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The Recruiter's Digest
 Recruiting News, Training & Commentary by Bill Radin

April, 2005

Candidate Pay: Finding the Phantom Income

If a candidate leaves a $75,000 job in San Diego for a $75,000 position in Kansas City, will he be better or worse off financially? If you answered "better," you'd probably be right, due to the generally lower cost of housing in the Midwest.

But how do you calculate salary differences -- and tweak a job offer accordingly -- when no relocation is involved?

Suppose you're working with a candidate who lives in Denver and commutes 40 minutes in each direction by SUV. What does the daily drive cost, in terms of gas, maintenance and insurance? And how would the candidate's disposable income change if he were to accept a new job only a mile from home?

Or, let's say you have an Arlington, Virginia candidate who decides to take a job in Washington, DC. How much extra tax burden would he have to bear each day, as he crawls across the Key Bridge into the district?

Not So Simple Anymore
Calculating a candidate's pay used to be a matter of simple arithmetic. A person received a base salary, plus additional income from commissions, a bonus or overtime.

However, in today's job market, compensation is much more complicated. Not only must you stir medical benefits and profit sharing into the mix, you'll need to calculate a wide range of direct and indirect income components any time a new job is being considered. In other words, what is gained from one element may be lost in another. For example, a $10,000 increase in base salary could easily be wiped out if the new company has a far less generous medical or 401(k) contribution plan.

The next time you ask a candidate what he's earning, try to be as specific as possible, look at all the elements, and make an effort to identify phantom income and expenses. The last thing you want is to generate an offer, only to find out the offer represents a pay cut, rather than an increase. Even if the candidate is relocating to an area with a higher cost of living, you may be able to find income that may not be visible at first glance.

Here's an easy-to-use worksheet to help you navigate today's complicated maze of compensation:

Current Job

New Job

Element to Consider

$               

$

Base salary

$

$

Bonus, commissions

$

$

Car allowance

$

$

Tuition contribution

$ $ Other perks

$

$

Profit sharing

$

$

Stock or equity

$

$

401(k) contribution

$

$

Defined benefits

$

$

Reimbursed expenses

$

$

Cost of living

$ $ Commuting, parking

$

$

Moving expenses

$

$

Travel expenses

$

$

Insurance premiums

$

$

Property taxes

$

$

State, local taxes

$                      

$                   

$           Difference (+/-)


 

 
 


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