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Compensation

Jacoby Kroll - Founder of Finance for Athletes, Dwight-Englewood 23’ (Jacoby@financeforathletes.com)

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What is compensation?

  • The time periods you get paid for work
    • Hourly wages
    • Weekly wages
    • Every other week
    • Once a month
    • Once a year
  • Types of earnings
    • Salary
    • Bonus
    • Stock/equity
    • Non-monetary

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Types of Compensation (Financial and Non-Financial)

  • Financial Compensation: When people receive a salary, wage, or bonus (actual money)
    • Bonus is an extra source of earning someone receives when they or their company does well
    • Salary is a regular payment usually paid every week or month
  • Non-Financial Compensation: It consists of health insurance, stocks, tuition reimbursements and more (things that have financial value but aren’t physical money)

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Job perks

  • Companies can provide:
    • Free gym membership
    • Parental leave
    • PTO (Pay time off) for vacation
    • Free lunch
    • Funds for transportation
    • Mental health services
    • Remote flexibility/working from home
  • Is it a job that you enjoy and learn from?
  • There can be two companies that offer the same perks, but one might require 80 hours a week while the other requires 20 hours a week
    • The average work time per week is 40 hours in the U.S.

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Salary and Wages

  • Hourly wages: Equivalent to minimum wage - employees make an hourly amount of money - it depends on which state they live in (New Jersey - $13 per hour)
    • Major events like COVID can affect a state's minimum wage (New Jersey’s wage rose from $11 to $13 over the past two years)

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Average earning depending on one’s profession

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Financial benefits of education levels

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What determines compensation? (Part 1)

  • How do companies decide a specific number to pay an employee?
    • They study the market for similar jobs
    • Consider how hard it will be to acquire the employee
    • Consider the intensity of inflation - people will want to get paid more
    • The difficulty of the job - the higher the qualifications of the job, the higher the salary

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What determines compensation?(Part 2)

  • What do companies want?
    • Employees to be happy and continue their careers with them
    • Companies give bonuses to encourage employees to work hard
    • Companies want to give equity to employees to make them feel that if the company wins, they do to

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What is equity?

  • It’s not cash, it’s a slice of the pie
    • If the pie (company) grows, the value of your share grows but your % stays the same
    • Pizza example:
  • Equity is generally referred to in percentage terms
  • Not all companies give equity
  • If companies do give equity, employees usually get a small percentage
    • At some point, you can sell your equity/stock in a company and get your money back

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Negotiating salary

  • It’s common to negotiate salary in an interview with a recruiter
  • You should be polite and grateful
  • It’s not just about salary, it’s also about all the job’s perks and different forms of compensation
    • The best negotiations are when you look at the broad picture and work together with the recruiter to find a fair compensation