Question

You’re choosing between two job offers. Both are with respected organizations and desirable work. The first offer is with a large, well-established firm at $22,000 per year in salary plus noncontributory benefits worth $7,000 per year. The other job is a small business with salary of $30,000 per year without employer voluntary benefits (the employer is required to pay for social insurance programs).

a. What factors should be considered in determining the better offer? Which package do you think maximizes total compensation?

b. Which employer is economically better off (all else being equal), the one offering salary plus benefits or the one offering salary only? Explain your answer.

Answer 1

a) Total difference CTC by 2 companies=(30000-22000-7000)=$1000 only.

Hence, compensation wise employer 2 is better offer.

However, there are other several factors that should be chosen while determining job. Below are the factors:

1) Job stability/security: As firm 1 is large and well established in comparison with the small business. Hence, job security is more with the firm 1

2) Work pressure: As firm 1 is more stablished, there would be less work and organised work pressure while in small business work pressure will be higher and it will be relatively unorganized.

3) Learning: As small business is in the initial phase, you will learn more from firm 2 than firm 1.

4) Age of the employee: When you are young and just started your career, you can take risk and you should learn more. Hence, in this case, small business is good but when you are bit experienced and you want stability in life you should chose firm 1

b. Economically firm 2 is better off all else being equal. And with wise decision you can get all benefit with your own arrangement which can be lower than $7000.