Total compensation is base pay plus the employer's share of health premiums, retirement contributions, paid time off, bonus and equity. The first four are factual and can each be established with one question. Bonus and equity are estimates, and the honest method is to count guaranteed money at face value, formula money at target, and discretionary money at zero.
The lines that make up a package
Base salary. The only genuinely fixed part, and the one everything else is calculated from — bonus percentages, retirement contributions and future increases all reference it.
Variable cash — bonus, commission, shift differentials, overtime.
Equity, where it exists.
Employer retirement contributions, which are cash you cannot touch yet.
Insurance, where the employer premium share is the real number.
Paid time off, which has a computable value.
What published wage data actually covers
The national wage survey reports straight-time gross pay including commission and production bonuses. It excludes annual bonuses, equity, employer retirement contributions and insurance.
So a published median is a wage figure, not a package figure. Comparing it against a total compensation number from a company is comparing two different measurements, and the gap is not evidence that anybody is overpaid.
How to value each line honestly
Guaranteed cash at face value. Base, and any bonus contractually guaranteed for a defined period.
Formula-driven variable pay at what the median person actually achieved, not at target. Ask what people in the role earned last year rather than what the plan promises.
Discretionary anything at zero. Not because it will not be paid, but because you cannot rely on it and valuing it at target is how people accept packages that underdeliver.
The employer contributions worth counting
A retirement match is deferred cash with a known percentage. An employer paying six per cent against your contribution is adding six per cent to your compensation, and declining it is declining part of your salary.
Health premium share is the other large one. The number that matters is what the employer pays monthly, not the plan’s headline value, and it is a fair question to ask at offer stage.
Equity needs its own treatment
Public company shares that vest on a schedule are close to deferred cash with price risk, so they can be valued at the current price with a discount for the risk and the wait.
Private company equity is a different instrument entirely. It has no market, its stated value comes from a funding round that may not repeat, and it may never convert into money. Valuing it at the number in the offer letter is the most common overvaluation in this whole area.
The lines that reduce the total
Commuting cost and time. Required equipment. Unpaid on-call. Certification and continuing education you fund yourself. Any part of the package that is really an expense transferred to you.
These rarely appear in a comparison and they are the reason two offers with identical totals can feel very different a year in.
Comparing two offers properly
Build both columns with the same rules: guaranteed at face value, formula at median achieved, discretionary at zero, employer contributions as percentages, equity discounted for risk.
Then subtract the costs each job imposes, and apply state and local tax. What remains is comparable. Most people compare base against base, which is the single line the employer has the most flexibility to dress up.
Which line to negotiate
Base first, because everything else is calculated from it and because it is the only part that persists through a bad year. A larger bonus percentage on a lower base is usually worse than the reverse.
Then the non-cash terms that cost the employer little and are worth a lot: the start date relative to vesting, the retirement contribution, the premium share, and time off. Those are frequently more movable than the salary and almost nobody asks.
A worked comparison
Offer A: $95,000 base, 10 per cent target bonus, six per cent employer retirement contribution, employer pays most of the health premium. Offer B: $105,000 base, discretionary bonus, three per cent retirement, and you pay a much larger share of the premium.
Value them by the rules above and A is worth roughly $95,000 plus whatever the median person actually earned on that bonus plan, plus $5,700 of retirement, plus the premium difference. B is worth $105,000 plus $3,150, plus zero for the discretionary element.
The $10,000 base gap narrows considerably and can reverse entirely once the premium share is included. Which is why the comparison has to be built line by line rather than argued from the headline number.
Common questions
What is the largest item after base pay?
Usually the employer's share of health premiums, particularly for family coverage. It is also the one people most often leave out entirely.
How should I count a bonus?
Guaranteed in writing at face value, formula-based at target, discretionary at zero. A history of payment is evidence of intent, not a commitment.
Should I count perks?
Only what you would otherwise buy. A benefit is worth what it saves you, not what it cost the employer to provide.
Does paid time off really count?
Yes. It is your daily rate multiplied by the days, and with roughly 260 working days a year the share is easy to work out.
Why do two offers change order once totalled?
Because everything outside base varies far more between employers than base itself does, and none of that variation appears on the letter.
What counts as total compensation?
Base, variable cash, equity, employer retirement contributions, the employer's share of insurance premiums, and paid time off.
Do published wage figures include benefits?
No. They cover straight-time gross pay including commission and production bonuses, but exclude annual bonuses, equity, retirement contributions and insurance.
How should I value variable pay?
Guaranteed at face value, formula-driven at what the median person actually achieved rather than at target, and anything discretionary at zero.