Salary vs. Employee Benefits: Which One Is More Important?

FT Contributor
A man calculating his salary on a calculator while writing "benefits" on a notebook.
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When compared to hourly workers, salaried employees need to carefully consider the salary and benefits they’re offered during the job-hunting process. Unlike executives, average job-seekers are tasked with weighing the pros and cons of each, facing a choice as to which they place more value in — salary or benefits.

Many people think that searching for, applying to, and taking a job is mandatory, but the fact of the matter is that job hunting is a personal choice. During your search for a job, you should consider factors like career satisfaction, work-life balance, location, and a wealth of other things, but the salary and benefits should be at the top of your list.

While a salary allows you to afford the things you want out of life, the benefits package you’re offered can ultimately be more valuable to you. Depending on your personal preferences, current life situation, and career goals, benefits can play a big role in defining what your work-life balance looks like.

Additionally, just because one salary and benefits package works for you doesn’t mean it will work for another individual. Some people place more value in the salary they’re offered, caring very little about benefits, but in most cases, the combination of salary and benefits that come with a job reigns supreme.

Learn more about the value placed on benefits and how to compare that value to what you’re offered in salary. This knowledge will allow you to be smart in choosing your next job.

How Much Are Benefits Worth?

According to the U.S. Department of Labor, employee benefits account for 37.7% of an employer’s costs, leaving salary to account for the other 68% of the costs associated with employing an individual.

The actual cost of benefits an employee receives will vary based on their state, the position the individual is hired for, and the benefits that they negotiate into their job offer. Some of the most common benefits that are an added cost to the employer include:

  1. Health insurance: This is the most significant cost in a benefits package. The cost will vary depending on the coverage you need (individual or family), as well as the plan your employer provides. The 2018 Milliman Medical Index stated that the average cost of preferred provider organization (PPO) healthcare for a family of four was $28,166; 56% of that cost is picked up by employers.
  2. Dental insurance: Not all employers offer dental coverage. Depending on the plan your employer provides, a dental plan might cover half of the costs associated with basic dental needs. In some cases, a plan will also cover orthodontic costs.
  3. Retirement plan/401(k): If your employer matches your contribution to 401(k), that’s an additional cost added to the total value of your benefits. The percentage you put in determines the cost to your employer, as well as any other profit-sharing contributions they might make to your account. Use this retirement plan calculator to understand what your 401(k) might look like when it comes time for you to retire.
  4. Unemployment insurance: Every employer is required by law to put a portion of your paychecks aside for unemployment insurance per the Federal Unemployment Tax.

According to the Bureau of Labor Statistics, the cost of benefits for an employer in 2019 was:

Cost ($) Percent of


Paid leave $2.68 7.20%
Vacation $1.31 3.50%
Holiday $0.79 2.10%
Sick $0.41 1.10%
Personal $0.16 0.40%
Supplemental pay $1.04 2.80%
Insurance $3.22 8.70%
Life $0.05 0.10%
Health $3.06 8.30%
Short-term disability $0.06 0.20%
Long-term disability $0.04 0.10%
Retirement and savings $1.96 5.30%
Social Security and Medicare $2.08 5.60%
Social Security $1.65 4.50%
Medicare $0.42 1.10%
Federal unemployment insurance $0.02 0.10%
State unemployment insurance $0.13 0.40%

Benefits vs. Pay

So, benefits or pay — which is better? If you’ve surveyed your professional network, you’ve probably heard mixed reviews. There are pros and cons to having a higher salary over more benefits, just as there are pros and cons to having more benefits rather than a higher salary.

Remember, the benefits and salary that are right for you may not be right for someone else. It’s about making an informed decision to put yourself in the best situation to succeed. Below, we’ll discuss the major pros and cons of each.

Pros and Cons of a Salary

The pros of earning a higher salary include:

  • You have more money to invest in yourself or put away into savings.
  • You also have more cash flow and can afford to purchase more.
  • Your paychecks are steady, making it easier to budget.

The cons of opting for a higher salary are:

  • There is less of an opportunity to earn overtime pay.
  • There is a lot of pressure placed on certain workers, overextending them.
  • A stressful office environment can develop from overworked, salaried employees.

Pros and Cons of Employee Benefits

The pros of increased employee benefits include:

  • You get the support you need in the event of an unexpected health emergency.
  • You consistently have peace of mind knowing that you’re covered in every aspect of life.
  • Better benefits create a more positive company culture.
  • Copays, deductions, and premiums make healthcare more affordable.

The cons associated with receiving more benefits are:

  • Better benefits can be expensive for larger employers, lessening the annual salary you’re eligible to receive.
  • There may be additional fees charged to you depending on the benefits being offered.
  • You might have trouble finding healthcare providers or less of a choice in policies.

When it comes to finding the job that’s right for you, consider what you want your life to look like. Do you want job satisfaction? Better benefits may be right for you. Do you want to be wealthy? A higher salary could be the answer.

Whether you have a limited employment history or you’re a self-employed person looking for a career change, these tips will help you decide whether salary or employee benefits are more important to you when negotiating a job offer.



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