives 10 days PTO, 6% retirement matching, and receives 60% employer-subsidized health insurance which totals $10,000. Calculate the benefit rate. Round to the nearest percentage point.
Answer (2)
Calculate health insurance benefit: 0.60 × $10 , 000 = $6 , 000 .
Calculate retirement matching benefit: 0.06 × $52 , 000 = $3 , 120 .
Calculate PTO benefit: ( 10/260 ) × $52 , 000 = $2 , 000 .
Calculate benefit rate: ( $6 , 000 + $3 , 120 + $2 , 000 ) /$52 , 000 × 100 ≈ 21.38% , which rounds to 21 % .
Explanation
Understanding the Problem We need to calculate the benefit rate, which is the total value of benefits divided by the annual salary, expressed as a percentage. The benefits include health insurance, retirement matching, and paid time off (PTO).
Calculating Health Insurance Benefit First, let's calculate the value of the health insurance benefit. The employer subsidizes 60% of the total health insurance cost of $10 , 000 . So, the health insurance benefit is 0.60 × $10 , 000 = $6 , 000 .
Calculating Retirement Matching Benefit Next, we calculate the retirement matching benefit. The employer matches 6% of Hannah's annual salary of $52 , 000 . So, the retirement matching benefit is 0.06 × $52 , 000 = $3 , 120 .
Calculating PTO Benefit Now, let's calculate the value of the PTO. Hannah receives 10 days of PTO. We'll assume there are 260 working days in a year (5 days a week × 52 weeks). The value of one day of work is 260 $52 , 000 = $200 . Therefore, the value of 10 days of PTO is 10 × $200 = $2 , 000 .
Calculating Total Benefits The total benefits are the sum of the health insurance benefit, the retirement matching benefit, and the PTO benefit: $6 , 000 + $3 , 120 + $2 , 000 = $11 , 120 .
Calculating Benefit Rate The benefit rate is the total benefits divided by the annual salary, expressed as a percentage: $52 , 000 $11 , 120 × 100 ≈ 21.38% .
Rounding to Nearest Percentage Point 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, calculating the benefit rate helps you determine which offer provides better overall compensation. This calculation includes health insurance contributions, retirement matching, and paid time off, providing a comprehensive view of the total value you receive beyond just your salary. By quantifying these benefits as a percentage of your salary, you can make a more informed decision about which job truly offers the best financial advantage. This approach ensures you're considering the complete picture of your compensation.
To find Hannah's benefit rate, we total her benefits which amount to $11,120, calculated from health insurance, retirement matching, and PTO. When divided by her salary of $52,000 and expressed as a percentage, the benefit rate is approximately 21%. Thus, the benefit rate rounds to 21%.
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