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 (2)
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 , 692.30 .
Calculate the total benefit value and benefit rate: $70 , 000 $6 , 000 + $4 , 200 + $2 , 692.30 × 100 ≈ 18% .
The benefit rate is 18 % .
Explanation
Identify Benefits First, we need to identify all the benefits Will receives. These include health insurance, retirement matching, and paid time off (PTO). We will calculate the value of each of these benefits and then determine the total benefit rate as a percentage of Will's annual salary.
Calculate Health Insurance Benefit The problem states that Will receives 60% employer-subsidized health insurance, which totals $10 , 000 . Therefore, the value of the health insurance benefit is: 0.60 × $10 , 000 = $6 , 000
Calculate Retirement Matching Benefit Will receives a 6% retirement matching. This means that the company contributes 6% of Will's salary to his retirement account. The value of this benefit is: 0.06 × $70 , 000 = $4 , 200
Calculate PTO Benefit Will receives 10 days of PTO. To calculate the value of this benefit, we need to determine Will's daily rate. Assuming there are 260 working days in a year, Will's daily rate is: 260 days $70 , 000 = $269.23 per day (approximately) Therefore, the value of the PTO benefit is: 10 days × $269.23 per day = $2 , 692.30 (approximately)
Calculate Total Benefit Value Now, we sum up the values of all the benefits to find the total benefit value: $6 , 000 + $4 , 200 + $2 , 692.30 = $12 , 892.30 (approximately)
Calculate Benefit Rate To find the benefit rate, we divide the total benefit value by Will's annual salary and multiply by 100: $70 , 000 $12 , 892.30 × 100 = 18.4176% (approximately)
Round Benefit Rate Finally, we round the benefit rate to the nearest percentage point: 18.4176% ≈ 18%
Final Answer Therefore, the benefit rate is approximately 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. Suppose Company A offers a $60,000 salary with a 15% benefit rate, while Company B offers a $60,000 salary with a 20% benefit rate. By calculating the actual dollar value of the benefits, you can make an informed decision about which job provides more value.
Will's benefit rate is approximately 18% when calculated from his health insurance, retirement matching, and paid time off benefits, relative to his salary. The computation considers the value of each benefit and sums them up to find the total benefits. Finally, this total is divided by his salary and converted to a percentage.
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