What's in a job offer?

Descriptive transcript: Find a job with a pension plan open new window

Congratulations! After months of job hunting, you finally have an offer on the table. Was the salary the only thing you heard when the offer was being made? You aren’t alone – most of us go right to what’s going to end up in our wallet in the near future. But there are other factors that make a compensation package attractive, and you need to make sure you take them all into consideration before you sign on the dotted line. Pension plans and health benefits can often make a job offer, even at a lower salary, worth it to you financially. In addition to the salary, consider these factors:

1. Workplace pension or retirement savings plan

Having a pension on top of your salary means that you are earning more overall than someone else with the exact same salary and no pension plan. Even if you earn a lower salary, you may walk away with more at the end of the day, especially as your employer must contribute to your pension plan.

Take a look at the chart below. It compares two scenarios: a job offer of $42,000 and no pension and a job offer of $40,000 with a defined contribution pension plan. See the difference a workplace pension can make after one, three and five years.

Job Offers Comparison
  Job offer scenario 1: $42,000 and no pension plan Job offer scenario 2: $40,000 with a defined contribution pension plan Difference in total compensation
Pension plan contribution 0% 10% of salary contribution per year (5% employer, 5% employee)  
Total compensation after one year of work, after taxes $35,700
($35,700 net salary + $0 pension)
($32,300 net salary + $4,079 pension)
$679 more with a pension plan
Total compensation after three years of work, after taxes $109,800
($109,800 net salary + $0 pension)
($99,343 net salary + $13,046 pension)
$2,589 more with a pension plan
Total compensation after five years of work, after taxes $187,651
($187,651 net salary + $0 pension)
($169,780 net salary + $23,182 pension)
$5,311 more with a pension plan

The numbers shown in this comparison are based on the following assumptions:

  1. assumes a 2.5% salary increase per year
  2. assumes a 4.0% investment rate of return per year
  3. assumes a flat 15% tax rate based on the 2018 Ontario average tax for $40,000 of income
  4. assumes net salary amount only takes into account the Canadian Income Tax and the employee contribution deduction. It does not include the Canadian Pension Plan (CPP), Employment Insurance (EI) Premium and other payroll deductions
  5. results can vary significantly if other assumptions or benefit formula are used.

If your employer does not offer a pension plan, ask if they have a group retirement savings plan that you can join. While not quite the same as a pension plan, saving through this type of plan will likely give you access to lower administration fees than you’d pay otherwise, which can help increase the returns on your retirement savings. And in some cases you might find that your employer matches some of your contributions.

Young man standing in front of a brick building smiling at the camera and holding a cell phone in one hand

Keeping a lookout for a job with a retirement savings plan

Dev is 24 and lives in Brampton with his parents. He just finished school and is job hunting. He’s found it really difficult to find a job, but he knows that he can’t live with his parents forever, despite them wanting him to! It’s been seven months and Dev still doesn’t have a job. But Dev doesn’t want just any job. He knows that saving any money in this economy isn’t easy and any money he does have, he’ll need it to pay off his student debt, so he’s looking for a job with a retirement savings plan that will help him save for retirement automatically. He knows finding the right job with a retirement savings plan will take longer, so in the meantime Dev has been doing odd programming jobs on the side. They haven’t paid a lot, but with the money he does make, he pays off his student loan and puts a little aside into an RRSP.

2. Health Benefits

Does the new company offer health, vision, dental or disability benefits? If they don’t, this may impact your wallet as health expenses add up fast. For example, Canadians spend on average $355 per year on dental services. While health benefits may not seem important to you - after all you’re young and in good health - having an insurance plan through your workplace can mean paying less money for medical expenses down the road, and it may also cover your spouse or dependants like your children. After all, those massage therapy sessions don’t pay for themselves!

3. Life Insurance

Does the new company offer you life insurance? The truth is that one day we will all die, and the average funeral costs anywhere from $8,500 to $20,000. That’s a lot of money to burden your loved ones with, not to mention how they’re going to live without your income. Life insurance ensures your loved ones are taken care of when you’re gone. Your company may be able to offer you a life insurance package at more reasonable rates than if you were to purchase one as an individual.

4. Professional development opportunities, association memberships

Learning new skills and developing professionally is important throughout your career. Knowing that your company will pay for you to learn and stay relevant takes the burden off you. Perhaps they’ll pay your membership dues to an industry association that provides learning and networking opportunities or provides industry updates in the form of reports and white papers? Keep this in mind and be sure to ask your company what internal opportunities they have for learning, and what their policy is on external learning opportunities.

5. Work from home policy

Does the new company offer working from home as an option? Being able to work from home one or two days a week would save you the cost of commuting in, and who knows, you may find yourself more productive at home away from your chatty colleagues (plus perhaps you’ll have a little more to put towards your retirement)! If they don’t have a work from home policy, perhaps your employer is willing to pay for your commute or parking costs?

6. Flexible work hours

Some days you may find yourself needing to go in to work a little late or leave a little early as dentist appointments, parent/teacher meetings or having to be at home for a delivery may impact your day. Maybe you’re willing to work longer hours every day for a period of time in return for a day off every month? Flexible work hours would give you the ability to make room for these possibilities.

7. Vacation

How many days vacation are outlined in your offer? Vacations are important for your health. They’re a way to refresh and gain new perspective, and a great opportunity for you to spend time with friends and family. Typical workplaces offer two weeks, but this may be something you can negotiate. Also keep in mind that even if you are making minimum wage, you are still entitled to mandatory vacation pay. That means while you may not get vacation days, you get paid for them instead.

Getting a job offer is super exciting and you are probably thrilled your job hunting days are over, but don’t just take any job – accept the one that fits your lifestyle and needs. In addition to the salary, be sure to weigh all the factors in your decision.

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